Daytrading leveraged ETF's

Below is a chart of TNA, the 3X Russell 2000 Small Cap ETF. It and its sibling TZA are ideal for intraday trading, especially on a rule-based system like Blue Wave.


The chart above is the 5 minute TNA chart from today's (Thursday's) trading. Note the whipsaws in pre-market, which is why I don't usually trade until 30 minutes after the open. On the above chart, that first trade was the SELL at 7:00 am (PDT). There was one very nice trending trade today, between 11:00 am and 1:00 pm, capturing about a 5% move in TNA.

There were a few minor whipsaws along the way, but none big enough to make a dent in the days profits.

This is what I mean by a whipsaw:



Notice how prices broke down through the stop/reverse dash on the fifth bar above, but quickly recovered to close out the five minute bar still in BUY (BLUE) MODE. I have a few rules that effectively deal with these situations, but still I get caught and whipsawed every so often. The key is that the nice trend trades that last 2 hours, like the trade above, more then compensate for the whipsaws.

This kind of trading also works with less leveraged ETF's, but returns are commensurately lower. Options are just way too inefficient and expensive to trade in this manner, so I save those for longer-term positions.

One doesn't need BW to trade like this, but one does need some rule-based system. I'm experimenting right now with 5 minute 3-Line Break charts that are based simply on the mechanics of those charts. Renko charts are also suitable, using the rules of the charting format for one's rule-based system.

Leveraged ETF's like TNA/TZA/BGU/BGZ have really opened the door to intraday trading apart from traditional S&P Futures and Options. If your system is good enough to average just 1% a day in profits, times 20 trading days a month, times 12 months year (except leap year), well you get the idea.


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Recognizable Patterns: The Case for Wave 3 Down

Spot a Pattern You Recognize: One Simple Tip for Becoming a Better Trader
July 15, 2009

By Gary Grimes

The following article is adapted from market analysis by Elliott Wave International Chief Commodity Analyst Jeffrey Kennedy. Now through July 22, Jeffrey Kennedy’s daily, intermediate, and long-term forecasts for up to 18 markets are free via EWI’s FreeWeek. Learn more here.

Wave patterns are like beautiful women, classic cars and great art – you know them when you see them.

EWI analyst Jeffrey Kennedy drives this point home during his live Elliott wave trading tutorial. It's my favorite of his tips for trading with Elliott waves.

"Trade the pattern not the count," Jeffrey says.

If you don't recognize a pattern at a glance, don't trade it – plain and simple. After all, your wave count can be wrong; the pattern cannot.

Does that mean you must know the exact wave count at a glance, as well? No. Simply spotting a pattern you recognize is where you should start.

Jeffrey scans hundreds of charts, clicking through them one by one, spending mere seconds with each. If he doesn't spot a pattern he recognizes, a click of his mouse takes him to another potential opportunity.

Does price action look extended or choppy? Is it trading in a channel? Is it forming a wedge or triangle shape? These are some of the signals Jeffrey's looking for. Each could help him identify – at the quickest of glances – whether price action is impulsive or corrective. This is the first critical step, Jeffrey says, to spotting high-confidence, Elliott wave trade setups.

That brings us to the following chart. Do you see a pattern you recognize? I do.




Look at the downward price action; the moves look decisive, almost in straight lines like impulse waves. Now look at the upward moves; they look indecisive and choppy like corrections. There's also one down move that is clearly longer than the others – that's almost certainly a third wave of some degree.

At just a glance, here are a few things we can determine:

This is a bearish market pattern, because downward impulses are interrupted by upward corrections.

The price action from September to November seems to be a pretty clear wave 3 down, followed by waves 4 up then 5 down, completing what appears to be a larger degree wave 1 in early March.

Wave 2 follows wave 1, so the upward move starting in early March is most likely a larger degree wave 2.

Wave 3 follows wave 2, so that's what we can expect next.

Wave 3 is never the shortest and often the longest of all five waves, so we can expect the next impulse move to take prices to new lows.

You see, with just a quick glance, we've put a finger on the pulse of the market. Negative psychology pulls prices down, and brief reversals of mood result in upward corrections – this appears to be a long-term bear market.

If you can gain this much insight simply by glancing at a chart, just think of what else you can glean by spending more time with it. Look at this pattern within a longer time frame, and you can determine the degree of trend (this one appears to be primary). Formulate Fibonacci price and time targets, and you can be confident about when and where prices will most likely turn.

There are literally hundreds of things you can do with a good chart, but none of them mean much unless you can first identify a pattern you recognize.

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For more information on using patterns to spot trading opportunities, access Elliott Wave International’s FreeWeek. Now through July 22, all of EWI Chief Commodity Analyst Jeffrey Kennedy’s daily, intermediate, and long-term market forecasts are completely free. Learn more here.

Gary Grimes focuses on mass psychology, U.S. stocks and the U.S. economy. Gary has a bachelor’s degree in journalism from Auburn University in Auburn, AL, where he was first turned onto the Austrian School of economics by way of the world-famous Mises Institute. His study of classical liberalism eventually led him to discover the Elliott Wave Principle and Robert Prechter’s theory of socionomics.

Anatomy of a rally

Today's rally thrust a spike in the heart of the head and shoulders analysis that was so embraced about this time last week by the New World Order. In the spirit of, "if you can't beat them, join them," let's take a look at the most bullish frame of reference I can construct, albeit only for a trade while awaiting the re-emergence of an ongoing bear market.




In Advanced GET parlance, the above SPX chart has triggered a "Type 1 Buy Signal." To make a long story short, (no pun intended) all a Type 1 Buy Signal means is that a corrective wave has ended and a new impulse wave has begun. For our purposes, the corrective wave above is contained by the auto-regression channels and in today's rally the SPX broke above those channels on the chart. The significance for me is that now I have a target for where this rally should end, using orthodox Elliott logic as applied by Advanced GET.




The chart above is a close-up of the corrective wave along with three likely targets for the resolution of this rally. These levels are first, the blue horizontal line coming in just above 1000 on the SPX, then the two Wave 5 chart annotations at the 1050 and 1150 levels. Note how the False Bar Stochastic confirms this wave count and rally.

This spunky rally from the first week of March has been a bear (no pun again) to manage through strictly pattern recognition analysis. The mantra here (AllAllan) has been that we trade the trend, not the forecast and as you can see on this Daily chart of the SPX, the Daily Trend Model flipped LONG yesterday at 901.15 and caught all of today's rally. As of today, the reversal level to go Short is at 883.21, as indicated on the right axis of the chart.

My big picture view of the market remains unchanged. Below is a monthly chart that although not tradable, provides focus and perspective:



Here is a close up of the same chart with Fibonacci retracement levels:



Note how prices in this rally since March have only retraced 25% of the entire bear market decline and that how the next important Fibonacci resistance level is at 1011 on the SPX. Now look again at the Daily chart with the resistance levels and note how the first level (horizontal blue line) comes in right at 1010-1015.

Finally, a tip of the hat to Robert Prechter's group, who have been correctly assessing this market for the past 12 months, including the corrective wave up currently in play. They expect that when this rally plays out (could be any time) that will mark the end of Primary Wave 2 UP, to be followed frightening market panic in Wave 3 DOWN.

For those interested, they are offering a free week of their Commodity analysis service, which you can access by clicking the banner ad at the bottom of this page.



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NNVC - Update

The table below summarizes the most salient and fundamental potential for NanoViricides and it's shareholders:


Let's briefly review what this company is all about. NanoViricides, Inc. is a development stage company with a unique nanomedicine technology. Preliminary testing of their anti-viral applications have demonstrated very high efficacies in vivo and in vitro.

(1) Their anti-HIV nanoviricide showed efficiacy superior to HAART cocktail in animal studies. "HAART" means highly active antiretroviral therapy. "HAART" is essentially just antiretroviral therapy. It's three drugs combined to make highly effective therapy;



(2) Their EKC-Cide is a topical solution for viral eye diseases and is currently subject to an MTA (Materials Transfer Agreement) with a major (unnamed) pharmaceutical company. It is the first ever drug to have shown clear clinical response in animal studies against adenoviral epidemic kerato-conjunctivitis;

(3) Their FLU-Cide for common influenzas has shown excellent efficacy in animal studies;

(4) Their FLU-Cide-HP for Highly Pathogenic Avian Influenzas (HPAI, aka "Bird Flu") has shown excellent efficacy against H5N1 clade I (resistant to Tamiflu) and H5N1 clade 2.

The total dollar markets for these and other commercial disease targets represent large markets of approximately $40B total by 2013.

Download Company Fact Sheet


As of today's stock close of $0.70, the market capitalization of NanoViricides is about $86M. The markets their products are addressing over the next 4 years, some of which represent markets with no current non-toxic drugs and others in which there are no effective treatments whatsoever, amount to $40B. The HIV market alone is $21B. The smallest market for any single one of their drugs is $1B.

How much longer will the market cap of NNVC remain under $1B?

At $1B market cap, share price will be about $10.00, or 14X current share price. But that's just for starters. If their HIV anti-viral hits, a $21B market, how much is the company worth? Does $10B seem reasonable? It does to me. At a $10B market cap, share price is about $100.

At $100 per share, every 10,000 shares of NNVC (costing $7,000 at today's closing price) becomes worth $1,000,000.

Acknowledging that this is all idle speculation and that there is risk that none of the above ever comes to fruition, it seems to me that as likely as it is that none of this happens, it is now just as likely that part, of not all of this does happen. Yes, that means that as I follow this company, meet and talk with it's CEO, read the SEC filings and everything else I can find on NNVC, that I see a 50% chance that the goal of $100 a share in the next five years will become a reality.

That is one hell of a risk:reward from my standpoint.

Be aware that I own and control a bunch of this stock, in personal, family, friends' and managed accounts and that I will benefit greatly if this stock appreciates. Also be aware that much of the stock I own or control has been purchased at prices lower then today's market price, some as low as 10 cents per share.

BUT MOSTLY BE AWARE THAT THERE IS RISK IN OWNING STOCKS AND IN PARTICULAR, THIS STOCK. DEVELOPMENTAL COMPANIES, OF WHICH NANOVIRICIDES IS ONE, ARE MORE LIKELY TO FAIL THEN TO SUCCEED.

That said, let me point out that in my investment career, which started when I was 13 years old, there have been but a handful of investment opportunities come my way that offered the potential to change my life. I believe NanoViricides is one of those opportunities, maybe the last one for me. I am adamant in my resolve that unlike some of the others, I will not look back at this one with the regrets of "What if" or "If only."

This time, I am in....................ALL IN.


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NNVC

My Elliott Wave software, Advanced GET, has today generated a Wave 5 target based on price patterns over the course of the last two weeks:


Still working on a more comprehensive update, but all of a sudden volume has spiked (relative to recent days) along with price, suggesting, along with banter on iHub message board, that something is up.


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SRSR

SRSR is up about 25% since first written up here on July 1st and up about 300% since I bought it about 90 days ago.




Is the run over, or is SRSR still a Buy?



The Daily chart above is suggesting $0.20 for a measured Elliott Wave 5-wave up advance. If that comes to pass, no doubt much higher prices will be projected from that level. At current price of 10c a share, there is tremendous leverage if their story pans out. If not, then even at a 50% stop-loss, the risk would be 50% against a 100% to thousands of percent gains in the months and years ahead.

Not quite the same as buying NNVC at a dime three years ago, but the same risk:reward type of analysis.


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Advanced charting

Below is a comparison of 60-minute Renko, Three-Line Break Point and Traditional Bar Charts. This is a little tricky, ergo the "Advanced" label in tonight's Blog title. If these seem too confusing or esoteric, don't worry about it. The significance here is in the nuances that are probably only recognizable by those well steeped in technical analysis. In any case, the charts should be viewed in full screen mode by clicking the image below.



To get things started, note how all three formats nailed today's 21.92 point SPX rally. I'll leave the rest to you're collective vision, observation and ingenuity.


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