New EUO Trade

Click on Chart to Enlarge

The chart above is UUP which is the main US dollar bull ETF I follow. I have made several posts in recent months on the sentiment and possible Elliott wave patterns forming in the EURO and USD. The main message I have been sending is that I am looking at establishing a longer term "trade" on a bullish dollar fund. The first 2 attempts were stopped out at the initial stop for a loss, and the dollar has continued lower since then.

Looking at the chart of UUP above it is easy to see the downtrend. The thing I wanted to point out here is the recent sizeable gap down this week. It has since been retraced with no substantial downside after the gap. Whenever this type of thing occurs, a chart reader should be alert to the gap being an exhaustion gap. This is a type of gap that occurs as a "blow-off" or capitulation before a significant trend reversal. Given the bearish sentiment, the hammer reversal at the low, the quick gap fill, and break of the minor trend line shown in green, I am certainly willing to enter a trade again.

So I am going to post a new trade here on EUO which is a 2x bullish $ ETF. The current price is 17.93 which will be the blog entry price. 17.54 will be the initial stop.

The goal is to catch a major bottom and gradually move a stop up under support as the advance occurs. For any one that needs a little more confirmation of a new uptrend, you could use 18.09 as a buy stop, but use the same sell stop after entry. That will make the risk/reward ratio less favorable, but probably decrease the likelihood of a losing trade.