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Based on all the past waterfall declines that are somewhat similar to the recent downdraft in stocks, the tendency has been for a deep or complete retracement of the initial rally attempt. Based on past charts I've studied, I would anticipate this rally attempt to get close to the 122 SPY level as a target with the probable reversal zone being 120-124. I do not expect the market to retrace past 126. If it does then it is not behaving like the majority of past waterfall declines, particularly ones in a similar contextual position to our current market.
Also, as of right now there are a couple unfilled gap ups below prices that could offer exit targets for a short position. Additionally the 30 min and 60 min charts are now reaching overbought territory on the oscillators, suggesting a likely pullback in the near future.
Taking everything together here...
New Trade
Place a GTC limit order to buy SDS at 23.00. The trade will be exited if the high of Aug 3rd is exceeded, so that can be used as a stop. I'll use the hourly chart to monitor for exit and trail the stop down if/when swing highs are completed on the way down.
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