TBT - Short Setup

Looking at both TLT and TBT here.

TLT first:

TLT has I think completed an ABC zig-zag down to $112.6 where it has overshot the 1:1 Fibonacci extension to bounce and print a shakeout reversal pattern as can be seen well on the monthly chart with the wick passing through the 1:1 fib and printing a hammer.

Worth noting that the textbook will say a hammer at the low is bullish, but here it does I think indicate the trend will turn, but perhaps find a lower low first.

Looking on the daily TLT has formed a corrective ascending wedge on the bounce of which price is falling out of now. This I think will see the dominant trend resume a little longer to print Wyckoff ST Secondary Test to again move back through the fib extension.

Long term support of October 2018 is at $11.9 and I think TLT will hit or overshoot this to form ST. This ST would potentially also be a wave B of a corrective expanded flat bottom.

Its worth considering that TLT could continue to the next fib at $95 but I just dont think there is much chance of that. RSI has hit the lower band on the monthly RSI which has never even got close to before so $95 wont happen I dont think. Or not at least without a big bounce first.

Now, if TLT does this then TBT is going to go higher.

And TBT also has a long term landmark of resistance from Jul 2016 at $29.45.

It is currently printing what appears to be a 3 wave pattern which will likely be an ABC correction. This wave up now has been a bit more impulsive than potential A so I think this may well be a 1:1.618 C wave also considering that it has moved passed and also potentially found support on the 1:1 extension at $24.58.

And so a 1.618 extension would take TBT to $32.64 slightly higher than long term resistance and once it moves back down it will have printed a shakeout reversal pattern.

And so if it does get to $32.64 then i'll enter a short.

But if I see a bearish reversal through resistance then I will go short there.

If this happens I will be buying a LEAP put as far out as I can probably 2024, although if it is September (probably not) when it gets there then i'll buy 2025 put.

Btw if of interest do see my previous TLT ideas where I called it to hit $113 back in September when it was at $146 and hardly anyone though it could get here.

Not advice.

Comment:

Looking good so far TLT has fallen back through the 1:1 ABC fib and now on its way to test long term support.

So now I have plotted the potential overshoot from 1.13 which is a common reversal point up to 1.168 which should be the approximate extremity.

0.168 tends to be the phi related overshoot extremity for a 1:1 similar to how 0.786 is the extremity for shakeout reversal passed a 0.618 retracement, because 0.786 is the phi relative because √(1.618/1) = 0.786 and 0.786 - 0.618 = 0.168, thus for a 1:1 the overshoot extremity is 1 + 0.168.

And so the blue band shows my potential reversal area. If it falls below and then rejects the 1.168 area to go lower then I will start considering the almost unthinkable that the long term ABC could be a 1:1.618 down to $95.54.

There is also a 1:1 taken from the 3 previous pivots landing in the blue overshoot area at $109.61 - adding confluence.

Now looking at TBT the inverted 1:1 aforementioned will take it just shy of long term resistance at $28.92 and just beyond the 1.618 reverse extension.

Worth noting also that a 1:1.618 extension would see it get in the area of the 1:1.618 3 pivot extension from the lows at $32.09.

So I think it tops near either of these points and I'm slightly siding with it being the first @ $28.92 to then touch resistance at $29.45.

And so what i'm going to do is see where TBT is if TLT can get into my blue overshoot area. Ideally if TBT can hit resistance while TBT is in the blue then I will enter LEAP put(s) there.

Because my trade area is very narrow this may allow me to have a larger short position, because I will have very high RR and defined risk.

Comment:

Also if I see a strong upside shakeout reversal (big wick) through LT support then I will consider to enter the TBT short.

Comment:

Evening star upside shakeout reversal back through the long term 1:1 fib should be a temporary short squeeze before continuing down.

Comment:

I think this could be a 1-2 1-2 1-2 Primary C wave with 13 sub waves.

Comment:

And so upside shakeout reversal pattern on the 8H becomes SRP to the downside on the daily.

And now that upside SRP provides the next to pivots to set another 3 wave 1:1 target. Where does it land? - Right in the middle of the blue band $109.85.

Comment:

And plenty of bullish divergence as there should be if the trend is about to reverse.

From 9 April low to 19 May low TLT fell 5% but RSI rose by 3.

Comment:

Bounced well off the 1:1 fib in the middle of the blue band with TBT hitting the 1.618. I will be buying this on a re-test or if TLT pushes out the band.

Comment:

It has retraced to 0.5 from the low and I've decided I'm happy with that considering it is beyond 1.13 ratio which is quite deep if my fibs are correct and have bought a 2024 $30 strike put for $7.15. Will now wait to see if the blue band holds.

Comment:

Well the low of the band was tested but TLT closed the day with a nice engulfing candle. Could be plenty of shenanigans from here but with the engulfing moving sharply up passed the previous low, its starting to look like a bottoming pattern already.

Comment:

Well TLT has fallen below the blue band with quite a volatile slump, and so if it does bottom in this area I will be taken notes of the ratios. Other technicals suggest this is a bottom and my gut says I should hold my position and eat bacon, so I'm going to listen to my gut for now.

Comment:

Divergence coming in on the 1H and back in the blue band. This is starting to look like it will reverse. 🐖 🥓

Comment:

Boom! 💥

The reversal is on.

Comment:

TLT closed last week with a big bullish hammer where the close is just above support. And it may trickle down for some further shenanigans, but if there is consolidation above support next week then it is probably the end of the beginning for this trade.

Comment:

Well the monthly candle closed and this trade is going very well. Monthly candle is a big shooting star of which my put was bought right near the top of the wick.

From here a 1:1 fib time extension takes the next wave to spring 2023. I'll be keeping on eye on it but other than that just let it fly from here.

Comment:

Comment:

And on TLT the monthly candle printed a long wicked hammer reversal candle with the lower wick piercing my blue band.

Comment:

TLT finding some legs to close the week with a big bullish candle.

Looks good now 😁.

Comment:

This is looking far too impulsive to the downside for TLT and so I have exited my TBT position and far too risky to hold. It could be that the unthinkable is about to happen and bonds collapse and yields break out. Whichever i'm GTFO of the way for now and if it settles down may re-enter.