Saturday, July 18, 2009

EWT - Upward Channel

Okay, back in the US now (I'll miss you Taiwan!)...

A quick update on EWT:

On the 60m chart, we've established a new upward channel on EWT. If we break above the $11.05 78.6% retracement level off the June 1st highs, we may have to reconsider my previous assumption that EWT is resuming the downward trend on the larger picture (in this bear market). A break above $11.47 (previous highs) would be really bullish, and that will definitely make me bail on my Sept 10 Puts. Those puts are already trading at only $0.25, my cost at $0.79- taking a large drawndown right now. I'm very tempted to exit for a loss if we get above $11.05, and re-entering upon better probabilities that lower prices are in-store for EWT.

Edit: Taking a step back and looking at the daily chart on the 2 year time frame, I had previously drawn the retracement levels from the highs and lows on the 2 year chart. The $11.05 is now more important than I thought. Look below:

We have a short ambush (50% retrace) on this time-frame. As we know, the larger the time frame, the more important the levels and moves become. I may consider entering EWT puts on my secondary account at this juncture. The reward/risk here is decent. Enter short with stop, say above $11.10. A better entry with excellent risk/reward is wait for low $11s and short, with stop above the previous interm high at $11.59. Will update as always if I take the trade.

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