First Trade - What Now?

Yesterday I posted about how I had an opportunity to sell for a thousand profit but opted not to. My reasoning was that I anticipated additional downside in the next few trading days. In today's premarket around 8:30 am, price fell to 17.84 and is now at 18.93. Overall, I'm up $1200 or just shy of 8.6% in one trade. The ideal move would have been to sell yesterday and buy back again today in the morning - so that is one strike against holding. However, there is no guarantee I could have timed it perfectly. With that said, this my rationale for why additional downside can occur.

Looking at the Russell 2000, we can observe that price has made a lower high in the few weeks and is generally weak. The highlighted black box below is important because it shows us that price has been following it very closely. We can see that back in Q2 of last year, price behaved very well to the box, bouncing as support off the low end. In the present, price is also behaving to this 8 month old pattern. Price now is bouncing off the upper red line. Note, that this is highly improbable to be due to coincidence alone - somehow, the entire behaviour of the market as a whole has created this orderly pattern. Our job is to exploit it. What I am targeting is a continued move down back to the top red line of the box. The best case would be to break below the entire box, but that is unlikely and too far to forecast at the moment.

The chart below is the daily chart for the last few weeks. Looking in the last few days we can observe something very important. Price had fallen, touched the upper red line of our black box, bounced, retested it and moved higher to candle stick A (in the right chart).

Candlestick A - Investors bought up shares on good news, then sellers came in and pushed the price even lower than the previous day after making new highs. Very bad news if your looking to go long

Candlestick B - Price fell further in the day on Wednesday, but managed to claw its way back up. This means either that buyers came in at the lower prices or sellers eased their selling pressure. Price closed up for the day.

Candlestick C - Today, Thursday, price opened up at or a bit higher than the high of the previous day. Sellers took control or lack of buyers removing the floor resulted in price falling even further. What this signifies to us is that the buyers who came in yesterday have lost their money, they have either exited or are holding out for a move back up. Furthermore, new buyers will be wary of entering just yet, that is assuming there are still enough new buyers to continue the move up.

Overall, what we can conclude from this is that there is a more than 50% chance that price will move down to test that support level. At that spot, TZA will be at about 20.35 which represents an additional $1400 dollars in profit for my position. Anything over 50% is a trade worth taking, but I'm still not convinced.

What If I'm Wrong?

One should always have a plan prepared as to how they are going to react when they are wrong. The biggest problem is positive job numbers tomorrow and good unemployment rate that will send shorts scurrying to cover and side line longs to buy the dip. That would be disastrous to my trade and would most likely lead me to liquidate. However, the allure of the money now and the possibility that the job numbers are fudged tomorrow are leading me to sell more likely than not by the end of today. By the end of today, I will either reduce the position by half or more, or liquidate it entirely.

Edit - Liquidated the entire position and waiting until after unemployment reports tomorrow for further action.