The recent swings in the market have left plenty of investors wondering what they should do. Is it time to bet on stocks, or is it time to bet for a farther fall? Well, that time’s over – with stocks right underneath a key resistance level, we could be in the midst of a reversal to the upside. Here’s everything you need to know to profit from it…

Tuesday was day two to the upside of the potential Elliot Wave B Wave up. There is an old trading adage that comes to mind right here: On the third to fourth day, watch for a reversal.

This is also why an “IBD O’Neil follow through day” – a strong signal that a rally is set to ensue, based on research conducted by Investor’s Business Daily – takes place on the 4th through the 7th day after a correction. If the market is going to fail, it’s usually going to happen before the 4th day. At the rate we are climbing, the 50-day average and the 50% Fibonacci level are just a day away…

On your mark, get set, wait.

Fibonacci retracement levels, which mark mathematically significant price levels between a stock’s short-term high and low price, are a very important factor to consider. They show us significant levels of support and resistance.

Let’s look at some upside levels per Fibonacci theory. In addition to that, we’ve also got overhead supply and the 50-day average to deal with too.

Said another way? There’s upside resistance all over the place.

Notice how we are fast approaching the 38.2% Fibonacci level? If we are going to the 50-day average we need to get through this level first. At the rate we are going, it’s going to be one more day and we are there — or at least in the zone. Then we have some choices: Wait to see what develops or start to lay out some probing positions in the Inverse Index ETFs and select individual issues on the short side.

Inverse Index Action ETF’s (Short Selling Exposure for IRA’s)

Recently we talked about Elliot Wave ABCs to the downside. The flipside to that are – not surprisingly – ABCs to the upside. If the indexes are in the process of building out potential ABCs to the downside then it stands to reason that inverse ETFs would be building out ABCs to the upside.

If you know about myy longside set-ups, then the short side set-ups are just as easy. Essentially the short-side patterns are long-side patterns that are inverted. That’s pretty neat, and keeps it simple.

Each of the inverse ETFs are pulling back off of their highs right now, just setting up a prime time, low risk buying opportunity which allows us to have short exposure in our IRAs.

So the next couple of days, I’ll be looking to deploy cash into individual stocks that are setting up on the short-sell side and to buy inverse ETFs on the longside.

Sincerely,
David Grandey
AllAboutTrends.net

February 3, 2010

David Grandey

David Grandey is the founder of All About Trends, an email newsletter service revealing stocks in ideal set-ups offering potential significant short-term gains.  A successful canslim-based stock market investor for the past 10 years, he has worked for Meriwest Credit Union Silicon Valley Bank, helping to establish brand awareness and credibility through feature editorial coverage in leading national and local news media. Special Report: Imagine Getting Rich as Ignored Stocks Soar- How you could turn $200 into $1.2 million!

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