Strategy Description: This pattern effectively showed up twice today, but the main one was on DUST/NUGT so will go through that one and use charts for it. It certainly isn't required for the ETF to be leveraged, but that seems to help the definition of consistent trend. I mean if a 3x leveraged fund is trending consistently then the sector must be having a pretty consistent trend.
Background: NUGT has been on a bit of tear and is due for a pullback. But it's not just as simple as shorting an overextended gap up and riding it because it usually gaps up everyday. You can get some nice shorts off, but there's really no opportunity to size in aggressively on gaps.
However as it consolidates tightly (in this case to the lows, but equally as good to the highs), can short as it makes new lows and makes lower highs going into the breakdown. Remember that it is an ETF (and a leveraged one at that) so annoying wicks are quite likely. This chart demonstrates it pretty well. So stop-loss really needs to go above the consolidation high.
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