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I spy a setup in Sina (SINA) -- a Fibonacci price cluster zone that just happened to be tested in Tuesday's session, apparently on some fundamental news. Regardless of that news, I am a technical analyst, so let's focus on the technical buy setup and the parameters we should be watching for a trade in this stock. Sina is a major component of several ETFs, including Guggenheim China Technology ETF (CQQQ), and First Trust ISE Chindia Index Fund (FNI) and PowerShares Golden Dragon Halter USX China Portfolio (PGJ)
First, if we take a look at a daily chart of Sina, we'll see a double-bottom was confirmed against key support on Jan. 11 as shares took out the Dec. 23 high. This was the beginning of a new bullish pattern in the stock, and it's illustrated on the daily chart below. That bullish pattern remains intact now, and it will do so as long as the price continues to hold above the Feb. 23 swing low.
Other support levels have come in above the Feb. 23 low, though the price did not end up holding above those prior zones. The price cluster zone we are looking at now came in between $63.06 and $64.72. This zone includes the coincidence of a 0.786 Fibonacci retracement, a 50% retracement a 100% price projection and a 1.272 Fibonacci extension. A low was made March 27 at $64.21 -- directly within this key zone.
Note that the prior swing down into the Feb. 23 low was $17.46, and the most recent swing down into the March 27 low, at $16.59is very similar. We will often see market reactions at these symmetry projections -- that is, swings that are similar or equal. This is one of the reasons I really like this zone in Sina. Since the price held above the cluster zone, we wanted to start to look for price triggers that suggested it was worth placing a bet against this key support. If the price does continue to hold above this zone, the upside potential comes in at the $85.31 area, which is listed as target 1 on the chart. The risk-reward ratio is healthy here.
Note that, early in Tuesday's session, a day trading trigger was the first to fire off after Sina held above this key price decision. Later in the session, that was followed by triggers for a swing trade against this same zone on both the 15- and 30-minute charts. For more information on triggers please refer to this prior informational piece on the subject (available to ETF Profits subscribers).
Now, since the triggers have already fired off and we've missed the initial entry, what we can do now is to look at a pullback to the most recent low for a possible entry. Our risk on the trade would be defined as either below the low made prior to the buy trigger, $64.21, or just below the low end of the price cluster zone -- that is, below $63.06 by a decent margin.
The most ideal areas for a pullback entry come in at the $66.59-to-$67.48 and $65.46-to-$65.61 areas, though the pullback entry does not need to be as precise as the entry for the initial trade setup. I am considering buying some calls as long as price remains above the March 27 low. If, instead, this low and the key support described above is violated, I'll be backing off the buy side until further notice and that trade setup will have been negated.