When to buy VXX? Key rev. level is 16,10Trading the most popular VIX based ETF is as tricky as trading VIX Index, or the volatility curve itself.
If you are wrong on timing, the curve contango (roll down, negative cost of carry) kills your long position very quickly.
But if you catch it at the right time, your gains will be extremely nice and quick.
Daily:
- Ichimoku setup is still bearish, but Kijun Sen came lower to 16,10. Buyers have to watch this first key level.
- Heikin-Ashi gives mixed signals, but there is some positive divergence in haDelta/SMA3
- EWO is bearish, but here a positive divergence has been building too. Maybe it reflects a slow bottom building in VXX.
4H:
- Ichimoku setup is still bearish. Key reversal level is marked by Senkou B and 100WMA: 16,10+
- In terms of price action we have one important thing: Price could not make a lower low. It worths to watch, as the flattening and thinner forward Kumo may also suggest we see some form of bottom building here.
- EWO is bearish, but again, we have a positive divergence.
Strategy: You can try to do bottom fishing in 14,60-15,00 zone, but the good risk/reward trade will be if you buy the 16,10 breakout, as by then the setups will reverse towards bullish, and your chances to make money on volatility surge will be better.
Basically you have to watch for following bullish signals on 4H: Price/Kijun cross, Tenkan/Kijun cross (weak or medium), Price/Kumo (and 100WMA) cross, Chikou/Past candle cross. They will follow each other in this sequence :-)
