XME

XME is an interesting ETF. It has bounced for the past three days and is now above its envelope. We can see that past 3 days bounces offered a weak continuation before a breakdown.

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We can see that the trend is clearly down. It might start to turn here, but we will only know it later. As of now, the test of a short trade at the close of yesterday shows a good R/R ratio.

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The sensitivity analysis also looks positive

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The above stats only measure the data related to a continuation of the downtrend. We however still should consider the possibility that this reversal will continue.

This is what the Materials sector MF is probably telling us. As of now, I would not short XME, but would probably buy pullbacks if the MF is still above the 0 level. However, as soon as the MF crosses back below 0, I would test a short trade using the breakout calculator.

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The above analysis tells that it is important to use different type of tools in order to have a good understanding of the dynamic behind an instrument.