Shorting The Euro: Breakout or Further Consolidation Squeeze?

In the past 8 trading days we have seen much volatility in the in market due (primarily) to the banking/debt crisis in Europe. Overall with all clear an increasing bearish outlook for the EU's financial situation, which i will not go into depth or detail that is for a macro-analysis article, i decided to investigate the ETF EUO (Pro-Shares Ultra Short the EURO). More-less i believe the EU is poised to have a de-valued Euro, due to the economic cascade, and eventual first domino to unfold in the region.

The charts typically do not lie, so i analyzed EUO's price history and found a few current and developing Buy Signals.

Above we have the set-up for a incredibly reliable (92% Bullish-Breakout) Bullish Descending Wedge.

The wedge, while visibly apparent, is technically incomplete. The rule of thumb 5 reversal points must touch the wedge channel lines in order to have a confirmed Declining wedge.

So far EUO has touched the channel line 4 times, leaving the 5th, in my opinion to occur between the 16.75 to 16.55 price range. I believe that further consolidation and sideways trading are yet to come...to form the final breakout area of EUO upwards. Looking at oscillators in a sideways trading range is necessary when determining the breakout-direction.

Lets see what we have above via Oscillator Analysis.

• Bollinger Bandwith close to approaching the 0.0 Buy signal line but also shows that sideways trading poised to breakout shortly.
• Bollinger % B also close to approaching the 0.0 Buy signal line also.
• Stochastics Show that EUO is closing in on a buy signal but not quite there. (in accordance with my analysis it has some room to pull back yet)

More Oscillators for analysis.

• CCI shows EUO to be oversold, suggesting a buy signal.
• ADX shows a new trend is soon to take place.
• Directional movement doesn't not support any bullish confidence, but DMI is also very mechanically trading based and is very lagging.
• MACD tells us we have some room to fall yet, but a reversal also seems to be in the works.

All in all its clear the Bullish Descending Wedge is in current formation, further consolidation and side-ways trading will continue for a short time frame. All oscillators suggest EUO is oversold. All Trend-Directional Movement indicators suggest a major reversal trend is due to come as well.

Taking a position now or waiting for further confirmation is trader discretionary, but regardless its pretty apparent, based of Europe's situation that EUO is a long call.

Position: Long EUO