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Yesterday, on above average volume, the ProShares UltraShort Euro (EUO) gapped below its 50-day MA but recovered to close near session highs. With this “undercut” in place, EUO is now positioned for a possible recovery. Although it is too early to make the call for a long entry in EUO, yesterday’s price action has put the first piece of a potential long setup in place. What we will be looking for now is price stabilization at the current level and the formation of a setup that will give us the proper reward to risk ratio, in order to enter the trade. The pink candlesticks represent the type of price action that would provide an opportunity for a potential long entry. An “inside” candle followed by a false breakout would be just what the doctor ordered. Then, a move above the high of the false breakout candle would give us a legitimate entry.

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