RUSS and Copper

Not much going on now. RUSS is creeping up again, will add short positions on further ascents. I've already sold two thirds of the previous positions.

Copper is looking for a bottom but doesn't look quite there yet. At least I don't feel comfortable to enter a position yet. When I do it will be though Copper ETF JJC.

Is there anyone out there?

I've been writing this blog since last August. Sinse then my portfolio has gone up by about 50% which I think is pretty good. I've done a lot of predictions and I would say a large majority of them accurate. I almost never do any follow up on predictions that turned out to be profitable, I take the profit and am happy. I usually do follow up posts when my predictions fail or as I see it takes a little longer than expected to materialize. With the style of trading I do patience (shorting bubbles) can solve an initial wrong guess. Anyways, from time to time I wonder is there anyone out there reading this blog? I can see in the stats that there is. If your not a bot just say hi or whatever in the comments section, it would totally make my day to see anyone reading this blog. If not then I guess I'll continue making my predictions for all you web spiders out there. Writing this blog has helped me tremendously in fine tuning my trading skills and I can recommend it to anyone interested in becomming a better trader to do the same.

My new favourite ETF pair

Natural gaz ETFs UGAZ and DGAZ are like two sibblings fighting it out each day with daily movements of 5% or more not uncommon. This creates a lot of volatility drag which means I don't even have to know which direction these ETFs are going to make money, I can just short them both. Who said trading isn't easy? But as always limited bet size is a must, after all one of them might win big over a period of time and that could make severe damage to the portfolio if the position is large. For now I have about 2.5% of portfolio on each of these.

RUSS Update

So far I've accumulated a position of about 18% of my total portfolio size shorting RUSS. Looking at this chart I'd say that is probably a little too conservative.

Managing bet sizes is the key to successfull trading and it is better to too little than too much. Still, I'm hoping for an overshoot of yesterdays top today so I can dig myself in even deeper before this chart comes crashing down again. This style of trading almost seems too easy now that I've done it for a while. I hope it's not going to bite me in the ass one of these days. :) If it goes up significantly from here I'll go long a straight Russia ETF. I'm prepared to use the other 80 percent of my portfolio and leverage on top of that if needed.

At this level I'm only few percent down on the RUSS trade and about brake even on the TNA trade. I'll be glad to reduce my short position in TNA as it is a risky bet but I would like to see at least a little profit first.

It's time again

To start shorting Russia ETL RUSS. Limited bet sizes and accumulation on further moves up.

Devils advocate

I'm going to play devils advocate for a while and repost the same charts as in the last post but with the trendline drawn as a support floor.

I have to admit most of these charts looks smoother than the previos ones. Regardless of this they are starting to get pretty steep. However it clearly shows that there is a lot of danger at shorting at these levels

Basic materials touch of resistance

Another touch of resistance shows up in one of the long leveraged ETFs. If anyone wonders why my resistance lines are curved it's because A, I'm using linear scaled charts and B, my curved resistance lines usually works. It's as simple as that.

So take a look at daily materials:

Daily materials is a sector that requires a large amount of capital for the companies that operate in the sector and because of that is one of the most sensitive sectors to deflation. If MATL tops here it means that deflation expectation will increase from this point.

Market leaders such as healthcare and biotech has already fallen several percentages from their highs having touched resistance at previous positions.

I keep redrawing the trendline for TNA (Small Cap Bull 3x) but regardless of the exact location of the trendline it still looks like a touch of resistance as well. 

Because of these reasons I am still short some of the leverage long ETFs. I always prefer to be short inverse leveraged ETFs since shorting the long side is riskyer. But sometimes it is too tempting to time the long side. I use limited bet sizes and have a preparedness to call it quits should it turn further against me.

Leverage

I make money on stocks mostly by shorting leveraged ETFs. It has sometimes been said that all leveraged ETFs go to zero given enough time. That's not entirely true unless enough time is an awful long time. Here's an interesting article on the subject:

http://ddnum.com/articles/leveragedETFs.php

Leveraged ETFs can be held long term provided the market has enough return to overcome volatility drag. It usually does. For most markets in recent times the optimal leverage is about 2. But some markets and time frames will reward a leverage of up to 3. No markets will reward a leverage of 4.

 It's not as easy as picking a leveraged ETF to short and then holding on. Timing is essential, and volatility drag higher than return is needed. That's why shorting inverse leveraged ETFs are superior to shorting long leveraged ETFs. Markets tend to go up over time and if the go down they do so in a more volatile pattern. In markets where there is a lot of volatility, like natural gas, it is safer to short the long leveraged ETFs then it is in low volatility markets, however it will always be prefered to short inverse leveraged ETFs. Most important of all there has to be a technical setup, a more or less educated guess about the future direction of the ETF. That is where the blow of top pattern and the related testing of resistance pattern helps.

To summarize. 1. Find the technical setup 2. Weigh the technical setup against A, expected volatility and B, the direction of the leveraged ETF (inverse to be prefered). If it looks good then trade it and always leave some ammo dry for even better setups.

RUSS Update 2

Closed half of the position I took in RUSS for a quick small profit. Sold at 21.80, bought at 20.40.

RUSS Update

RUSS is expected to open around the 21.70 area, about 25% up from Friday. This level fits well with the previous floor line. I intend to initiate a short position at this level at around 5% of total portfolio size if RUSS is not totally out of sync with RUSL, the leveraged Russia ETF of opposite direction. The fundamentals doesn't look good for Russia with uncertainty about the Ukraine crises expected to continue. But fundamentals should best be ignored in order to have success in technical trading.

Russia

As dissapointed as I am about the ongoing events in Ukraine and what real implications it might have for the people there it is an interesting development from a charting standpoint. I was watching the chart of RUSS on Friday thinking this chart is starting to behave as my favourite pattern. It is a reverse leveraged chart and it's starting to produce a peaky pattern. This is where good money can be made. But it also looks like this chart wants to go higher before it turns and for that to happen it needs news. Well news came during the weekend that Russia is preparing to possibly attack Ukraine. Exactly what will happen no one knows and I hope for the best. RUSS is now a top priority ETF that I will watch closely for the right time to enter a short position. I also wanted to show a chart with a long time frame to show what extreme moves could be possible in RUSS. Patience and limited size bets are essential ingredients as always in order to continue to make money on trading.

TNA Update

TNA is creeping higher and I am now in the red by about 6% on this trade. I still believe in this trade and I'm sticking to it. (Condidering I rarely make a loosing trade, I usually just wait it out) The resistance line has been adjusted higher which speaks even more for a bounce back sometime soon. It even looks like a megaphone pattern is forming. The market has a harder time deciding on a price and volatility is increasing. This is good for those of us that like to short leveraged ETFs. I'm adding to the short position at 83.30 if it goes up there. It is however always good to be aware of the risks. This shart could still go up steeply from here and build a classic BOT (blow off top) pattern. I won't stick around for long above 83.30. If it doesn't turn shortly I'll probably cut the losses.

Biotech bubble is ready to pop

I've been following biotech and it is the one sector with the most bubbly pattern. It is now at a place where shorting is very likely to be profitable. It's impossible to say if this is a long term top but it looks at least as a short term top and that a profitable trade can be made from here.

Brazil is the last dog market

Now that the precious metals and miners have recovered the only short leveraged ETF with a price at least 100% above it's lows is the Brazil ETF BZQ. It's in a long drawn topping process. I am already in a small position and will continue to add short position on further ascents.

Is the market topping?

TNA has been one of the leaders of the long leveraged ETFs. It sure looks to me as a clear cut case of "touch of resistance". Similar charts are showing up in other long leveraged ETFs. It is risky to short long leveraged ETFs but the chart looks good enough for a try here. The risks are that the market doesn't care about the touch of resistance and just continues up. I don't think that will be the case here. The touch of resistance looks so clean and the last days of getting here is showing an exponential curve which is what I want to see in a scenario like this. The other risk is that the market tests the resistance line serveral times and this is only the first. That chance of that happening is large. Still, the chart should bounce down from here before it can test it a second time. There is also a third risk that the line drawn below is not the correct line and that it should actually be steeper which means the touch of resistance would happen at a higher position than below. But I think this is close enough to initiate a position.