Just for a change of pace and to practice my skills on something other than mining stocks, I decided to take a hard look at about 100 Exchange Traded Funds (ETF) and see how the market looks going into next week.
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The ETF's with the most compelling setups were invariably those with a bearish bias. So I have got to imagine there will be some downdrafts in the stock market this week.
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This first chart is Direxion Daily Real Estate Bear 3X (DRV). Now if I were to buy this one in the upcoming week, the 60 minute chart (not shown - but you can make your own at FreeStockCharts) would have to show me a new attitude. At the moment, the True Strength Index (TSI) indicator says price will continue lower, at least initially, on Monday.
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Click on the charts to ENLARGE
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This second chart is Direxion Daily Emerging Markets Bear 3X (EDZ). This one needs to move higher at least 5% just to fill a little gap left open from 5 or 6 days ago. The hourly TSI looks pretty good so if I saw price and the TSI turn north after the open, I would be inclined to buy.
This third chart is Direxion Financial Bear 3X Shares (FAZ). Believe it or not, I have a true aversion to having anything to do with trading anything related to the financial stocks. Call it a bad attitude on my part, I guess. That sector seems so incredibly rigged that I just refuse to screw around with it. But for the reader with a better attitude than mine, this could be worth keeping in mind.
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The hourly TSI charts says downside momentum will be a problem on Monday. To buy this I would have to see the hourly chart get it's act together. If FAZ trades down to $13.00 fairly quickly, that will put a nice positive divergence in place and I could be a buyer of that.
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This fourth chart is Direxion Daily Latin Amer Bear 3X (LHB). The hourly chart on this one has been strengthening for 5 days now and I would be kinda surprised if price holds still much longer.
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And finally, the sixth chart is Technology Bear 3X (TYP). Like so many of the others above, the 60 minute TSI would not encourage an immediate purchase of this. If/when the 60 minute has either a trend line break or a significant positive divergence in place, THEN this could be a very nice BUY.
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To wrap up my little exercise session, I would suggest the stock market could be in for some bouncing around this week. I would not have the immediate confidence to buy any of these 6 on the open Monday, unless perhaps the market opens with a very significant gap to the upside. Even then, I would definitely give it careful thought. I do however think if a person monitored these 6 this week, there would be good opportunities to make 5-10% on any one of them.
Price erosion in leveraged ETF's is pretty bad.
ReplyDeletehttp://seekingalpha.com/article/127365-leveraged-etfs-handle-with-care
I hope you won't hold them for more than a couple days.
Yeah, the 5-10% I may attempt to make on any one of these would definitely be a surgical technical maneuver, not a buy and hold until Christmas type of thing.
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