Here's the most recent ETF Junkie letter giving you an idea of what to expect when you subscribe to the ETF Junkie Letter, besides profits of course:
ETF Junkie January 31st, 2016 Current Action: Buy 5% LABU @ 7.01 Raised stops on ERX to 16.69 and SPXL to 65.49 The first month of 2016 is in the books and the Junkies are rolling in it. If you followed the simple nightly instructions, you are up 8.56% for the month, with three current open positions up double digits. It doesn’t matter what the economy is doing if you just follow the price action. We are going to add a small position in the LABU on Monday morning. XBI has been a laggard in this recent up move and is still oversold. This is a dangerous sign long term, but with the expectation of the broad market rally to continue of a week or two, we are going to attempt to capture a short term move only to the most recent resistance.
Because of the volatility in XBI, that resistance area is almost 10% away, which means LABU should bring us a gain of close to 30% if we aren’t stopped out. Because of this volatility, we are only taking the small 5% position. And if filled @ 7.01 we’ll put in a sell stop at 6.49.
That was a huge rally on Friday, and there may be a slight pull back before it resumes over the next week or two into our target area. We are staying long SPXL and may look to take half off when it gets into the low end of our target area around 1967.
Energy also had a huge day on Friday arriving at some resistance. Even though Energy is getting into overbought territory, we are going to continue to hold expecting XLE to reach a major area where the 50d moving average, 50% retracement, and volatility stop come into play.
Finally, we’re taking a look at our UGAZ (UNG) position which we failed to add to on Friday. We’ll raise the limit order on another 5% to 2.02, but I'm not tremendously optimistic that we’ll get filled there before it rallies some more and our target is reached. UNG has a ways to go before it reaches overbought levels and good resistance at the top of the upward channel. If you haven’t gotten in yet, and want to be a rebel, you could do half in on the open Monday, and the other half at 2.02.
Current Positions:
Working Orders:
I hope all the Junkies out there had a great first month of the year. This is one of the few times of the year when I watch golf on TV. Torrey Pines is great course, and I always enjoy the close ups of Paulina Gretzky.
Brad Price ETF Junkie
1 Comment
Leveraged ETFs can be Dog Shit. This is true because people don’t understand what leveraged ETF’s are. Leveraged ETFs are short term trading vehicles plain and simple. No layman investor should own Leveraged ETFs expecting to hold onto them for extended periods and have 3x performance. They are not designed that way, and over time the leveraged products price decays compared to the index. Here are some details explained by Jared Levy from ETFDailyNews: "The Mechanics of Leveraged ETFs Leveraged ETFs were specifically created for professionals and short-term traders and most have nuances you must understand before investing even $1 into them. Here is an example, using the Direxion Daily Financial Bull 3X Shares (NYSE:FAS), which is a very popular leveraged ETF. The FAS is purported to return 3X (300%) the movement of the financial sector index on a daily basis, which it can do so, but not all the time and not if held for a duration longer than a day (yes, a day). Here are some nuances of the FAS:
The Devil Is in Daily Rebalancing Most leveraged ETFs get their leverage only for the day and then at the end of the day, that leverage resets, which can hurt you in the long term. This is the biggest profit siphon when investing in a leveraged ETF. *Check out what happens if the Russell 1000 index moves up 3% today and drops 3% tomorrow and you are long the FAS. If you bought FAS today at $30, it would move up about $2.70 (9%). At the end of today, the ETF would actually take those profits and invest them the next day starting fresh (this is rebalancing). So tomorrow, you now have $32.70 invested at three times leverage, so if the Russell index then drops 3%, the FAS would drop 9% (of $32.70) and you would now lose $2.95, leaving you with a net loss of $0.25, even though the underlying index is actually flat." Or we can show you visually. Below are charts for the Russell Small Cap ETF (IWM) and its 3x version (TNA). Notice how from 12/31/2014 to 12/1/2015 IWM is up fractionally (not including dividend) while TNA is down 5% without a dividend. In short, leveraged ETFs should only be traded by those who know what they are getting into and do not expect to hold for an extended period.
Remember to subscribe to the ETF Junkie Newsletter over on the right side of the page.
I put together a list of the most popular 3x Leveraged ETFs sorted with their tracking ETF/Index:
Here's the most recent issue of the ETF Junkie Newsletter. If you like it, you can subscribe under the newsletter tab above.
The Tech Sector took one on the chin today with the FANG stock getting hit as well. WIth the breakdown in XLK, it broke through the neckline and closed below the 200d moving average. We have to keep an eye on this to make sure it's not a bear trap, but if it continues to break down, the newsletter may want to take a short position by buying TECS.
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AuthorBrad Price, the founder of ETF Junkie, has more than 15 years experience trading the markets. Archives
May 2017
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