What's NEW and Trade Updates/Closings

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UPDATE: CLICK ON THE PICTURES TO VIEW THEM BIGGER

Been busy the past several weeks. I'm currently transitioning from the large firm I'm currently working for, to a smaller hedge fund. I've closed out just about all my sector mutual fund trades that I mentioned several weeks ago, and below I'll go through each of the setups and why I took them and how they resulted from a P&L standpoint. I basically look at the sector ETFs in order to get trading ideas, and then try and find a mutual fund that should correlate very closely to the ETF (again, I've been forced to trade mutual funds because of my firm's short-term trading restrictions from trading anything that trades intraday).

So... now, onto the trades!

US Treasury Futures/Interest Rates
First, an update of the US Treasuries trade that I have discussed endlessly in the past few weeks both from a fundamental and technical standpoint. (Scroll down a post or two to see the initial technical and fundamental analysis I did on the interest rate market.) No real update on the analysis. My inclination about the Fed not being as comfortable with inflation as the rates market indicated over the past couple weeks all came to fruition this past week when the Fed said they are still slightly concerned with housing, and inflationary aspects of the economy--which then caused the bond market to sell off fast and swiftly as I was predicting--Again, sure wish I was trading the futures with this trade, but I was stuck trading the ridiculous RYJUX fund inorder to profit. See the chart in the previous two posts--with my entry and exits were discussed in previous posts below from a couple weeks ago... I basically profitted from entering the trade when the 10yr was 4.55% and exiting when it was 4.76%. Anyone who trades interest knows that capturing a 21 bps move in a short period of time doesn't happen everyday. I really liked the discipline I showed on this trade. Namely, 1) taking a small position at first, 2) having the position go against me, 3) doing the fundamental research again to support my technical analysis to keep me in the trade, and 4) having the convicion in my analysis to put on another position at a better price, and of course, 5) taking my profit quickly once I caught the swift move in my direction.

Large Cap Biotech ETF (symbo: BBH)
This was my best trade from a "worked as expected" standpoint. The setup here was purely technical. Sellers (ie: excess supply) seemed to consistently dry up quicker and quicker as the BBH has had its downmoves over the past couple of months. This was telling me that the supply/demand situation for the traders in this space was starting to tip into the favor of buying demand stepping up, rather than sellers (and supply) continuing to send the price of the BBH (and its underlying constituents) down to lower levels. Also, in the chart below, notice how volume was when the BBH moved down, while volume was much more on moves up--just another supporting argument for demand outstepping supply as the BBH has been trading the past month. This description and supply/demand analysis pretty much defines why technical analysts jump into "Flat-top Triangle" patterns whenever they get a chance!

Typically if I had the ability to trade intraday, and with more flexibility beyond the mutual funds I am stuck with, usually I like to anticipate that the pattern will end up working out with a small size trade and initiate positions as it sells down to the lower uptrend line, and then piece out of it a bit as it bumps up against the upper support line, then if it breaks out, I will add an additional position. I don't really have a clue WHEN (or if) the chart will breakout, but I can still grind out short-term trading profits while it trades within the range of the pattern--and then if/when it breaks out (like the pattern and supply/demand suggest it will), the profits from the breakout will just be icing on the cake. On the flipside, if the pattern does NOT hold, and the pattern sells through and breaksdown below the lower uptrend line, then I would get out of the positions, and the intention from my strategy standpoint, is that the small profits I grinded out will trading the range of the pattern, will make up for the loss if the pattern breaksdown. Obviously, in this case of the BBH, the pattern held (ie: Did not breakdown through the lower uptrend line), and it turned into a nicely profitabel trade-both as it traded between the pattern range, as well as when it brokeout to the upside and traded straight up to the next upper resistance line (at 190).


Basic Materials ETF (symbol: XLB)
Very similar setup to the BBH. So I'll just show the chart...

I did not get the breakout to the upside as I did with the BBH, but I captured a quick pattern range bound profit. I decided to exit the trade because Alcoa (AA) is the largest weight in this ETF and they reported a horrendous quarter (as they have been known to do the past 3-4 quarters-will mgmt there ever get a clue?) Anyway, the pattern still looks good but I just do not want to be in a sector trade where the biggest weight in the ETF/fund is a poor performer... This actually begs the question for a good trade for those capable-why not buy the XLB and short AA against it perhaps on a ratio with a net long bias?

You can see the XLB chart above with my entry and exit points (I used the fund RYBIX to trade this for my own account).

Regional Banks ETF (symbol: RKF)

Again, a very similar setup as the XLB and BBH trades, except that the "Flat-top Triangle" breakout is occuring at the RKH 52-week high area, rather than at a local low point (like in the BBH, and XLB setup). I used the RYKIX fund to trade this ETF in mutual fund world.

Eventhough I got the breakout that I was looking for, and as the pattern suggested, I decided to exit the trade because I did not like the volume follow through on the breakout. I basically would have liked to have seen more buying volume on the breakout. Since I anticipated the pattern correctly, I was able to catch a quick profit, with a very low risk (because my stop in all these setups all go slightly below the lower uptrending line (I usually give it some leeway because of the floor traders who like to "stop-hunt" the technical traders who just place their stops 1 penny below their trendline. 1 penny below their trendline?? This business is not that scientifically precise-especially with trendlines that can be drawn with easily 10 cent to 25 cent variations depending on the trader.) For 100 dollar stocks/ETF's like the RKF, I like to use a stop of about 50 to 75 cents below whatever support/resistance trendline that I am using-this allows me to stay out of the whipsaws and being taken too early out of a good trade setup.


Oil Service ETF (symbol: OIH)
Who hasn't noticed the dramatic selloff in oil? Wouldn't you have liked to catch a bit of the selloff on the short side? Here's what I did. Notice, that I missed the brunt of the move down, but I still was able to capture a nice sized move over just a couple of days from a very low risk trading setup after the OIH market had already shown its hand.

Here is the chart setup with entry and exit point that I used (I used the fund SNPIX in order to get my short exposure)...

On a similar note, I think a very similar setup is in play right now-I actually just got short again at this level, with my stop/evaluaion to close the trade if the OIH closes at a price above the 132.50 level. My profit target is around around 120 or even as low as 115 in a washout sell out low scenario-2 point potential loss, 10 point potential reward-a 5 to 1 risk/reward ratio is a beautiful thing.