Why actively trade ETFs?
- Thread starter deronwagner
- Start date
Hi Mir,
Glad you like it. I will post articles on this site about once a week.
Happy Holidays,
Deron
Glad you like it. I will post articles on this site about once a week.
Happy Holidays,
Deron
Quote from Mir:
Deron,
Excellent thread, very rich in information. Bravo and thanks !
Yeah, SPY bounced off the low of Dec. 13, forming a perfect double bottom. The problem is that it is now positioned to form a head and shoulders with the neckline being the low of today and Dec. 13, the head being the highs of Dec. 16 and 17, and the right shoulder being formed on any rally attempt today.
Looks like SPY is trying to hang on to 50-day MA too.
Deron
Looks like SPY is trying to hang on to 50-day MA too.
Deron
If anyone who follows this ETF trading thread is interested, I will be presenting a FREE live mini-lesson entitled "The Power of Trailing Stops" on Monday, December 23 at 4:15 pm EST.
The live lesson will be presented in our online ETF Real-Time Room and will consist of a 45 minute lesson followed by a 30 minute Q&A session.
To attend the mini-lesson, e-mail me for login details. We will reply to your email no later than 12 noon EST on Monday.
Thanks.
The live lesson will be presented in our online ETF Real-Time Room and will consist of a 45 minute lesson followed by a 30 minute Q&A session.
To attend the mini-lesson, e-mail me for login details. We will reply to your email no later than 12 noon EST on Monday.
Thanks.
Out of all the ETFs we follow, one of the most notable technical events that occurred yesterday was that BBH (Biotechnology HOLDRS) finally rallied and closed above its 200-day moving average. The last time BBH traded above its 200-day MA was in March of this year. In addition, BBH has started to breakout from its cup and handle pattern on the daily chart. There is a little price resistance around 92 on BBH, but once it breaks that, we expect a strong rally in that index over the next several weeks.
We are finally noticing money flowing back into the Biotechnology sector for the first time in almost a year and that is bound to spur a rally. Many of the individual players in the Biotech index either broke out yesterday or are very close to doing so. On top of all that, Amgen, which makes up over 30% of BBH, received FDA approval after the close to build a new plant to increase production of their arthritis drug. Although we don't make trades based purely on news, it's great when the technicals already look good and then positive news comes in addition to the technical setup.
We are long BBH from 90.45 (89.77 in the ETF Room) and plan to use trailing stops to capture a multi-week move if it happens. Our initial stop is just below the 50-day MA at 87.75, and we will trail it higher once the move is confirmed.
The chart below shows the breakout taking place in BBH:
This is only my opinion and is not meant to be a recommendation to buy. . . blah blah blah
Happy Holidays!
We are finally noticing money flowing back into the Biotechnology sector for the first time in almost a year and that is bound to spur a rally. Many of the individual players in the Biotech index either broke out yesterday or are very close to doing so. On top of all that, Amgen, which makes up over 30% of BBH, received FDA approval after the close to build a new plant to increase production of their arthritis drug. Although we don't make trades based purely on news, it's great when the technicals already look good and then positive news comes in addition to the technical setup.
We are long BBH from 90.45 (89.77 in the ETF Room) and plan to use trailing stops to capture a multi-week move if it happens. Our initial stop is just below the 50-day MA at 87.75, and we will trail it higher once the move is confirmed.
The chart below shows the breakout taking place in BBH:
This is only my opinion and is not meant to be a recommendation to buy. . . blah blah blah
Happy Holidays!
Quote from deronwagner:
Out of all the ETFs we follow, one of the most notable technical events that occurred yesterday was that BBH (Biotechnology HOLDRS) finally rallied and closed above its 200-day moving average. The last time BBH traded above its 200-day MA was in March of this year. In addition, BBH has started to breakout from its cup and handle pattern on the daily chart. There is a little price resistance around 92 on BBH, but once it breaks that, we expect a strong rally in that index over the next several weeks.
We are finally noticing money flowing back into the Biotechnology sector for the first time in almost a year and that is bound to spur a rally. Many of the individual players in the Biotech index either broke out yesterday or are very close to doing so. On top of all that, Amgen, which makes up over 30% of BBH, received FDA approval after the close to build a new plant to increase production of their arthritis drug. Although we don't make trades based purely on news, it's great when the technicals already look good and then positive news comes in addition to the technical setup.
We are long BBH from 90.45 (89.77 in the ETF Room) and plan to use trailing stops to capture a multi-week move if it happens. Our initial stop is just below the 50-day MA at 87.75, and we will trail it higher once the move is confirmed.
The chart below shows the breakout taking place in BBH:
This is only my opinion and is not meant to be a recommendation to buy. . . blah blah blah
Happy Holidays!
It appears as though the "little" price resistance around 92 on BBH has held up yet again. If you had to do it all over again, would you consider waiting for a breakout from those levels before purchasing? It sounds as though you were planning on holding BBH for a relatively large move (several weeks?). When you take positions like that, do you trade trends? If so, which chart would you be trading the trend on (Daily?). I'm looking at the chart I attached, and I have a hard time getting excited about entering for a trend trade on my chart. To me it appears as though neither the buyers nor the sellers are in clear control of prices.
I am enjoying your thread, thanks.
Banker
Hi Banker,
We just got stopped out of BBH today (although we lightened up on the position yesterday prior to hitting the stop). Let me see if I can answer your questions here:
1.) Would I consider waiting for a breakout from those levels before purchasing if I could do it all over again? No, I would trade it the same way even if I could do it all over again. Although the risk is higher by not waiting for a break of 92, my entry point was low enough that the risk/reward ratio of making the trade was favorable. In addition, we expected a break of the 200-day MA to give it a boost, but it was not confirmed by increasing volume.
If it broke 92, my plan was to add to the position, but that never happened. Therefore, my actual capital loss was limited. I guess you could say it was more a case of position management. I really liked the setup and don't regret entering it. Obviously I am going to be wrong sometimes and I have no problem admitting it.
2.) Yes, I was planning on holding that for several weeks, which is what I also told our subscribers. The target was 102 and the stop was 87.75, thereby giving the trade a risk/reward ratio of about 4:1, which is very favorable for us. With a little help from the broad market, I think we would have seen a big move in the index, but it was not to be. Although most of our trades are held from 1 - 3 days, we occasionally have a setup that we hold for several weeks.
3.) We usually trade trends on our shorter term trades, but this was a breakout anticipation play on the follow-through of a cup and handle. Technically speaking, a cup and handle breakout usually is equal to the distance from the bottom of the cup to the top of the handle.
If the time horizon of holding is several weeks, we will use daily and weekly charts. In this case, the weekly chart gives a much different perspective than the daily chart. In fact, the cup and handle is very clear on the weekly chart, as well as the 20-day MA underneath which is acting as support.
Since the breakout failed, it is still a neutral play, but I am going to keep my eye on it for more confirmation. A lot will depend on broad market direction.
Glad you are enjoying this thread and thanks for your participation.
Deron
We just got stopped out of BBH today (although we lightened up on the position yesterday prior to hitting the stop). Let me see if I can answer your questions here:
1.) Would I consider waiting for a breakout from those levels before purchasing if I could do it all over again? No, I would trade it the same way even if I could do it all over again. Although the risk is higher by not waiting for a break of 92, my entry point was low enough that the risk/reward ratio of making the trade was favorable. In addition, we expected a break of the 200-day MA to give it a boost, but it was not confirmed by increasing volume.
If it broke 92, my plan was to add to the position, but that never happened. Therefore, my actual capital loss was limited. I guess you could say it was more a case of position management. I really liked the setup and don't regret entering it. Obviously I am going to be wrong sometimes and I have no problem admitting it.
2.) Yes, I was planning on holding that for several weeks, which is what I also told our subscribers. The target was 102 and the stop was 87.75, thereby giving the trade a risk/reward ratio of about 4:1, which is very favorable for us. With a little help from the broad market, I think we would have seen a big move in the index, but it was not to be. Although most of our trades are held from 1 - 3 days, we occasionally have a setup that we hold for several weeks.
3.) We usually trade trends on our shorter term trades, but this was a breakout anticipation play on the follow-through of a cup and handle. Technically speaking, a cup and handle breakout usually is equal to the distance from the bottom of the cup to the top of the handle.
If the time horizon of holding is several weeks, we will use daily and weekly charts. In this case, the weekly chart gives a much different perspective than the daily chart. In fact, the cup and handle is very clear on the weekly chart, as well as the 20-day MA underneath which is acting as support.
Since the breakout failed, it is still a neutral play, but I am going to keep my eye on it for more confirmation. A lot will depend on broad market direction.
Glad you are enjoying this thread and thanks for your participation.
Deron
Looks like the DIA short is working out well. My post on November 26 predicted a top of just over 91 in DIA, which is where the rally stopped a few weeks later.
If you are short, I would consider trailing a stop above the upper channel resistance on the daily chart. That could have marked the high for a retest of October lows. We shall see!
If you are short, I would consider trailing a stop above the upper channel resistance on the daily chart. That could have marked the high for a retest of October lows. We shall see!
Hi Deron,
Thank you for explaining your reasoning. When you calculate risk/reward for yourself, it sounds as though you are thinking in terms of: if I'm proven wrong, it will cost this much, and if I'm proven correct I will make this much. The odds of having either scenario pan out (being proven right or wrong), is given less weight. Meaning, if you can take a position which you feel could produce a large gain, or a small loss, whichever way it turns out, you probably take it.
Now with this particular trade, you decided to go long when there was in fact resistance just above where you entered. This resistance wasn't just a one time bout of selling, it had been acting as a barrier to advancing prices for some time (in your time frame). Wouldn't it be prudent to think about the odds of that particular trade working out or not? Let's say prices had been turned back by the resistance the last maybe 7 times they had tried to get through the barrier. The odds of the trade working in my mind reflect those failed attempts to move above that price level. Meaning, if I were to enter where you did, I would have to say that there was a fairly good chance that the trade would result in a loss (regardless of the size of the loss). Maybe that's not as important to you though.
When you say that a lot will depend on broad market direction, was that also true when you placed the trade? What was the broad market direction when you placed the trade?
Regards,
Banker