7-30-15 – Trading Strategy
Real time portfolio updates are now available here
7/28/15 – EPV (Inverse Europe) @ $52.00
EDZ (Inverse Emerging Markets) Stopped out @ $38.93 for a 1.82% Loss
RUSS (Inverse Russia) Stopped out @ $38.96 for a 3.08% Loss
UVXY (Ultra VIX) Stopped out @ $26.73 for a 10.90% Loss
No news was good news today as the two Fed days seemed to bolster global markets. However, it’s a very short term speculation to believe there are any global fundamentals that will sustain this much further than this week. One can come up with many theories as to why the markets have moved globally down and then all reversed the last two days. However, it was a great excuse for all the short sellers to take their profits.
As for the way I handled this week, ready to play Monday Morning quarterback?
I sustained 3 losing positions today, but I need to examine how well I played them and should I have at all?
1) First, EDZ (Inverse Emerging Markets) and RUSS (Inverse Russia) I think were very well played because I was able to buy in close to 1% of the low for the day in each. I set a safety cushion very low to the low which allowed me to exit with minor losses.
If you look at the actual charts today for EDZ and RUSS the losses could have been much greater.
EDZ could have fell another 2%
RUSS (Inverse Russia) could have fell another 7.8%
Now onto XIV (VIX) and my play on UVXY (Inverse VIX)
Let’s look at XIV when I decided it was time to get into UVXY.
Technically, this was a good setup. Price had broken downward off a resistance level that it previously turned down from. Price broke below both the 20 and 50-day EMA and on increasing volume (although not extremely above-average but that isn’t always a requirement). PPO turned negative on this day as well. So to believe XIV would continue to fall certainly was not out of the question.
Looking at how it turned out with UVXY (Ultra VIX) the trade turned out bad because even though I was filled, the drop for the day was much further than expected.
If UVXY was going to continue for a fourth day higher on the 29th, the $30 mark would have been near the low. However, it closed much lower and actually closed about 1.6x the daily trading range lower.
UVXY at the time had a 10% ATR so there is always risk, however putting in a bid near that 10% mark, say $28.30 was very unlikely on a new bullish move.
However, I think with such large ATR stocks, I should have put in a stop order at around 3-4% to be triggered on the same day. Ideally, I should have sold out on Tuesday when it filled.
** Another consideration could be not to play high ATR stocks during Fed Meetings. I believe that is my biggest mistake. I have seen many fed meeting days and volatility picks up, but I thought it would work in my favor instead of starting a new two day countertrend.
It never hurts to sit out through what could be predictable weeks of volatility especially when one is sitting on a $5,000 gain for the month. I would advice most traders to just sit out those weeks, as your win ratio will probably not be any better than 50:50 even if the technicals line up.
Current Holdings with Open Orders for 7/30/15
Sell EPV (Inverse Europe) Limit @ $54.00 (3.85% Profit)
Sell EPV (Inverse Europe) Stop @ $50.50 (2.88% Loss)
– Same order as yesterday.
New Open Orders for 7/30/15
Buy TMF (20+ Year Treasury Bonds) Limit @ $71.55
– TMF was a buy a couple of days ago as it broke upwards over the 50-day EMA again for the second time and when it broke over the previous high. One of the unique characteristics is TMF usually quite choppy so I’ve been waiting specifically for this pull back to get in and protect myself against any major downturns. I may not get in tomorrow at this price, but possibly Friday.