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Using the Stock Trader’s Almanac to Swing Trade LETFs (leveraged ETFs)

Using the Stock Trader’s Almanac to Swing Trade LETFs (leveraged ETFs). Results Updated (slide 26) on Feb 2 for presentations at: Free Market Traders- Jan 24, 2011 Tuesday Webinar - Jan 25, 2011 OC Traders - Jan 29, 2011 Wally Eater ( Thank You to Rick Edwards & Brian Cox

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Using the Stock Trader’s Almanac to Swing Trade LETFs (leveraged ETFs)

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  1. Using the Stock Trader’s Almanacto Swing Trade LETFs (leveraged ETFs) Results Updated (slide 26) on Feb 2 for presentations at: Free Market Traders- Jan 24, 2011 Tuesday Webinar- Jan 25, 2011 OC Traders- Jan 29, 2011 Wally Eater (Thank You to Rick Edwards & Brian Cox for scanning Stock Traders Almanac pages)

  2. DISCLAIMERS • Not a professional trader • Presentation is for information only • Not selling or soliciting anything • Viewers hold presenter harmless • ALL leveraged ETF sites state VERY clearly they are for day trading ONLY -- NOT for holding for extended periods • Not an offering per SEC Acts of 1933-34

  3. WHAT I’LL COVER • What is the STOCK TRADERS ALMANAC? • How I used the Almanac to identify a swing trade for leveragedETFs (LETFs) 11/8&9 - 2/2/11 • RESULTS from swing trading LETFs • What I learned-- & would do differently • POSSIBLE NEXT TRADES using the Almanac? • Q&A- HOLD questions until end, in BIG type so you can see at back

  4. WHAT ISTHE STOCK TRADERS ALMANAC? • “Stock Traders Almanac 2011”, Hirsch & Hirsch, Wiley Publishing. companion “Commodity Traders Almanac 2011” Hirsch & Person (Person’s Pivots). • “The Almanac is a practical investment tool… that alerts you to patterns and tendencies on which shrewd professionals enhance profit potential.” • 20 yrs data back tested:Dow, S&P, Nasdaq, RUT • Amazon ($25.31) or StockTradersAlmanac.com.

  5. HOW I USED THE ALMANAC • Updates investment knowledge & informs you of new techniques and tools • Is a monthly reminder and refresher course • Alerts you to seasonal opportunities / dangers • Supplies forms for portfolio planning, record keeping and tax preparation

  6. 2011 ALMANACEXAMPLE PAGESon next slides(title only, no format discussion)

  7. Page 7- Calendar

  8. Page 18- Jan may forecast the year

  9. Page 22- performance during mo

  10. Page 32- 3rd yr of election cycle up

  11. Page 40- if Dow 1Q close <Dec close,a warning sign

  12. Page 44- Nov, Dec & Apr best mos

  13. Page 50- MACD leverages returns 3x

  14. Page 52- down Fri & down Mon are warnings

  15. Page 68- stocks lower Mon & Fri

  16. Page 72- 1Q most bullish

  17. Page 80- seasonal corrections

  18. 13 HYPOTHESES p 1/4Market up 11/8-9/10 thru 2/2/11 due to(green = occurred, black= pending, red = did not occur): Seasonality per Almanac (Nov-Janbest 3 mos of the year;3rd yr of election cycle) Elections will favor freer market Senate Quantitative Easing 2 will be implemented Bush tax cuts extended by Congress

  19. 13 HYPOTHESES p 2/4Market up 11/8-9/10 thru 2/2/11 due to(green = occurred, black= pending, red = did not occur): Short rates will remain at .25% Sideline cash continues shift to stocks mid-late Jan / early Feb as bond holders see big declines after receiving Dec and Jan statements Economic data improves (jobless claims, GDP, housing, etc)

  20. 13 HYPOTHESES p 3/4Market up 11/8-9/10 thru 2/2/11 due to(green = occurred, black= pending, red = did not occur): • Hedge funds behind benchmarks will take additional risk at year end to obtain bonus, save their job & deploy new monies in early Jan & Feb • Emerging market growth continues • No one time event (ie, 9/11, etc)- Tunisia, Egypt

  21. 13 HYPOTHESES p 4/4Market up 11/8-9/10 thru 2/2/11 due to(green = occurred, black= pending, red = did not occur): • 4Q10 earnings > estimates • Oil will be >$90/barrel • USD further declines (EU problems tended to negate USD decline)

  22. HYPHOTHESES I’D ADD p 1/2 Use leveraged ETFs that ALL have a HIGHcorrelation w/each other. AGQ had a very low correlation w/DRN, ERX & TNA. (source for correlations: www.ETFscreen.com) Bump from BHO State of the Union Major currencies: Yen, EU; possibly CAD, AUD

  23. HYPHOTHESES I’D ADD p 2/2 Ireland, Greece &/or Italy do not substantially worsen 94% of S&P profits for 2010 were on the first day of the month- thanx to Eric Severance- posted to OC TRADERS in Jan (http://www.greenfaucet.com) Weather anomalies affecting: mining, crops, oil, etc (Australian floods were an outlier)

  24. SWING TRADE OBJECTIVES11/8-9/10 thru 2/2/11 12.3% profit for LETF portfolio (50% APR) Capture overnight gaps Hold thru late Jan or 2/2- w/o taking trading profits/losses Sell if “extraordinary” event Do not exceed amount allocated for trading Run model by Free Market Traders for input prior to buying

  25. WHAT LETFs I BOUGHT(approximate equal dollar amount in each) DRN (3x real estate REITS), 11/8, $61.16 ERX (3x energy), 11/9, $46.25 AGQ (2x silver), 11/9, $142.84 TNA (3x RUT 2000), 11/9, $59.95

  26. RESULTS($/share, % APR based on 252 trading days / yr, greencolor / not sold- held yet as of 2/2/11 close, approximate equal amounts invested in each ETF below) * $127.99 was 2/2 close. AGQ was held to be sold later.

  27. WHAT I’D DO DIFFERENTLY & WHAT I LEARNED p 1/2 • BUY using my day trading technicals. All 4 leveraged ETFS would have been a better BUY a week later had I used my technicals for entry. • SELL when objectives are met-- or track daily for ongoing profits • SELL if quick run up, BUY back at drop using day trading technicals, ie Jan 3 would have been a SELL & Jan 4-7 a BUY BACK.

  28. WHAT I’D DO DIFFERENTLY & WHAT I LEARNED p 2/2 • BUY TYH, 3x tech, week before Thanksgiving (ie, the old buy “Comdex” & sell May buy model) thru at least 2/2. • DAY / SWING TRADE during 11/8/10 - 2/2/11. Estimated returns would have been 2-3x greater day / swing trading rather than buying / holding.

  29. POSSIBLE NEXT LETF TRADES BASED ON THE ALMANAC p 1/2 Do not hold an LETF for more than 1, or 2-4 days max and ALWAYS trade w/the trend. For the S&P: there are only a several to back 4 bull or 4 bear days* in a row: Feb 10-22 (4 & 4days), Apr 1-6 (4), July 7-14 (5 of 6 days), Nov 23-Dec 5 (6 of 9 days,nobeardaysduring the 9 days). There are no 4 back to backbeardays or 4 out of 5/6beardays for the rest of 2011. * one day is when the S&P is up/down t least 60% of the time on that trading day for the last 20 yrs.

  30. POSSIBLE NEXT LETF TRADES BASED ON THE ALMANAC p 2/2 FAS, buy early Jan & trade thru early Jun DRN, buy Jan & trade thru early Jul ERX, /UCO (2x oil), buy early Jan & trade thru early Jul TYH, 3x tech, buy early Jan & hold thru May 3 Weather (rain, freeze, tornado, hurricanes, El Nino, etc)

  31. CONCLUSIONS / QUESTIONS p 1/2 Almanac provided edge for swing LETF trades Almanac also provided an edge for 10 profitable 0-3 day LETF swing trades. Held most longer than normal (1-3 days if trend) to capture daily gaps. Have 1 LETF position, AGQ: BUY- Thurs & intend to SELL by Tues.

  32. CONCLUSIONS / QUESTIONS p 2/2 Closely monitor other items that could undermine trade: political events, economic news (US / EU / China), industry news, etc This presentation will be at xsprofits.com and be replaced with updated results page when DRN, ERX, AGQ and TNA are sold.

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