Long DUG at 25.17, sold at 26.30

The weekly chart of DUG (ProShares Ultra Short Oil & Gas) was showing signs that the support line at 25 is holding.  It has been in a channel for the last 5 months.  There is a bullish divergence in the MFI, and ADX is showing a weakening down trend.  I think it is possible that DUG is forming a bottom.

The daily chart shows the 5-month channel more clearly.  It also shows an oversold MACD which seems ready to turn up.  In fact, MACH-H has already started turning up.  Slow Stochastics is still in pre-buy, so maybe this move was premature.  But Stochastics is also showing a clear change in rithm since the start of March, with clearly defined waves.  The same change in tempo is also visible in RSI, which is at near oversold level. 

MACD on the hourly was showing a buy signal.

I think all of these signs are indicators of a bottom. At the very least, it's a low-risk entry, for being so close to the support level.

My stop was hit on the open on August 1st, because DUG opened really low, and then proceeded to rally for several days.  I think I had some bad luck here.  I should have stuck to my analysis and bought it at the next chance, even if at a higher price than what I sold it for.

Start of the July 18 week

The US Dollar (UUP) is still in a long term DOWN trend, albeit it is slowing down. It is also still inside a 10-week triangle started in early May. Intra-day: 21.52.

Gold (GLD) is off to new highs, at 156.22, following the break above resistance at 153.50. All oscillators are flashing overbought, so nothing to do here.

US oil (USO) is still trendless, at least on the long term. The long term trading channel is between 32 and 46, and today we're at 37.54, below both the 200 and the 50 day MA, which are 38.90 and 38.43, respectively. Oscillators are giving mixed signals.

Commodities (DBC) are in a long term UP trend, but weak on the intermediate term. Today DBC is at 30.34. There is good resistance at 30.50. Oscillators are on the overbought side, but not quite flashing sell signals yet.  DBC may be ready for a leg down to the 28.5 level. 

The Thomson Reuters/Jefferies CRB Global Commodity Equity Index (CRBQ forever hence) is a little ahead of DBC in showing loss of upward long trend and is showing a 3-point DOWN trendline in the intermediate term, while the oscillators are mostly overbought.  However, there could be a flag in the making in the last four weeks, but it would be a bullish flag, which is against the intermediate term trend. Today it is at 50.19, resistance at 51.50.

The 10 Year Treasury Note Yield ($TNX) is not in a clear long term trend, but its 40-week MA is moving up. The long term channel is between 24 and 40, today we're at 29.24. The intermediate trend is DOWN, but there was a recent spike to 32 which may have some significance.  If the June 27 bottom at 28.50 holds, we might be looking at a double bottom and the start of a new leg up.

The NYSE Index ($NYSE) is in a long term UP trend, however at 8,118 is just below the 40-week MA (8,133). The intermediate term is trendless, in a range between 7,900 and 8,700. There is the appearance of what to me looks like a head and shoulder pattern, which would be complete with a decise drop below 7,900.  Oscillators are mixed: Slow Stochastics gave a sell signal a week ago, MACD is giving today, but RSI(10) looks already mildy oversold at 41.

Short HPQ at 35.48, covered at 36.03

Last night I was looking at the 30 stocks in the Dow and HPQ caught my attention for being in a strong downtrend. This morning it opened at 36 and just moved down from there. After it got past some support at 35.50, I placed my first short at 35.48.  My stop is at 36.02, right above today's high and open price.

Support, and my first target, is at 34, given by the early June low.  If it gets past that, there seems to be no bottom.
I am a little worried because MFI is showing some life, however by tomorrow it will have turned down because of today's 3.25% drop.
The principles behind this trade are:

1. A strong trend
2. The overall market is correcting
3. Stay with the trade as long as you can
4. Oscillators pointing down

Covered at 36.03 on July 21, after several days where HPQ qas going nowhere.  I had a sense that the support at 35 was going to be broken, but that didn't happen, and I watched MACD flatten out and never really give a signal, while Stochastics actually turned up and gave a BUY signal!

About staying with the trade, I think that's valid as long as the trade is a winner. When it looks like a minor move happened and now we're sitting pretty for N days in a row at the same level, while the indicators never really give off the proper sell signals I was anticipating, then stops should be tightened accordingly.

Bought EUO at 17.97, sold at 17.72

This morning there were scary news coming from Europe, about fear over the Greek tragedy and massive worries about the Italian fiscal situation, and related market crash.   EUO (Euro inverse 2x) has been in a triangle pattern for a while, howver, this time it looked more like a reversal than a continuation pattern.  I was waiting for the breakout above the trendline and it happened this morning.

Instead of buying at market open I decided to wait and see if my guess was correct, but this strategy resulted in buying at the high of the day.  However, this allows me to put my stop just below the low of the day.

There is a relevant resistance area between 18.10 and 18.20, given by a May peak in the triangle formation and the 38% retracement of the move down from 21.80.

Support is given by today's breakaway gap - I am choosing the top of the gap, although I have a sense that it may be best to use the lower end, around 17.40.

Volume has been strong during the recent up moves, and weak during the down moves.

The oscillators are not showing any divergences, in fact, they seem to be confirming the bottom and the start of a new leg up.

The goal of this trade is to let the profits run.

If resistance at the 18.10/18.20 level is taken out, the next stop should be at 18.90. After that, it's 19.59, which is the 61% retracement.

The plan is move the stop up, following the price.

Sold at 17.72 on July 13.  My stop was hit.  The expected move never happened.

Bought UNG at 10.63, sold at 10.58

On July 6, I bought UNG in anticipation of a move away from the lower trendline.

I didn't consider that Thursday is when the EIA releases their natural gas inventory numbers. The ETF plunged so fast that it didn't hit my stop.  I had placed a stop limit order at 10.47.

I decided to wait for better conditions on the 15-minute charts, since everything was oversold.

The next day it came up again and when it got near 10.60 I sold it back - I was lucky that I was able to minimize this loss, because the buy I placed on July 6 was absolutely bad. No preparation, no homework. It was practically an impulse buy.

Long EUO at 16.73, sold at 17.06

On June 30, I saw that EUO was touching the lower line of a possible triangle. I realize that a triangle in a bear market should be a continuation pattern.  For this reason my stop is close to the lower line. However, I also see this triangle as a possible reversal, and with the price now so close to the lower line, it allows for a low-risk entry.  I will have to move my stop up every day, especially as we get closer to the upper line.

 

At the same time, I have placed a stop order on ULE, so in case the triangle is broken to the downside on EUO, it will be broken to the upside on ULE, my buy order will take place, and I will ride that move, possibly as far as it gets. By measuring the length of the move prior to the formation of the triangle in ULE, from 26 to 32, this would mean a move from 29.5 to 35.5.  Honestly I find it hard to believe - but I will observe and report.

 

On July 7, after seeing a gap up, I moved up my protective stop to halfway through the gap, at 17.06. That same day EUO moved down to 17.03, and my stop was hit.

This chart makes it clear that my stop was once again too tight - the lower third of the gap would have been a better choice?  Maybe the lower end of the gap, at 16.99, would have been right.  I was worried about protecting my gains up to that point.  The next day, Friday, EUO moved up to 17.42, only 0.03 below my measured target of 17.45.

Lessons of the trade

1. The lower end of a gap is a good place to put a stop.
2. When considering measured targets, it may be wise to reduce them by a tiny bit, like 0.5%.