Wednesday, November 25, 2009

Adding to TZA, SDD Shorts at S&P 1108

While the S&P index and Dow appear at highs, the small caps are telling a different story.  Limited bailout monies, limited exposure to weak dollar.

SDD and TZA both look to be forming rounded bottoms. According to McHugh :
Stocks continue to trace out the path we annotated over the past few night's newsletters, a small Rising Bearish Wedge, which is usually a termination top pattern. Historically, stock prices generally rise the day before and after Thanksgiving, and historically have a bad Monday afterwards.
Despite the S&P rising the past few days, my TZA position is still profitable.  SDD is another small cap play.

As I have mentioned previously, I use these highly leveraged securities as short term plays.  Timed correctly, they offer significant benefits versus options.  The leveraged returns allow me to play with smaller positions than I would normally need to invest to generate returns.

My position is relatively light as the pattern is not entirely clear, but the divergences building on the 60 min RSI make me comfortable that my entry will pay off.  Having enough ammo on hand is critical to playing this strategy.  And I do.

Happy Thanksgiving.

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