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Ultra Financials ETF Bounce Strategy Keeps Working

by: Jason Kelly October 14, 2008 | about stocks: SKF / UYG    

Jason Kelly

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It's rally time thanks to a coordinated global effort to inject liquidity directly into banks, and no matter whether you think it has legs or is just the latest upside fake-out, it makes for a profitable trade.

I suggest as a trading vehicle, as I have for some time, the leveraged index ETFs. If you buy one, such as Proshares Ultra Financial (UYG), set a stop once it rises to protect against another plunge.

That's the whole formula, as it has been for the last five weeks.

Update: People keep writing to tell me why my bounce strategy of holding leveraged long ProShares, such as Ultra Financials, won't work -- and it keeps working. Ratchet stops higher as the rally continues.

UYG is up 50% from last Friday's base at around $8 to Tuesday morning's low at $12. It's already gone well enough that you can't possibly be wrong, even if stops out Tuesday at, say, $11.95.

Its inverse, ProShares UltraShort Financials (SKF), gained 87% from its Oct. 1 price of $97 to last Thursday's $181. Since Thursday, it has fallen 41% to Tuesday morning's low at $106.

These are wonderful times to trade. Annual incomes are being made each week.

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This article has 3 comments:

  •  
    Oct 15 06:35 AM
    Financial ETFs are great until you wake up on a Monday morning and hear that the government has changed the rules *again* and you are trapped in the theater with flames shooting up all around you and everyone is running for the door.
    Reply
  •  
    Oct 15 06:40 AM
    How do you set stops to avoid early sales?
    Reply
  •  
    Oct 18 01:10 AM
    I have been afraid to hold a position over night to prevent a gap open beyond my stop. Isn't that valid?
    Reply
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