ETF Trading Opportunities: Is The Rally Fizzling?
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The market has lost a good amount of upside momentum over the past few days.
Is the bounce fading? Or is everyone just taking a collective breath? Either way, watch for breakouts!
- The bounce, bear market rally, or whatever you want to call it, has slowed markedly in recent days, with most markets starting to trade sideways – watch for breakouts!
- SPY and QQQ are both consolidating, as IWM tries to test resistance
- XLRE, XLF, XLY spent the last week trading sideways; even XLP’s heroic rally has stalled
- Energy stocks (XLE) are still making new highs for the year, but with macro conditions deteriorating all over the world, how long can demand for oil remain at current levels?
- XLU moves sideways too, but a move to test its all time highs in April remains possible
- Fixed Income ETFs continue to move together, as their rallies begin to reverse
- LQD, HYG, and EMB are all moving in a bearish direction again
- TLT is trying to find a bottom as it approaches another test of critical support
Trading Ideas – Performance
Trading Ideas – Commentary
- Re-entered short position in EMB as it broke below short term support at 90
- Trade aims to capitalize on EMB’s bearish trend, as well as deteriorating global macro conditions
- Entered a straddle on XLU at a strike of 72, expiry Sep ‘22
- Position will be profitable if XLU makes a decisive move in either direction
- Shorts in LQD and HYG stopped out as both spiked higher over the end of May, for respective returns of 4.93% and 3.33%
- Looking to enter short positions on pullbacks, possibly in:
Trading Ideas – Long
- A straddle on XLU is an increasingly interesting prospect
- Consolidating between critical support and all time highs, which way will it break?
- Straddles are expensive, but will allow us to profit as long as the market makes a decisive break
- With global macro conditions deteriorating, and energy prices remaining sky high, XLU will have to move in one direction or the other
Trading Ideas – Short
- IWM has broken out to the downside and remains vulnerable to further sell offs even as it bounces, given deteriorating macro conditions
- It is trading a fair distance away from the next major support level at 151.5, but it would be wise to wait for its short and medium term trends to realign
- LQD, HYG, EMB
- LQD, HYG, and EMB can still make a large move lower, possibly all the way to COVID 2020’s lows
- All three have seen their recent rallies go into reverse, are their short term trends realigning with medium term bearishness?
- EEM recently broke below its well established bearish channel, and is looking very weak even as it bounces
- EZU and FXI are also good short candidates, as their charts still look bearish
- FXI is trickier to trade now as the Chinese government has verbally intervened once to halt the selloff in Chinese stocks
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