Sold 350 HGD.TO @ 10.84, Profit +2%

China not-so-surprised the market (their delayed Treasury report was a hint) with a 0.25% rate hike overnight (WSJ: China Raises Interest Rates). The US Dollar shot up, precious metals took a big hit. I close my gold short soon after the TSX market open to collect some quick profit. Rinse and repeat.

I did mention that this trade is a short term swing. I bought this Horizons BetaPro Gold Bear Plus (HGD.TO), a leveraged gold short, on Friday and unloaded it this Tuesday. I fought against my greed to hold just a little longer. But the ascending support line on gold is too obvious to ignore (Fig. 1). Thus I closed this short term position with this 5%+ gap up while the market is still deciding what to do.

Furthermore, I noticed the equities market are holding rather well at the open. S&P500 held onto 1170 price level. Asian markets were marginally green overnight. And even the CAC in Europe is fighting an intraday low as the North American markets open. Thus, the sky is not falling just yet.

I figured it would take more omph to push this market further down as we are indeed in a strong bullish move. At the very least I am expecting some retaliation from the bulls. This can’t be this easy for the bears, can it?

Gold

Net profit for this trade is ($10.84 – $10.27) * 350 = $199.50 – $9.90 commission = $189.60 = 2% of account.

I am sorry, My Precious: Bought 350 HGD.TO @ 10.26

I cannot believe that I am doing this. I am shorting my favourite asset, gold. Spot gold was trading at 1372 at the time of my short during lunch hour (see Fig. 1). I bought 350 shares of Horizons BetaPro Gold Bear Plus ETF (HGD.TO) to short gold. It is just more convenient to do that in my RRSP trading account at Questrade. I am well aware of the deteriorating value of a leveraged ETF (especially bearish ones). So I don’t intend to hold this for more than a few days.

The reason for this trade is simple.

Today Bernanke made it clear that QE2 is on (WSJ: Bernanke Makes Case for Further Fed Moves to Boost Economy). Coincidentally, note the orchestrated weakening upward momentum across precious metal (Fig. 1), currency (Fig. 2), and equities (Fig. 3). Perhaps this is a matter of buy the rumour and sell the news?

I am betting that this rocket is running out of fuel. If I am wrong, I have my stop set with a limited risk. If I am right, there’s a long way down from up here.

So this trade is merely a matter of exploiting good risk/reward.

Stop is set at HGD.TO $9.90. Anything below $10.20 will be a sign of caution. Maximum risk is ($10.26 – $9.90) * 350 = $126 + $9.90 commission = $135.90 = 1.4% of account.

Gold

EUR/USD

S&P 500

Sold 4 MFC 11JAN Puts 14.00 @ 1.74, Mark 12.96, Loss 0.1%

S&P500 managed to bounce back from below 1130 support. It is confirmed by EUR/USD’s rise and treasury’s gap down (TLT) today. I’m not going to argue with the market. So I am ditching my short for Manulife Financial (MFC.TO) while it is still testing its 13.00 resistance at the open.

12.60 is the 50% Fibonacci retracement level for MFC. It made a textbook perfect bounce on it (Fig. 1). Also, it’s Friday today, so I’d rather not have the time decay eat more out of my premium by holding over the weekend.

Loss for this trade is ($1.74 – $1.70) * 100 * 4 = $16 – $27.90 = -$11.90 = -0.10%.

Now that I am out of my short position, watch the market tank without me on board.

Update: MFC and the market managed an impressive rally today. MFC closed at 13.15. I am glad that I followed my own strategy. I guess I do make good timing once in a blue moon.

Manulife Financial (MFC.TO)

Bought 4 MFC Jan 2010 Puts 14.00 @ 1.70, Mark $13.25

I am shorting again. This time on Manulife Financial (MFC.TO) with a January 2011 put at 14 strike price. MFC is trading at $13.25 at time of entry.

Recent series of prop desk closings isn’t going to bode well for the market, particularly for the banks as they need to recuperate those easy income. On top of it, the lack of push from the bulls this week as S&P test 1110 resistance doesn’t look promising either. Yet, this could very well be a bear trap.

In any case, I am taking a bearish bet via shorting MFC. Figure 1 shows a chart of MFC. It is depressed and it is struggling. Moreover, MFC keeps announcing billions of dollars worth of share offerings lately. I like it.

There is a distinct possibility of a bear raid if MFC can break this $13.50 resistance level. The gap above $15 is just staring at me.

Hard stop is at $1.00 premium. Worst case risk for this trade is thus ($1.70 – $1.00) * 4 * 100 = 280 + $27.90 commission = $307.90 = 3.2%. However, I’d be very cautious if MFC closes above $13.50.

Manulife Financial (MFC.TO)

Short USDCAD @ 1.0654, Stop 1.077

This is my first real forex trade after a year minus one day of studying the market and paper trading.

Shorted USDCAD based on the following intermarket observations:

1. Yesterday’s equities sell-off held around S&P at 1050
2. Overnight Asian market seem orderly, not every market followed through, but most did
3. European markets down move were slow overnight until US open
4. But perhaps most importantly, EUR/USD made a higher low with an increasing COT

Basically, as much as the sell-off tries to scare off people, the markets don’t seem to be moving in unison. So it would seem this move (in equities, thus inverse USD) is still a bear trap in an intermediate term bull rally.

Plus this daily chart, Figure 1, for picking USDCAD specifically.

USDCAD daily chart

And this 4-hour chart for trade execution.

USDCAD 4-hour

Size of trade is 1000 unit. Risking about 0.05% of capital with a hard stop at 1.077. Anything above 1.070 would put me on alert though.

Coincidentally, I first got into the forex market by studying the loonie. Let’s see how this first trade performs.