I day traded Ultrashort Oil & Gas ETF (DUG) this morning for a tiny profit. Then the market looked weak on the second peak in the morning. That's when I decided to make a small position in DUG to ride the potential downtrend in the market. This is to hedge my remaining longs in SLW and ESLR.
[caption id="attachment_904" align="aligncenter" width="500" caption="S&P 500 internals"][/caption]
Notice at the first peak of 868, a major resistance as I noted in the pre-market analysis, we have a negative divergence of both the TICK and Advance-Decline line from yesterday. This is the first sign of weakness. On the second peak about 11:55, we produced a lower low on the TICK and the A-D line remained negative. However, the trough at 11:00 is a retest of 840 but the TICK was lower than yesterday. This is a bullish sign. So 2 to 1 bearish to bullish sign.
I chose DUG because it's just above a major support level. So that I would know when to get out if necessary. Also, the price / share is cheap so I can have more shares. Here's a list of the day trades in the morning.
09:49 BOT +30 DUG @33.71 10:02 SOLD -30 DUG @33.12 10:11 BOT +30 DUG @32.50 11:18 SOLD -30 DUG @34.17
I placed trailing stops of -0.40 and then -0.7 for the trades. They were both triggered.
As I was saying, then I decided to stay in for a swing trade. I bought at 12:09.
[caption id="attachment_905" align="aligncenter" width="500" caption="Ultrashort Oil & Gas ETF"][/caption]
[caption id="attachment_906" align="aligncenter" width="500" caption="Ultrashort Oil & Gas ETF"][/caption]
DUG actually broke my uptrend line in the above graph. I'm thinking of unloading it as we speak.
Update: I was stopped out at \$33.14 but re-entered at \$33.02. The 3pm rally peaked at 855 on the S&P 500 and the TICK reached a new high of the day. The A-D line has turned up from -161 to -121. The higher TICK but lower high on the S&P is what led me to believe we're going to go down. In any case, this will be my last try on DUG for today. Stop: \$32.40. Target: \$35.40.
[caption id="attachment_915" align="aligncenter" width="500" caption="DUG"][/caption]
: http://traderpau.files.wordpress.com/2008/11/2008-11-25-spxintra.png : http://traderpau.files.wordpress.com/2008/11/2008-11-25-dug.png : http://traderpau.files.wordpress.com/2008/11/2008-11-25-dug_prp.png : http://traderpau.files.wordpress.com/2008/11/2008-11-25-dug_prp1.png