Fourth Trade this Year – Up

I finally closed out of my ETF Extremes trade today for no loss/gain. QQQQ gapped up at the open so I decided to exit the trade given the short-term overbought state the Q’s have entered. Furthermore, the Wilder RSI (2) in the tech-heavy index has pushed into an extreme state with a reading of 97.6 while at a level of strong overhead resistance. Couple all of the aforementioned and the probability of a short-term reprieve has increased significantly.

Of course, there are no guarantees in trading, but when the probability of a certain move (this time to the downside) increases dramatically I must, as a trader, seriously consider a position. Remember, as a trader, all we have are probabilities.

So, with that being said I decided to place a trade on Collective2. You can check out the strategy at the following link: http://etfextremes.collective2.com

Overbought-Oversold levels for February 17, 2010

ETF Extremes Options Trading Strategy

* S&P 500 (SPY) – 71.9 (overbought)
* Dow Jones (DIA) – 72.3 (overbought)
* Russell 2000 (IWM) – 77.4 (overbought)
* NASDAQ 100 (QQQQ) – 74.3 (overbought)

Sector ETF Extremes Options Strategy

* Biotech (IBB) – 77.5 (overbought)
* Consumer Discretionary (XLY) – 76.8 (overbought)
* Health Care (XLV) – 63.8 (neutral)
* Financial (XLF) – 66.9 (neutral)
* Energy (XLE) – 69.3 (neutral)
* Industrial (XLI) – 71.5 (overbought)
* Materials (XLB) – 68.3 (neutral)
* Real Estate (IYR) – 73.6 (overbought)
* Retail (RTH) – 76.5 (overbought)
* Utilities (XLU) – 53.1 (neutral)

Ultra Extremes

* Ultra Long (SSO) – 71.3 (overbought)
* Ultra Short (SDS) – 27.7 (oversold)