August 17, 2017

IBB Exit and April’s Seasonal Picture

Today marked our fourth successful trade in the PaperTrade Extremes strategy (Insiders Only) for a cumulative return of 92.1%. Yes, 92.1

On Thursday, I placed the following trade (posted to the Insiders page as soon as the trade was placed) in the Biotech sector (IBB) due to the extreme overbought state that it had reached.

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The trade was the fourth in the PaperTrade Extremes strategy (Insiders Only) since its inception roughly one month ago. The short-term overbought/oversold indicators proved successful again today. The decline in IBB Friday (-$1.28) left the Apr08 80 put worth roughly $5.50. I held onto the trade for several reasons, one being the large unclosed gap in QQQQ that I have mentioned throughout the week. QQQQ moved decisively lower today and is now only slightly above the $43.10 area which was the high the prior trading day.

Holding onto the trade was probably not the best decision as IBB opened up sharply higher and continued the move to take out my trailing stop. While I never like to complain about winning trades I never like to leave that much money on the table. However, even with the $.30 gain I still made over 7% on the trade.

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As you can see from the trades below the PaperTrade Extremes strategy has done quite well. Like all of our strategies it doesn’t trade often, but as most professional traders will tell you the less you trade the better. Stay patient and be selective. This is the key to our success.

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The only sector near an extreme at the moment is Agriculture (DBA). It barely dipped into an oversold extreme today so I will be watching it closely over the short-term.

April is the best performing month for the Dow over the last 56 years. The Dow has seen 6 straight years of gains during the first day of April. Furthermore, the first trading day of April has finished higher 9 out of the last 12 years.

As the month progresses towards the middle of the month (tax time) the market historically weakens, particularly after the tax deadline.

Overbought/Oversold for March 31, 2008

 

Major Benchmarks

  • Dow (DIA) – 44.8 (neutral)
  • S&P (SPY) – 47.4 (neutral)
  • Russell 2000 (IWM) – 48.4 (neutral)
  • Nasdaq 100 (QQQQ) – 51.8 (neutral)
  • Emerging Markets (EEM) – 54.8 (neutral)

more overbought/oversold levels on additional sectors found in the Insider’s page (Buy the White Paper and receive Two Months of the Insiders Page Free) – less than $1 a day.We work hard to bring you our latest views, opinions and research on a daily basis. If you are a loyal reader and find our thoughts useful please show us your support by joining our newsletter service.

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