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Reminder on Banking stocks
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I know it's not proper to recycle recent articles but I really think everyone of you should go through the exercise I recommended. If you do this and dont't act then there may be no hope for you. Let me know what you think!!! I recently wrote: But there is a way for the common investor to make a good bit of money in this market. Don't buy individual banks, buy the whole sector. Proshares has some new ETFs that are leveraged on both the up and downside. The Proshare Ultra Financial (UYG) tracks 2 times to the upside and the Proshare Ultra Short Financial (SKF) tracks 2 times to the downside of the banking sector. Do I have a crystal ball to tell you which to buy? Not exactly, I have a tool to help you decide. Most of you have access to charting packages ( I use BarChart, but AOL and most of your on-line brokerage packages have it) that will let you chart one stock against another. Go to your favorite package and plot UYG against SFK. You will easily see which on is now out performing the other. Plot them every day and you will be able to get a feel of the industry. Which ever one you choose put in a stop loss at the 50 day moving average and be prepared to switch horses in mid-stream. Please even if you don't act, do this exercise!!!! | ||
Comments (3)
Just checked barchart. Sell signals dominate for both the ultra long and ultra short etf. Not sure how to read that, but suspect it either means 'stay on the sidelines' or that market sentiment is shifting.
I think you're better off trying to sort the good from the bad and buy individual banks rather than buying the ETFs. Even tho' you can't make a lot of sense out of balance sheets, you can get some valid relative information from their reports. For example, we know Wachovia has a lot of 'pick-a-payment' loans that came with their Golden West acquisition; we know WaMu's balance sheet is predominately mortgages since they're an S&L; we know who's had to raise capital and who's been able to make acquisitions... That's all information that can be used to make a judgment call between the companies.
Posted by Russell Krull | July 23, 2008 7:33 PM
Van Meerten,
Thanks for the blog posts. I have plotted the two ETFs, but do you have any advice as to when to jump in. The long ETF has had a pretty good run recently, but hasn't passed the 50-day moving average yet. Did you get into the long ETF earlier? What was the trigger, a 2-day rise, 5-day rise, passing the 10-day or 20-day moving average? Is it too late to get on the long ETF? Any guidance would be appreciated.
Thanks,
Steve
Posted by Steve | July 24, 2008 7:18 AM
Congratulations on winning the competition! I've learned a lot from all of your posts, and I'm glad you reposted this one. I have always ruled out both options and shorting in real life and didn't even try shorting in my pretend portfolio. On rereading your posting, I am now tracking SKF for purchase at the right price. Thanks! I'm looking forward to following both you and Vad in the next round of Strategy Lab.
Posted by Eileen Teska | July 25, 2008 11:27 AM