IYF

[AussieTrader]

Profile:

iShares Dow Jones U.S. Financial Sector Index Fund (the Fund) seeks investment results that correspond generally to the price and yield performance of the Dow Jones U.S. Financials Index (the Index). The Index measures the performance of the financial sector of the United States equity market, and includes companies in industry groups, such as banks, non-life insurance, life insurance, real estate and general finance. The Index is a subset of the Dow Jones U.S. Index and is capitalization weighted. Component companies are adjusted for available float and must meet objective criteria for inclusion to the Index. The Index is reconstituted quarterly. The Fund invests in a representative sample of securities included in the Index that collectively has an investment profile similar to the Index. The Fund's investment advisor is Barclays Global Fund Advisors.

Trading Idea:

Whichever way you slice it financials seem to have found a bottom and gained upwards momentum. Perhaps the market is saying the baaaad news is now priced in and money is coming back into the sector, those companies that survive this period will ultimately be very strong and hopefully free from the historic issues we are dealing with right now. The market is always looking ahead of where we may think we are.

So to position ourselves for that type of scenario we can use the financial ETF IYF

Technical Layout:

After bottoming July 15th (remember my 'Sky is falling in' commentary)http://www.3stocksonfire.org/trading/index.php?topic=10059.msg117044#msg117044 financials as a group have bouned strongly and with decent volumes. IYF reflects this and shows the bounce encountering resistance July 23rd and now consolidating those gains in a tecnically good pattern just below the 50ema and descending resistance.

The pattern sets up a good Standby trade plan opportunity as follows; Entry on the break of 50ema and descending support at $73.20. I would anticipate if that eventuates it would break above July 23rd swing high. Stop will be a breakdown of the pattern (if that occurs so we will not calculate that until we are in). Logical target would be $80 at the low end to $86 at the high (again, this would follow later).

Trade Plan:

BUY IYF if it Trades at or above $73.20

[poli]

AussieTrader:  I bought UYG this morning instead of IYF.  Good health and trading.

poli

[AussieTrader]

AussieTrader:  I bought UYG this morning instead of IYF.  Good health and trading.
poli

Nice one Poli, of course you have purchased the 2x ETF so you will get double the profits The charts of IYF and UYG match each other pattern wise, so the trade plan I have was the exact same scenario for UYG. I didn't go with the ultra ETF as I want to build into financials if they prove themselves so opted for the less volatile option.

Update:
This is exactly how I envisage these standby plans to work. We locate the setups and put our strategy in place for the market to come to us.  Markets reacted favourably to the Fed meeting especially perhaps to the fact that by a margin of 10 to 1 Fed members agreed to keep interest rates on hold. Financials were just about the strongest sector along with transport and consumer cyclical.

Technically the chart has stopped at the resistance I discussed in the trade plan, but if this rally has legs then that short term resistance will not last for long. We are still in 'is this a bear rally or a new bull run' mode, but the great thing with this set-up is that now we are in, we can construct a nice risk / reward plan to protect us if the rally fails and let the $ run if it gets going. Today I will put a stop in place at $69.50, it is close, but outside decent support / volatility. Below there and the set-up (at least for then) would have failed.

Trade Plan:

HOLD IYF with Stop at $69.50

[AussieTrader]

Update:

Financials just like the indexes couldn't break the short term resistance and we saw a broad selloff as a result. We have a close stop on this play because we are very much in an environment that is still fully undecided on direction. Tuesday and Wednesday looked like bullish continuation was most likely, Thursday took all that away.

I will leave the stop unchanged today, it is close enough to limit downside risk, but outside support enough to give the trade a chance.

Trade Plan:

HOLD IYF with Stop at $69.50

[AussieTrader]

Update:

I could insert exactly the same commentary from my previous update and it would be perfectly relevant to todays situation. JP Morgan announced a further $1.5B of mortgage asset losses and Wachovia cutting more jobs and increased their loss announced recently to $9.11B. Eye popping numbers for sure.

We will leave the trade open with the tight stop and see how this resolves.

Trade Plan:

HOLD IYF with Stop at $69.50

[AussieTrader]

Trade Update:

Stopped out of IYF $69.50