Slope of Hope Blog Posts

Slope initially began as a blog, so this is where most of the website’s content resides. Here we have tens of thousands of posts dating back over a decade. These are listed in reverse chronological order. Click on any category icon below to see posts tagged with that particular subject, or click on a word in the category cloud on the right side of the screen for more specific choices.

Chart on EWG (Mike Paulenoff)

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My near- and intermediate-term pattern and momentum work in the iShares German Index Fund ETF (NYSE: EWG) argues that all of the action from the Oct '09 high at 23.40 into last Tuesday's low at 17.97 represents a completed corrective period in that aftermath of the Mar '09 to Oct '09 advance. Let's keep in mind that current strength comes off of 17.97, which was the 50% support plateau of the entire upleg during 2009, and a sign that the EWG is trading very technically at the moment.

In addition, let's notice that at last week's low at 17.97, daily RSI established a higher low, suggesting strongly that the EWG "bears" were running out of steam. At this juncture, I am expecting the EWG to establish a near-term, base-like formation between 19.50 and 18.60 during the upcoming days prior to a run at 22.00.

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Originally published on MPTrader.com.

The Weak Get Weaker

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I used to be afraid to short stocks that were either:

+ Too cheap (single digit prices);

+ Already badly battered

But this is like avoiding buying stocks that have gone up "too much" in price (like, say, AAPL when it crossed the $100/share level early last year). The strong get stronger, and the weak get weaker.

Here's one of my best shorts in my portfolio (which is 100% short at this point, by the way):

0601-HERO

Spoiling the Open with Hedges

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Well, the opening bell should have been sensational for me today. I have 105 shorts, and the /ES was down nearly 20 points during the wee hours of this morning. Plus many of my shorts were energy-focused, and energy was getting killed.

However……….

Near the closing bell last week, I decided to hedge my shorts with a medium-sized SPY long, a large OIH long, a GLD long, and……..gack………a BP long position.

The GLD position, which I exited already, gave me a 1% return, and it was my largest long, so that was nice. But my SPY long eliminated that profit, and my OIH long – which I've also closed – got smacked down nearly 5%. As for BP……..the stock is in a free fall, and its P/E is about 5 (yes, five) and its dividend is into the double-digits.

So all those profits from the 105 shorts were neutralized by these 3 ugly longs. So, yeah, I was hedged all right. I hedged myself right out of a profit, because even though the S&P is down .81%, I am up just a tiny bit. It's disappointing.

Suffice it to say, I won't be tempted to play the "catch a falling knife" game with Gulf-wrecker BP, no matter how compelling its fundamentals appear to be. The Euro right now seems to be clawing its way out of its hole, but I don't think it's going to get anywhere past 1.225 or so, so we might be setting ourselves up for a better tumble today.

Anyway, I just wanted to share this object lesson as to how a "hedge" can be a "profit neutralizer". I wouldn't be whining, I suppose, if the Dow was up 150 and BP had sealed the leak and was soaring; that's the kind of uncertainty we traders face every waking hour.