Let’s track a $10,000 trade that takes advantage of contango, and value. The start time will arbitrarily be the first week of May and be updated every few months. It is going to be volatile 🙂
Update 1, June 3
I’m choosing not to include UNG because the case for it is less clear to me. Originally I included it because it would likely offset volatility. That’s not a very good reason. VXX is volatile. Might as well embrace it. So VXX is now 50% of this long term trade. So for the month of June, this trade is up 9% mainly because VXX is down 17% for the month.
Update 2, August 7
As of August 1, 2014, this portfolio is up 8%. For the sake of easy record keeping, profit loss calculations will stay the same. But for actual trading I decided to add a stop loss for when the VXX is very oversold. Unless one wants a set-and-forget system, it’s silly to remain short. So when the long term RSI or medium term RSI are around < 30, place a stop on the most recent significant high (short white line). Go short again after the rising trend line (long white line) is broken. Big uptrends are typically about 3 months long, yet price can rise almost 300%. It comes right back down again (historically), but why take the trip if there is an easy way to avoid it?
“After that, I understood the rules, I knew what I was supposed to do, but I didn’t. I couldn’t. I was compelled to stay, compelled to disobey.” — Agent Smith
Agent Smith’s are when when price seems like it “should” keep trending, yet doesn’t.
+ Yesterday gapped down and closed up.
+ Price closed above the 34 EMA.
+ Daily CCI is not too high.
+ Weekly CCI might be flattening out — could easily turn up.
These 2 items are are present, but the main point is that price “should” be going up, but didn’t. (
– 5 distribution days in past month.
– Weekly RSI > 70.
These order’s is don’t trigger too often, but when they do, there is rarely much of a drawdown.
Jan 25: Short CCJ at 31.10. Not as much follow through as expected though.
Stop loss is 39.2.
Also short BIIB at 66.53. Tight stop around 67.30. Should have broken the rising trendline and didn’t.
Jan 26: Stopped out of BIIB yesterday, -1%; and CCJ -3%.
Will be interesting to look back in a few days and see what I can learn.
Sell stop around 34.
Stop loss around 35.60.
– Price in the channel seems to be mostly distribution.
– Monthly and weekly CCI’s down sloping.
+ Daily CCI is very low.
– There was a backtest of the channel, the breakout gap, and the 5 EMA all at once.
– 34 EMA starting to trend down.
– Todays bar opened above yesterday’s and then closed lower on pretty good volume.
Jan 18th: Just exited at 34.97. Don’t think it will work out so I did not wait for the stop to be triggered. If it was going to work out, it likely should have by now.
I guess this is a “failed” breakout?
Jan 22: Incorrect stop placement. Lesson: If the trade looks okay, but I don’t like the risk It is much better to reduce the position size than have a stop too close.
Wait, didn’t I just try to short a momo and it did not work out? Yes. And here I go again. And again, this trade should work out quickly one way or another. ST did not have such negative volume.
Buy a Feb 175 put if price drops past around 176.38. (half position)
Stop loss around 185.20
– Weekly CCI trending down and below zero.
– 5 Distribution days since the recent top.
– The one accumulation day did not amount to much.
– In fact the 2 up days last week were quickly and mostly retraced.
– Broke the uptrend line, and frequently under a now flat 34 EMA.
+/- Earnings on January 24th.
+/- Short interest is about 30%. That’s a lot. There is a risk of forced short covering.
– RSI is > 70 on the monthly and recently weekly time frames.
+/- This recent gap on Nov 11th has basically been closed without the stock moving up. I assume that is a bit negative. The 2 other recent gaps did not get filled. A sign of strength.
UPDATE Jan 11: Price did not fall, so no trade. The daily CCI did cross above the weekly CCI and that’s bullish. But I liked the other stocks on the weekly outlook better.