Looking to triple your fun? Here are some 3x ETFs. (January 26, 2016)
SP-500 SPY SPXL GLD SP-500 USO UGLD IWM TNA XLF FAS XLE ERX XOP GUSH USO UWTI
We’re going to go through some of the underlying sectors and then their triple ETFs. This first one is the SPDRs S&P 500 ETF. The SPY, this is up 1.2 percent today. Now, the SPXL ( NYSEARCA:SPXL ), and by the way, that’s 98 million traded, 1.4 million traded here on the SPXL ( NYSEARCA:SPXL ), 3x, and you see the chart is real similar. The thing that you need to know here is, if you are long this ETF, these triple ETFs which are GREAT when you’re right. But if you are long the over night gaps can be kind of be nerve wracking. Like this gap down 2.6 percent from yesterday’s close, which doesn’t seem like a big deal. But what if you’re long here? You get the stock, a nice gap up, but the next thing you know it’s down 7 percent, in one day. My point is, this is triple your fun. So if you are correct on the movement of an ETF, if you want to trade sectors, but you want a lot more bang for the buck, then you go for these triple ETFs. The point is that the charts will look the same, but the magnitude of the changes are literally 200 percent. The underlying moves up one, this moves up three. One of the complaints that I make about trading ETFs is that they carry the worst of the sector in them as well as the best. So they’re ALWAYS, by definition, going to underperform the best stocks that are in that ETF.
Again, by definition the ETF has 50 stocks in it. Well, one of those stocks is going to be outperforming the rest of them. Wouldn’t it be nice to just be in that one? Well these triple ETFs can solve that problem a lot. Because again, all you have to do is be right about the SECTOR and be able to handle the swings. So right now, for this one for example, and I’m not going to go into this detail in every single one, this video would be 90 minutes long. The high here is, I don’t know if I like this or not, 666, 66.66 is the high. So if this starts rallying above that level and keeps going, which it kind of looks like it’s going to, probably not today, but if Apple ( NASDAQ:AAPL ) reports a good number and the stock goes UP, you’ll see this, I make not warranties on Apple ( NASDAQ:AAPL ), I have no position, I have an iPhone, I have a couple iPads, I have Mac; and did I mention I have an iPhone? That’s the only dog I have in that fight. I think Tim Cook is not particularly creative and anybody who thinks that Apple ( NASDAQ:AAPL ) is going to build a good car that’s going to compete with any other car is smoking a lot of the stuff that the Twitter board has apparently been smoking. So anyway, lets move on.
Gold ( NYSEARCA:GLD ), honestly just looking at the ETF, looking at Gold ( NYSEARCA:GLD ), I can’t really explain why this is moving up. If you’re a member, if you have any explanation, definitely post it in the forum. It just seems a little odd to me, Gold has been doing okay, it’s kind of been coming out of this base here, but with the market up, with oil ( NYSEARCA:USO ) up as opposed to down, it just seems a little odd that Gold ( NYSEARCA:GLD ) is breaking out, yet it is. So this is up 1.26 percent. If you’re long the 3x ETF you’re up almost 4 percent today on basically the same trade. And by the way, you CAN mix and match this stuff too, you can scale into this type of thing. I still see resistance right around this 200-day moving average. But the nice thing too about these triple ETFs, you can look at the underlying for example ( NYSEARCA:GLD ), lets say from today. If this thing comes up and tests the 200-day moving average, what’s my percent return? Okay, you look over to the left box, 1.2 percent. Now we look at UGLD ( NASDAQ:UGLD ). What’s my return if this comes up and tests the 200-day moving average? It’s 7.3 percent. So the technical analysis is the same, but the RETURN is much greater. Again, IF you are correct. And that’s where the rubber meets the road. You’ve got to be correct on the direction because if you’re not, hey, guess what? You lose 3 times as much money as you would on the underlying. So don’t just treat these as fun toys.
Okay, the IWM ( NYSEARCA:IWM ) Small-Caps. This looks like nice consolidation, kind of wanting to maybe breakout above 101.00 or something like that. So if we look at the multiple of 3 on the TNA ( NYSEARCA:TNA ), this breaks out above 46.00. This can go up quite a ways before this hits the 50-day moving average, though by the way the 50-day moving average is drifting lower, eventually it’s a function of math, it’s going to hit the 50-day moving average. We just don’t know whether it will hit the 50-day moving average, because the 50-day moving average has continued to trend lower, and the stock just oscillates around and hits it here, which has happened. Or whether this is going to rally up and hit it here. But again, the whole idea is that you can do the same technical analysis. And if you are correct on your technical analysis, on your trade points, on your buy signals, on your confirmations where you add to, you can make a lot more money on these triple ETFs
How about the Financials ( NYSEARCA:XLF )? These aren’t really doing much of anything. This ( NYSEARCA:FAS ) isn’t really doing too much of anything. But at a 4.5 percent return on just a little wiggle and a jiggle, this works. I’m just showing you this not because there’s any particular trade here. I think Financials are about as uninteresting as they’ve been in a long time. There’s a big question as far as whether Jumpin’ Janet and the Jelly Beans are going to hike rates four times this year as they have essentially hinted. Or if it’s only going to be one time. Or, and I saw an article about this yesterday, I think it was in Zero Hedge, and if I recall correctly it was a quote from the largest hedge fund manager in the world saying that he thought there might be a good chance that the Fed would actually backtrack, which of course would reveal them to be the fools that they are. But nevertheless, that’s what fools do. So the point is with this (that was a little editorializing on my part, so now you know where I stand on the competency of the Fed, both future, present, and past), but the Financials don’t really work for me here, but this is the triple ETF.
Now the XLE ( NYSEARCA:XLE ) Energy. Lets say you’re kind of thinking oil is bottoming out. The XLE ( NYSEARCA:XLE ), this is the big dog ETF with all the Large-Caps in it, this is your deal, this is up 3 percent today, which is pretty nice. Now 19 million shares traded, 3.8 million shares traded here ( NYSEARCA:ERX ), this is up 9.3 percent. By the way, and this is important for you to remember too, these gaps, where if you’re wrong the stock gaps down a lot and you’re like, “Oh crap! I think I’ve got to get stopped out here,” only to see this reverse. The same thing goes the other way around. Lets say you wanted to buy this at the open. Well you’re buying a gap up of 5 percent. And for a lot of traders you’re just not going to buy that gap, it’s up too much. But on these triple ETFs think about it as more like gaping up about 1.9 percent.
So there’s some tricks here to trading these ( NYSEARCA:XOP ). But the main trick, frankly, is to know that your technical analysis is what’s going to get you there. And you have to understand that the gaps, on a percentage basis, can be really scary trading these triple ETFs. But, frankly, that’s one reason why these are good DAY TRADING vehicles, because you’re not trading the gaps, you’re trading the moves. But to just be long a sector, I’m looking at the XOP ( NYSEARCA:XOP ) and this look pretty good to me, I would rather be long GUSH ( NYSEARCA:GUSH ) than the XOP ( NYSEARCA:XOP ), This is up over 16 percent just today.
The last one here is Crude. USO ( NYSEARCA:USO ), and to be honest I don’t know whether the triple ETF is based on the USO ( NYSEARCA:USO ) or some other one, but I don’t really care, because what we’re really looking at here are the charts. So this is up 5.3 percent today. Oil, if we go Long Crude ( NYSEARCA:UWTI ) this is up 16 percent and this really doesn’t look like much of a move. It really doesn’t look like much at all. This trade is VERY liquid, 105 million. You want to be where the action is in trading crude, there’s a lot of action here, and the nice thing is, you get to trade this like a millionaire, $2.00. By the way, it went for a 1-or-10 split here so you can only imagine what this was, this would be like 20 cents if they didn’t have that split. So this in not a function of the ETF, it’s a function of the price of oil.
I just wanted to show you these ETFs. And thanks to the member for asking me this question. We usually don’t do this on the Chart of the Day, go into something this long, but I thought it was really important, particularly in this volatile market. So again, watch the gaps here on these. Know that triple your fun can also be triple your pain or misery, and use these as day trading vehicles, if that’s your thing. Don’t just try to jump into day trading.
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