Skip to main content

Pick o' the Month - QID

Ok, I finally sold my last few shares of SanDisk (SNDK). Having posted a list of bottom-fishing candidates for this month's pick a few days ago, I expected to choose one of them as the Pick o' the Month and immediately put the money to work.

As I mentioned in my post yesterday, however, I have fixed a bug in the Signal Strength calculation for SELL signals in the TradeRadar software. The new version gives the same SELL signal (click here to view full size) on the QQQQ but now it looks strong enough to give me the confidence to act upon it. QQQQ sell signal. As a result, I turned around and purchased the ProShares UltraShort QQQ (QID). The "Ultra" classification means they are trying to achieve twice the daily performance of the associated index; in this case, the NASDAQ 100. So if the QQQQ is going to go down, QID should start moving up and moving up smartly.

I have been considering doing this for a while, at least since mid-December when TradeRadar first started giving indications the up-trend in the QQQQ might be coming to an end. The signal seemed to confirmed when one tech company after another, despite reporting good earnings, provided dismal guidance for the coming year. But with the Dow and the S&P 500 making new highs (and even the Q struggling to a new high during that time), I have been reluctant to move into the bearish camp. Finally, I decided to trust TradeRadar and go for it. QID closed at $52.68 today. Now we'll see how it plays out.

Recent weakness in ISM is also portending a move down with the number falling below 50. This indicates a sign of contraction in manufacturing (read more at RGEMonitor). This week the GDP number for 4Q2006 was revised upward to 3.5% but looking at the components of the number does not actually provide much support for the bullish outlook as the gain was mostly attained on the back of consumer and government spending (read more at The Big Picture).

More food for thought on the ProShares Ultra Long and Short ETFs: click here for some interesting charts on QLD and QID by Mike Branco.

Comments

Popular posts from this blog

Time to be conservative with your 401K

Most of the posts I and other financial bloggers write are typically focused on individual stocks or ETFs and managing active portfolios. For those folks who are more conservative investors, those whose main investment vehicle is a 401K, for example, the techniques for portfolio management might be a little different. The news of stock markets falling and pundits predicting recession is disconcerting to professional investors as well as to those of us who are watching our balances in an IRA or 401K sag. What approach should the average 401K investor take? Let's assume that the investor is contributing on a regular basis to one of these retirement accounts. There are two questions that the investor needs to ask: 1. Should I stop putting the regular contribution into stocks? My feeling is that investors making regular contributions are being handed a present by the markets. Every week the market goes down, these investors are lowering their average cost. When markets reco...

The Trouble with Trend Reversal Indicators

Many of us use various trend reversal indicators to time our trades. Our desire is to determine when prices have changed direction so that we can ride the new trend. Why doesn't it always work out? The first reason, of course, is that unforeseen events often drive prices in unexpected directions. That is something we can't change and it often makes all of us technical traders crazy. On the other hand, sometimes an unforeseen event is a prelude to a new trend. A stock spikes up on a what seems to be a one-time piece of good fortune and soon falls back. Does it start making its way back up or does it resume a previous down trend? The conflict within trend reversal indicators is that, though they can definitely tell when prices change direction, they suffer from two problems. One, they often can't determine how significant that move in prices actually will be. Two, they are often lagging indicators. As such, they can be late in providing a signal, sometimes leading the investo...

Unlock Stock Market Profits - Key #4

This is the fourth article in a series of posts describing 10 tools to help you identify and evaluate good investing ideas. It is based on a post that provides a summary of the ten keys that individual investors should use to identify profitable stock trades. ( Click here to read the original post ) With this fourth post, we will continue another step along the path of finding stocks that seem to have some potential. The first post in the series discussed how to use unusual activity to identify investing ideas. The second post described how to use stock screeners. The third post described how to use lists of new highs and new lows. This post will focus on identifying social or business trends in order to find investing ideas. Information on new trends might turn up anywhere. In conversation with friends or business associates, in newspapers or magazines, on TV or though your work. The key is to be aware of trends and how they start, stop or change. We'll start by describing what...