Timing The Housing Market, Patterns Always (Win / Win Strategy)
For over 2 years we've heavily referenced the NAIL ETF (Provided by Direxion) to get a better sense of the overall housing market. As a measure of context, our experience / trading background included heavy exposure in supporting MBS (Mortgage Backed Securities) and ABS (Asset Backed Securities) reference data providers. This is in no-way investment advice.
Needless to say, that with the right view, this particular security has been a pretty strong indicator on how the general housing and construction market will perform both in the short and long term.
One question that we are constantly asked, is whether the support price has already been reached. Well, historically speaking the support price hovers around US$20 and then bounces to over US$95. As part of our general methodology, we focus on generating a high volume of trades with automation, this allows for compounded returns (huge fan of pyramiding). So, buying at the support price, could well be one long-term strategy once the price reaches the US$20 support (if one can manage the stress associated with short-term risk), should the price drop even further one could increase the position to average down for a more preferable price.
On the other hand, we recommend that traders consider using two timeframes of reference for a guide on support and resistance levels. As an example, one could look at the long-term trend with 2–4-hour candlesticks across a large volume of ticks and then move to a shorter time-frame (such as the 15-minute candles) once a direction is established, to focus on directionally advantageous positions (either bullish or bearish outlook). This allows a swing-trader to remain in a position during times of volatility with a strong resolve based on back-tests that the future outcome will have some predictability.
The reason for this post is that we find that many "newly minted" retail swing-traders are focused on the short-term gain and tend to have stop-losses triggered fairly quickly. If one where to consider the approach above, a more loosely defined (%) stop-limit would allow for improved returns contingent on one using the long-term outlook as a guide.
Final Thoughts
Regardless of your strategy, we recommend one always trades with stop-limits and profit targets (this can be established with the tradingview strategy-tester), and more importantly focus on consistency. There is no such thing as a silver bullet, but historical trends on etfs certainly do help with timing.
Needless to say, that with the right view, this particular security has been a pretty strong indicator on how the general housing and construction market will perform both in the short and long term.
One question that we are constantly asked, is whether the support price has already been reached. Well, historically speaking the support price hovers around US$20 and then bounces to over US$95. As part of our general methodology, we focus on generating a high volume of trades with automation, this allows for compounded returns (huge fan of pyramiding). So, buying at the support price, could well be one long-term strategy once the price reaches the US$20 support (if one can manage the stress associated with short-term risk), should the price drop even further one could increase the position to average down for a more preferable price.
On the other hand, we recommend that traders consider using two timeframes of reference for a guide on support and resistance levels. As an example, one could look at the long-term trend with 2–4-hour candlesticks across a large volume of ticks and then move to a shorter time-frame (such as the 15-minute candles) once a direction is established, to focus on directionally advantageous positions (either bullish or bearish outlook). This allows a swing-trader to remain in a position during times of volatility with a strong resolve based on back-tests that the future outcome will have some predictability.
The reason for this post is that we find that many "newly minted" retail swing-traders are focused on the short-term gain and tend to have stop-losses triggered fairly quickly. If one where to consider the approach above, a more loosely defined (%) stop-limit would allow for improved returns contingent on one using the long-term outlook as a guide.
Final Thoughts
Regardless of your strategy, we recommend one always trades with stop-limits and profit targets (this can be established with the tradingview strategy-tester), and more importantly focus on consistency. There is no such thing as a silver bullet, but historical trends on etfs certainly do help with timing.