AMEX:XLU   SPDR SELECT SECTOR FUND - UTILITIES
150 9 6
XLU            
1 - Hitting hard in weekly bollinger .
2 - climax style
3 - 5 waves up since july
4 - 21% since july15
5 - Hitting trendline taking all tops in logarithmic since feb10 (115% up since)

These are utlities... They enjoyed better traction in the most defensive part of the rally... it is likely over or close to
Hi Yacine,

Agree on XLU going to overbought levels.
However I still think there are is a bit more room for the up move as there are no signs of exhaustion yet.

Will shorting now be a bit like catching the proverbial knife?

Update on $XLU: Prepare to Take Profit and Take it Quick

Reply
YaKa PRO BreakOutArtist
yes. see my comment above.
-1 Reply
Wow seems like you have caught the proverbial knife! Not bad!
Reply
An overly optimistic market is likely to decline. As best put by Benjamin Graham "all bull markets are bound to end badly". I easily see a pull pack from these extreme values, but Bollinger bands fail in that the price can ride the upper band as the price rallies as Bollinger bands do not provide measurements on the entire resistance zone. The most obvious confirmation of your short opinion would be falling volume which doesn't confirm a trend. However I don't see any major pullbacks yet, but currently SP 500 futures are up on CME. I assume if your shorting you will be buying puts. With falling volatility, the vomma on your puts will be positive. Meaning the options will gain value if vega rises, however the VIX has been falling, so vomma will work against you, if theta doesn't first. What strikes do you recommend, and what expires? Or instead do you prefer to do a direct short instead of buying puts? This is a higher risk trade. Also If your betting on increased volatility and bearish profitability, why not do a short put ladder instead?
Reply
YaKa PRO Rashad
All valid comments.

If futures: short 10% here and 10% at 50... this should work and is light enough to be sustained.

If options:
(alt a) buy 20feb15 48 put for 90cts
(alt b) buy 20feb15 45 put for 25cts
(alt c) buy 19jun15 45 put for 90cts
-1 Reply
In essence if you avoid the risk of stopping on spike to 50... this trade shall work. Immediately or later...
Note: XLU often makes tops a few months before the rest of the market in this phase of the rally.
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All market will be unstable next year....and we can hope a lot brutal moves of all market particulary indexes....see you and thanks for your analyses
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This is really the best trade around it seems.
-1 Reply
short 20% at 48.5
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