Stocks, charts, risk management & coffee

Shorting Stocks

UDN appears to have broken its trendline. Both a log and linear chart are provided below. Once UDN didn’t bounce this morning, I closed my position that I opened yesterday. I’m long right now anyway so I can do without the dollar exposure since it is correlated with my holdings. We’ll need to await confirmation that this is not just a fakeout protrusion, but if this is the beginning of a dollar rally than shorting stocks will be back on the table and all longs must be viewed with a very skeptical view. I’ve been saying for weeks that I wouldn’t short the market until this trend was broken. This could be the turn but it is too early to tell. I’m just letting it unfold and keeping a close eye on EURUSD like everyone else.

 

 

udn_log

Log chart of UDN.

 

udn_linear

 

Linear chart of UDN.

 

uup_001

 

If you look at UUP, you’ll notice support at $22. Even if this rally attempt fails, it seems it would be likely to bounce at $22. Longs would have to hope for sideways action. I don’t think blowing through $22 is very realistic. So the edge here goes to the shorts.

 

Another battle to keep an eye on is GDX. There is a battle at the 50 day SMA.

gdx_001

§745 · October 27, 2009 · Uncategorized · · [Print]
  • Z Listers Bonus Sites--I've updated your new location!
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  • Thank you Z.



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  • You said you still need confirmation on the dollar. How do you confirm it? Today UUP had decisive volume breaking the trendline.
  • I made the post before the close. I would consider today a break. But, let's see how it trades tomorrow and Thursday before we reach an actionable conclusion. Could still turn out to be just a protrusion. But if the decline is halted, than I can tell you that I will be looking for shorts over the weekend.
  • Thanks for the explanation. I agree with you, I am going short tomorrow if we decline below this level.
  • Gold stocks should trade really sloppy next couple of weeks, ( narrow price range, to down) --in other words, you won't see a "V" type recovery--X and ATI were just horrible at earnings today--they can't even report a profit! I don't know that this has much bearing on where the dollar will go.
  • C&C,

    Good blog here... I agree... The long term dollar chart has been suggesting a rally, if we don't take out the old lows... Also, the ridiculous bearish dollar sentiment picture right now...

    Will pass through here from time to time...

  • Thanks Singer. I'll check out your place as well. Just added it to my RSS.
  • To note: UUP did break the 22 support down to 21.85, and again to 21.95 four months later.
  • When I say break, I'm meaning a decisive break of support. That excludes intraday protrusions and closes that are generally near that level. I would consider those two little breaks to be bounces off support.
  • Ok, cool. I had been looking at those points and wondering if they should be the ultimate support, or if I should be looking at a range for support: 21.85 to about 22.15.
    I like how you've explained it now, though. Thanks.
  • Definitely do a range. Look at support with a "crayon" instead of a "pencil." Also, make adjustments due to volatility. Good rule of thumb is to consider a breakout or breakdown after support or resistance is broken by 3%.

  • Sold off XLE at $58. UDN being broken is a big deal. Oil isn't going anywhere if the dollar moves higher.
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