Time to short financials?

So lets get straight to the point.  The financial industry has been destroyed during this recession.  Going by the XLF, a ETF that focuses on the financial sector, at the prior bottom, the sector was down 83%. Meaning a recovery to previous levels would be a 488% gain.  Since the March bottom, it rallied 110%, and after a small pullback, has dropped to just 85% higher then the march levels.

So what happens next?  After this rollercoaster ride of a sector, what’s likely to happen next?  There are a couple key ways we can predict that, but keep in mind that the point of technical analysis isn’t to be 100% sure of the direction; the idea is to get a good idea of what is most likely to happen next, and capitalize on the opperunities the market gives you, while keeping your risk in check.  With that said, lets take a look at the technical picture.  Basic technical analysis, step 1 is to identify support and resistance levels.  Key support levels seem to be 11.20, and 9.80.
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Stock Trading Strategy: The Bullish Percent Chart

In my previous article on stock trading strategy, I showed you how to use relative performance to decide what sectors you should be buying and selling.  In this article, I’ll show you how to use a little-known tool to call reversals in the major economic sectors.  What is this little known tool?  Its called a Bullish Percent Index, or BP Chart. Read the rest of this entry »

ETF Basics

by: Jordan Weir

For many years, investors have attempted to diversify their overall portfolios by trying to pick stocks across a diverse set of asset classes. Which is all well and good, but the problem it generally runs into is you should also be diversified within any given asset class, lest something adverse happen to the company you happened to bet on. Yet as soon as your diversifying both within, and between asset classes, now your running a portfolio of potentially 40+ equities, and even the active investor rarely has time to do due diligence on the hundreds of companies required to find 40 excellent investments. Read the rest of this entry »