Another bloody day on wall street. I think the market is close to a bottom. Maybe just a sharp sell off away. If that happens, I'll consider three sectors:
- Financials. It's very oversold, and they're not going away. XLF and UYG are the ETF plays. All big names like MER, BAC, MS, C, LEH, WFC are way oversold. Any one of them can have a 10% bounce in a day.
- Sold off Ag and coal stocks. KOL was off 10% today, and MEE of close to 20% and PCX 15%. POT and MOS were sharply down as well. I was fortunate to make money in KOL, POT, MOS and MOO early this year, and my sell of POT and MOS were close to the top. Now, it's time to watch them consolidate before jump in. If oil tanks, they have further decline to go.
- Airlines. There is no better plays in UAUA and AMR when oil tanks. I think oil is the last one holding up, when it crashes, airlines will bounce sharply. Again this is the most risky one, since it can go down another 10-20% before the bounce. This is really a best way to short oil. Not a long term play, obviously.
- Overall, I think I'll use financials and general market ETFs like SSO and DDM to play the bounce. And added selected stocks in Ag and coal. Maybe one in airline.
2 comments:
Hi, simpletrade, how low do you think the UYG will go? I bought at 32 now lose tons of money. I don't know if I should still hold it...
mark
Mark,
Sorry to hear about your UYG position. Since now UYG is very oversold, and it is at a new low, I really don't know how low it can go. It can go either way. I already misjudged how low it would go, otherwise, I won't add my first position at 23.
On the other hand, it's likely to bounce back to 24-28 area in the short term. It has a history of bounce back to 50 EMA, likely to do so again this time.
I'll use the chance to reduce my UYG holdings.
Good luck to you.
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