DESPITE A DOWN MAKET TODAY, RSI MAKES TWO COMMODITY PICKS October 23, 2009
Posted by Marlowe Cassetti in GSG, UCO.trackback
Wall Street ended the week on a down note today, but that didn’t keep RSI from continuing its picks favoring the commodity sector. There is certainly a trend emerging within the RSI trading system. Out of the several hundred ETFs to select, there is definitely a tilt towards commodities/energy. So here they are:
- Buy 540 shares of UCO - ULTRA DJ-AIG CRUDE OIL PROSHARES at Monday’s open with a $1.86 stop loss under your filled price and a $2.78 profit target above your filled price
- Buy 430 shares of GSG – ISHARES S&P GSCI COMMODITY-INDEX at Monday’s open with a $2.31 stop loss under your filled price and a $3.47 profit target above your filled price
As I have pointed out in my prior discussions on the RSI methodology and the mechanics of trade initiation, the number of shares represent a $1,000 risk or 1% risk on a $100,000 portfolio. Please scale up or down accordingly based on your own portfolio and/or risk tolerance. As an example, UCO has a high volatility of almost 13% with a Ns volatility based on an ATR of $1.86. If the trade goes sour, the $1.86 stop loss represents a $1,000 loss (not including commission and order execution slippage) or 1% of a $100,000 portfolio. UCO closed at $14.35 on Friday, so the dollars invested in 540 shares equates to $7,749.00. Likewise the lower volatility ( 7%) GSG investment is $14,134 (again assuming the opening on Monday is close to Friday’s close of $32.87). Of these two funds I prefer GSG over UCO. The chart shows the volatility differences.
Over this weekend I have to decide if I want to buy GSG Monday morning. I have investments in commodity funds as it is so I need to quantify my total commodity exposure and the attendant risk.
At the end of this week my positions in RSI’s picks are ahead:
- AGQ - ULTRA SILVER PROSHARES 4.16%
- DYY - PS DB COMMODITY DBLE LONG ETN 3.25%
- RJN - ELEMENTS ROGERS INTL COMMODITY ETN 0.62%
Remember this is super short term results, so please keep the corks on the champagne bottle.
Anyway, you have a great weekend.
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