Thursday, March 05, 2009

Warning to SKF, FAZ and BGZ Players


To SKF, FAZ, BGZ (etc.) traders:

Okay, you are flying high, ripping ultrabone-financial quintuple shorts into your own personal stratosphere. Well done tough guy, but wipe that grin off your face and be at least poised for when to cover-up.

Fat city no doubt, but if you are long these here and now, then have a look at these charts going back to last November. I have discussed before how these over-bleed on the downside (vs. their relative indices), but now it is more timely. It goes something like this...

-They can continue to rise as high as the sky (this is no bottom call on financials, though it is a possible inflection point).
-But it is when they re-trace, after the huge incline that they bleed badly relative to the underlying index; meaning that the financials will be gaining far less than the SKF and FAZ will be declining.
-These are faulty products and it is after a big move that the faults appear. Math geeks can tell you why, I'm just telling you that is the unfortunate downside to these trading instruments.
-Wouldn't we all like to have this problem right now. Just don't get caught when they turn down, you scumbag shortseller ;)

[Edit: Dreamdaily sent in a nice and dummed-down video explaining the geek(less) math. Anyhow, whether SKF topped today at 250 or it is going to 300 or 450, etc., it is the counter-slide were anyone holding is going to get burned. I'm not going to hold any of these overnight for the time being, but I am not at all against using them for daytrades if the tape is ripe (rotten).]

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