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Post by novie08 on May 6, 2014 21:09:52 GMT -5
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Post by huh on May 6, 2014 22:30:38 GMT -5
RWM may be headed for low 20s. Anyone want to throw up a chart? TIA. I'm a big believer that you should never base trades on leveraged ETFs. Instead, use the non-leveraged underlying. This is because of decay and overshoots caused by the leverage multiplier. They mess up the math formulas used in the FIBs and patterns. OK for 'spirit of' type confirmations or general direction, but the buy marks, stops, resistances, etc. get all messed up. Here's an example using IWM and TZA only over the last few days (I stress only because the skew becomes greater over longer time frames & larger movements): IWM Bear Flag  TZA Bull Flag (inverse ETF so everything is flipped)  Some of the 'misses' in TZA may seem minor, but are extremely important when setting a buy or stop. And most importantly, the % of the miss increases dramatically over longer time periods and larger swings. And although it isn't leveraged, I would never use SPY for precise charting purposes over a period longer than a few days. This is because of the value adjustments made for the dividends. Over longer periods it also gets skewed because of these adjustments. So in the case of RWM, I'd use the charts for IWM instead. JMHO |
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