24 March 2008

Ultra-short ETF's on Another Big Up Day

I couldn't resist posting the stock certificate featuring a sniffing, huffing pig.

Today's big market upswing on news that JPMorganChase quadrupled the value of their offer for Bear Stearns offered me an opportunity to increase my position in DXD at a lower price. It's a good thing I didn't get filled last Thursday at $55.99, as I picked up shares at $54.205, cost-averaging my position in DXD down to $55.60 a share.

If you click on the chart below, you'll see that DXD has been trading within a tightening range throughout 2008. I am operating under the thesis that today's market action is a reaction to positive news within the context of a downward-trending bear market. With that in mind, I am looking for shares of DXD to head back up towards $62.

QID, the ultra-short QQQ ETF dropped 8.25% today, whereas shares of QQQQ gained 3.46%. The shellacking of QID drew my attention, as well as some investment dollars. I established a position at $48.39 per share. The same investing thesis holds for this position as with the DXD position. If QID remains range-bound, I will look eagerly to the $56-57 levels in the near term.

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