Wh1sp (99.99)

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Lessons learned from the rally

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September 21, 2009 – Comments (4) | RELATED TICKERS: FAS , FAZ , AXL

Feel free to comment or add your own!

1. Being short worst in sector stocks is incredibly dangerous during a period prime for a rally.

2. People tend to over-simplify complex market reactions.

3. Once underlying fundamentals begin to deviate from stock prices, getting in the way via shorting or buying a stock needs to be done with persistence, and preferably with options to limit losses.

4. Leveraged ETFs perform very well in directional markets, even the 3x versions.

4 Comments – Post Your Own

#1) On September 22, 2009 at 12:14 AM, BigFatBEAR (30.17) wrote:

Here here. Those were/are some difficult lessons to sink in!

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#2) On September 22, 2009 at 12:45 AM, checklist34 (99.80) wrote:

we've bounced roughly back to fair value, maybe not quite.

I would say now is when the fireworks starts.

In general iwould say that shorting a market down more than 30% is risky business, basically playing with gas and matches. Might work out, but its just not worth the risk. In general except as a hedge, why bother shorting anything that isn't in a clear and present bubble?

levered ETFs perform well in very directional markets unless you compare them to individual stocks you could have picked or their target goals...

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#3) On September 22, 2009 at 12:46 AM, RogueAccountant (< 20) wrote:

I'd like to beat the dead horse on lesson #3. This market is, as most of us know, trading on technical momentum...fundamentals, financials, and sound valuations flew out the door a long time ago. Playing the double and triple shorts (DUG, FAZ) has been an expensive proposition over the last two weeks. I will still invest in inverse ETF's especially because I don't like outright shorting stocks, but I do see some profit-making potential by playing inverse ETS's over the next couple of weeks. The trick is to actively manage positions and close them on the daily basis. I'd definately advice against staying overnight in one of this babies, unless of course, you don't like sleeping.

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#4) On September 22, 2009 at 5:20 AM, memoandstitch (< 20) wrote: