-
The case for ENERGY/ERX
With the Doha talk ready to roil the energy markets, here are a few ideas on how we could trade ERX (Triple leveraged ETF) on Monday.
We will test three hypotheses and see how these worked using data for the past 300 days.
1. Shorting a Breakdown on Volume
We can see that such an hypothesis worked well in the past.
![Name: ERX_T.gif
Views: 965
Size: 18.8 KB](http://www.effectivevolume.com/attachment.php?attachmentid=35619&d=1460881895)
It is interesting to look at the list of trades on which the stats have been built. We can see that the best trades were executed before March 2016 (During the downtrend.)
Since March 2016, there has been no such trade.
![Name: ERX_Trades.gif
Views: 975
Size: 15.1 KB](http://www.effectivevolume.com/attachment.php?attachmentid=35617&d=1460881895)
Also, we can see that the bottom reversals type of trades (Green arrows) were triggered when the price was at a low (Obviously this is only known in insight.)
![Name: ERX_TA.gif
Views: 945
Size: 36.8 KB](http://www.effectivevolume.com/attachment.php?attachmentid=35618&d=1460881895)
2. Buying a Breakout On Volume
If the Doha results are good, then oil could jump and push the whole sector higher.
We can see below that Buying a Breakout on Volume did also work in the past, both before (Win ratio of 7/9) and after March 2016 (win ration of 5/8)
![Name: ERX_T1.gif
Views: 953
Size: 18.8 KB](http://www.effectivevolume.com/attachment.php?attachmentid=35624&d=1460882347)
![Name: ERX_Trades_BOV.gif
Views: 960
Size: 18.2 KB](http://www.effectivevolume.com/attachment.php?attachmentid=35621&d=1460882202)
3. Shorting an Overbought Situation
Surprisingly, shorting an overbought ERX could also work, as far as the price is far in the upper section of the envelope.
![Name: ERX_OB.gif
Views: 933
Size: 19.1 KB](http://www.effectivevolume.com/attachment.php?attachmentid=35622&d=1460882203)
These trades occurred mostly before March 2016, but shorting overbought conditions worked relatively well also after March.
![Name: ERX_Trades_OB.gif
Views: 969
Size: 21.7 KB](http://www.effectivevolume.com/attachment.php?attachmentid=35623&d=1460882203)
Conclusions:
Because the Breakout Calculator can test different types of hypotheses, it is easy to "make it tell" what you want to read. This is called "trading bias."
In general, Buying work best when the price is low and the uptrend is starting. Shorting works best when price is high and downtrend is starting.
These situations can be easily spotted in hindsight.
Since we are working with an unknown future, the best is to test opposite hypothesis and decide depending on how the market acts on Monday.
-
This type of Money Flow tells me that there is too much at stake in that sector to allow it to fail.
This has more to do about refinancing than about the price of oil itself.
Pascal
Posting Permissions
- You may not post new threads
- You may not post replies
- You may not post attachments
- You may not edit your posts
Forum Rules