It's been a "tough year for short sellers." That's the Wall
Street Journal's headline from the Nov. 25th edition,
"The Dow Jones Industrial Average rose for the seventh week
in a row. About the only people gnashing their teeth are short
sellers, the investors who make a living betting that stocks will
fall in price rather than rise. Short seller hedge funds are down
nearly 15% from the start of this year, through October."
Reading articles like this might cause a person to improperly
assume that bearishness hasn't produced good results in 2013. To
the contrary, being bearish in the right places has paid off
The below chart vividly illustrates this point by contrasting
the monumental performance difference between the Direxion Gold
Miners Bear 3x Shares (NYSEARCA:DUST) with the Market Vectors Gold
Miners ETF (NYSEARCA:GDX). While DUST has soared over the past
three-months, GDX has lost more than 20%.
DUST aims for triple daily opposite performance to gold mining
Via our time stamped
to subscribers on Sept. 18 (the same time frame as our chart) we
"Gold miners are a leveraged play on physical metals and if
the next leg down in metals prices takes hold, as we suspect,
miners should lead the way down. Buy DUST around $24.60 with a
price limit up to $25.25. DUST aims for triple opposite daily
performance to mining stocks. A tandem options trade is to buy
the GDX Oct 2013 25 put options (GDX131019P00025000) around
How did our gold trade turn out?
Via intraday alerts to our readers on 9/19 and 9/20 we sold our
DUST position for a two-day +16.5% blended profit. DUST aims for
triple opposite daily performance to mining stocks. Our tandem
trade in the GDX Oct 2013 25 put options were sold for a two-day
gain of +68%.
At the individual stock level, Tesla Motors (NASDAQGS:TSLA) - a
Wall Street darling - is another example of how trading against the
crowd can produce handsome results. Since hitting its Oct. 1 peak
near $194, Tesla shares have sunk 37%.
Furthermore, Tesla is a brilliant example of how the stock
market's psychology or sentiment can change on the dime, even for
securities or markets with strong bullish performance.
Not being ready for a huge but sudden shift in market sentiment
is how most people miss out on the truly big gains from bearish
setups. But there's more to making money on bearish trades than
just being ready. What's another key?
Being selectively bearish, as opposed to blindly bearish, is how
smart bears make money. And in upcoming articles, we'll examine
other markets where being selectively bearish - despite an
overheated stock market - has been the right trade.
Profit Strategy Newsletter
uses technical, fundamental, and sentiment analysis along with
market history and common sense to keep investors on the right side
of the market. Since the beginning of the year, 74% of our weekly
ETF picks have been winners. (through Q3 2013)
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