UVXY - Still Giving Trade Gains

After topping out in early May, UVXY still gave +67% in two trades.

While markets have continued to new lows since May 12, UVXY had its high on May 9 and has had lower highs since then. In the past, this has preceded a market bottom, so perhaps the markets did hit their lows last Friday, June 17. Even with a hard market rally this week, UVXY still gave a quick trade for +7.4%. If you’re too busy to take advantage of these ‘small’ gains, you could have netted 66.8% with just 2 trades in 1 month. That’s a pretty good return for a tiny amount of time and effort.

With a little more time and effort, small trades since May 11 gave a cumulative gain of 165.4%, or 259% if you were more aggressive. Let’s have a closer look so you can see exactly how it was possible. Then, if you have the time and want to make the effort going forward, you can achieve similar returns.

Even though UVXY topped out May 9th and 10th, May 11th and 12th still provided a chance for +12.3% in one trade, or more if you took all 3 trades that were there for the taking. And given that volatility still had the potential to shoot to 40+, there was every reason to continue watching UVXY closely. Late on May 12, fear evaporated for whatever reason and UVXY was down sharply the next day. At 1pm, there was a scare that lasted an hour, but I was taking the day off. On May 17, it moved up sharply from a gap lower open, so buy. When it stalled and fell, sell. You may have bought late in the day, or early the next day, or later when it was clearly blasting higher. I used the conservative buy places in the chart which led to a cumulative gain of 165.4%.

Again, the buy moments early in the day are pretty obvious. On June 9, at 2:30, UVXY shot higher and would have triggered your alert or stop and it followed through to close up and gapped higher the next day. You may have sold and re-bought or just kept holding since you were up on the trade and the markets remained fragile. Best not to have sold at 18+ on June 13 since it could have easily continued much higher. Selling early the next day at 17.50 as it dropped allowed you to maximize your potential gain even though you gave up a bit of actual gain. The markets remained fragile and finally bottomed on June 16-17, so it made sense to continue trading UVXY, even though it continued to fall overall.

Last week was a very strong rally in the markets, +7.3% from Friday’s low. On such hard moves, there’s always the likelihood of a sharp pullback for a quick trade in UVXY. There’s also the likelihood that it’s a fake rally and the markets fall hard.

Lots of people say you shouldn’t try timing the market because it’s impossible, but it’s really not difficult to see points where caution is advisable. We also can’t predict rain for sure, but when there are black storm clouds blowing your way, it’s best to get ready for rain, and hail, even if you don’t get any.

I have no idea where the markets will be 6 months from now. Some say higher, many and perhaps most are saying lower. What I do know, is that a little time and effort trading UVXY will definitely be worth your while. Good luck!