Here is a recap of my recent swing trade in $UPRO step-by-step:
- $SPY has been in an up trending bull market for years above the 200 day moving average, and it made new all-time highs late in 2014. The best plan was to trade the long side all year. However, with a high probability setup with an oversold condition in the bull market, I wanted to apply some leverage with equity. I chose $UPRO, which provides three times the movement of $SPY, with added compounding if I caught a trend.
- The 30 RSI on the daily chart is a very strong end of day support level for $SPY. This is well documented over the years, even during downtrends and bear markets. The 30 RSI in $SPY is an oversold level bought by many professionals. It is a great risk/reward entry to trade for swing longs inside the primary trend. It is a fat pitch right over the plate for a swing trader.
- I purchased $UPRO for $118.90 at 8:45 am on the morning on December 16th near the 30 RSI, with my maximum position size for one trade in my trading account. My initial stop was a close below the $SPY ‘s 30 RSI.
- The next day, on December 17th, the price rallied quickly to the $124 area and I raised my stop to a close below the previous day’s low.
- On December 18th, $UPRO had a gap and go that took it over $132. I raised my trailing stop to a close below the previous day’s low again. I trailed it for the next seven days, as $UPRO made higher highs and higher lows in a strong, end of year rally.
- On December 30th, $UPRO was finally going to close below the previous day’s low so I exited at $136.75 at the end of the day, for a nice $17 move from the initial entry. This was almost a 10% gain on the capital at risk.
- This is the best way to use triple leveraged ETFs; for trading a low volatility trend, on a short term time frame.
— Steve Burns (@SJosephBurns) December 30, 2014