Sunday, December 14, 2014

SDP UltraShort Utilities ETF Weekly Chart Downward-Sloping Channel Oversold Falling Wedge Positive Divergence

SDP is a dangerous and speculative, thinly-traded, double inverse ETF against the utilities sector. The utilities are on a tear higher benefiting from lower interest rates. Utilities are always involved in long-term capital projects so lower rates create more attractive financing conditions. UTIL has catapulted to new heights at 598 and even created a new record high at 609.72 when no one was looking. UTIL weekly chart has a double top vibe to it and is set up with negative divergence with perhaps only a week or two more of buoyancy expected if that. XLU prints a new record high last week as well also developing the same negative divergence characteristics on both the weekly and daily charts. SDP is moving through the downward-sloping channel now printing at the lower trend line.

SDP is crushed over the last couple years as the utilities sector rockets higher dropping from 130 to 50, -62%. That will leave a mark. This is why the double ETF plays are dangerous; they give you twice the return when they go your way but also pound you twice as much when the trade moves against you. The triple X ETF's are even more dramatic and should be avoided. So why can't the SDP continue lower? Well, it can especially if rates keep dropping.

However, as would be expected since SDP is the inverse of UTIL and XLU, positive divergence is in play as shown by the green lines. The SDP daily chart is also setting up with possie d so this creates the conditions for a potential strong launch for SDP as utilities pull back for a rest. As always, catching falling knives is dangerous and not for the faint of heart. Keystone opened a long position in SDP on Friday. If SDP drops, Keystone will likely scale-in with additional buys going forward. A bounce is projected to the top channel trend line at 55-ish. SDP is thinly traded so that must be factored into any decision. As an alternative, XLU can be shorted or individual utility names. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.

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