When to take profits on my S&P500 trade

By: ispeculatornew
Date posted: 04.22.2009 (5:00 am) | Write a Comment  (1 Comment)

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sp5002A few weeks ago, I went long S&P500 at 793 thinking that the S&P seemed to be back on its way. The trade went down slightly to start off, but it is now up 9%. I did so through XSP, a Canadian dollar ETF that tracks the USD return of the S&P 500. It is exactly what I was looking for as I do wish to be exposed to the S&P 500 but given that all of my costs are in CAD$ and that the near future direction of the CAD$ is very unclear, I did not want to have the return of my trade affected by the exchange rate fluctuations.

I had decided I would close out the trade if I made 10%, waiting for a retreat as the economy is obviously not out of its misery yet. Of course, now that the trade is nearly up 10%, I’m hesitating about my early decision. Knowing that closing trade discipline is essential, I will probably be respectful of my initial thought. But the question remains… is the S&P 500 rally about to end??

I did find an interesting analysis using the triangle model, you can take a look at a video here, it’s free:) It does confirm that the S&P 500 is running into a lot of resistance right now and it is quite unclear if I would be better served by exiting my position and re-entering at a lower point. There are so many different ways to look at this debate:

-Time and time again, research has showed that trying to time the market has resulted in poor results (TFB wrote about it last week here)

-However, there is a very heated debate right now about the notion that buy and hold can still be a successful strategy

By the way, I did not report this trade in my positions here because it is not a “trading position”, it is in my retirement account! Just wanted to clarify that!

After a spectacular rally from the lows seen last month, the S&P appears to be running into overhead resistance and for this reason I am evaluating the position. What I will probably end up doing is respecting my initial trade and close out my position if/once I reach the 10% profit to analyze the trade once more. If I do come up to the conclusion that the S&P 500 is headed back up, I will be more than happy to re-enter the trade and see how that turns out.

So once more, feel free to go check out the video, I’m sure you will agree with me that is very interesting and helpful analysis, see it here🙂

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1 Comment

  1. […] Intelligent Speculator is taking profit from his S&P500 trade. […]

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