This post was just published on ZYX Buy Change Alert.
Please see the Morning Capsule for apparently a fund moving money from liquidating precious metal stocks into biotechs. This explains the move lower in LABD.
The real reason for holding is a potential Trump tweet or mention in his speech tonight of drug prices. In our analysis, the probability of Trump mentioning drug prices in tonight’s speech is low. However as the Congress moves towards repeal of Obamacare, details may have a negative impact on biotechs and pharmaceuticals.
LABD buy zone remains $9.50 to $12.52. First target remains $19.50 to $20. The second target remains $26 to $30. Stop zone remains $7.60 to $8.68. The stock is trading at $10.74 as of this writing.
For your convenience the last post is being republished here.
LABD is a triple leveraged inverse ETF which moves up when biotech and drug stocks go down. The present prices of drugs in the U. S. are simply unsustainable. Trump has said that drug companies are getting away with murder. All it will take is another tweet from Trump or a bill introduced in the Congress by Republicans to make drug and biotech stocks go down.
Lately there has been a lot of buying in these stocks on the theory that the market has moved up and there is too much risk in stocks that have been performing well such as financials, industrials, technology and energy. For this reason, some money managers are aggressively buying laggards including drug and biotech stocks. Please remember that many money managers have a compulsion to buy to stay nearly 100% invested. We do recognize that several of our subscribers who are money managers face the same compulsion. However our subscribers who are private investors, hedge funds, or registered investment advisors do not face such a compulsion and should not consider buying laggards with poor fundamentals just for the sake of being fully invested.
This is an asymmetrical trade with potentially very high profits but lower commensurate risk relative to potential rewards, although absolute risk is very high.
The new buy zone is $9.50 to $12.52. Please be aware that this ETF can trade in a very wide range. First target remains $19.50 to $20. The second target remains $26. to $30. Stop zone is $7.60 to $8.68. In determining the quantity, please remember that it is triple leveraged. The quantity used should be one-third of a normal position. Consider not exceeding 25% of the full core position size but less if you do not want to take that much risk.
This is suitable only for super aggressive investors because of triple leverage and potential movement in a wide range. If you are not a super aggressive investor, keep the quantity very, very small.
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