Thursday, April 2, 2015

I suspect that BRICs are about to take off. [RUSL] [UBR]

In the previous post on RUSL I indicated that it was at a major support level and so it would either bounce hard or break down.

As you can see from the current snapshot of the 120 minute chart, it bounced right where I indicated that it might.  We do not yet have 5 clear waves up from that point but I think it is likely going to happen.  I think a small 3rd wave is likely in progress right now.  As usual, buy the dip and do not chase the peak.  I plan to cost average into this over the next several weeks as I see dips.  I don't plan to day trade it once I have a confirmed bottom.  I will only trade the major turns because the volatility is just too high.  That does not mean I will not use stops!

If you look at the past couple of days of gains (20%) and think to yourself that the train has left the station, consider the big picture.  This has been getting pummeled for a long time and when commodities begin to rise into the 2nd half of the year, Russia and RUSL will outperform.

Yes there is still a possibility that the current formation is 4 of 5 and in fact I think the chart is trying to fake a 4th wave alternation there in order to scare people off.  But a 5th wave down of any magnitude would make the ETF negative so I think the bottom is already in, especially since I think commodities are going to catch a bid into June and then into the last half of the year as the dollar pulls back.  The target for this is the level of the prior 4th which is about $200.  If this is going to happen then we should begin seeing a rapid rise into that green box very soon now.  The rise should be virtually relentless because it will not be driven by asset value as much as by short covering of Russia IMO.  The world shorted Russia, shorted Putin, and ran into US stocks based on US saber rattling.  But now we see everyone rallying around China with the formation of the Asian development bank and Russia identifies more with Asia than with the west.

So if Russia is going to rise, so then should Brazil.  And so here is my first chart ever on UBR which is the ticker for the triple Brazilian ETF.  It is not nearly as volatile as RUSL but it too has gotten kicked as a result of the great commodity deflation that has been in effect since 2011 (same time gold and silver peaked....).  That break below the lower rail followed by a break back above it is likely a buy signal.  We again do not have 5 clear waves up yet but I think it will happen.  Note that PBR (Petrobras) is likely at or near a bottom as well and the fate of PBR is highly linked to the fate of the Brazilian economy.

A really good way to play these if you don't have time to watch the daily tick (as I might not soon) will likely be to cost average in not over a day or two but over a few weeks - a strategy which I will only employ at what I think are major likely turning points.

The procedure here is simple: wait for the first a-b-c dip that you see and then buy in with a small position.  Then just set stops below it.  If you get 5 waves up from there, wait for the next a-b-c pullback and double down.  You should be very green with the first lot by then and so you can use looser stops on the 2nd lot.  Leave all your stops in place so that they trigger in order should the wave begin to move against you unexpectedly. In this way you get a grab at the brass ring while limiting your downside.  When the shares have a good chance of being 10 baggers from the bottom (RUSL will with pretty high odds IMO) you can afford to risk a little something gambling on them.

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