3x ETF

Why search for great stocks when I can buy ultra ETF’s?

@ 8:00 am
GMI4/6
GMI-R8/10
T210889%

I spend so much time trying to find the right growth stock that will outperform the market.   Now that we have the extreme ultra (3x) ETF’s it may be preferable to trade them.   An ultra ETF is a basket of leveraged stocks or futures that attempts to outperform the relevant index.   Since I like to trade tech stocks, I focus on the NASDAQ 100 index, which escaped some of the carnage last year because it contains no financial stocks.

I could simply buy the QQQQ ETF when I think the market is in an up-trend.   In this way, I do not have to pick individual stocks but am invested in the 100 stocks in the NASDAQ 100 index.   Lately, stocks tend to explode or implode when earnings are announced.   Because the QQQQ represents 100 stocks, there is less impact from individual earnings announcements.   If I want to place a leveraged bet on the QQQQ I can even trade options on that ETF.

Enter the Ultra QQQQ ETF, QLD which attempts to double (2X) the bullish performance of the QQQQ.     While there is no 3X ETF for the QQQQ, there is a bullish tech 3X tech ETF, TYH.   (There are also analogous bearish ETF’s for those betting on a decline in these stocks, which I will not discuss today.)   Keep in mind that since these ultra ETF’s are leveraged securities, they can move more quickly in both directions–up or down.

So, if I am betting on an up-trend I could buy any one of these ETF’s to make money as tech stocks go up.   The table below compares how one would have done by buying each of these ETF’s during the rally that began after 7/14 through 8/21.

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Why search for individual stocks when we can ride the ultra ETF’s?

@ 10:58 pm
GMI4/6
GMI-R8/10
T210886%

It is rare that I complete an analysis whose findings totally surprise me, but take a look at this one.   A lot of the pundits claim that the ultra ETF’s,   leveraged baskets of stocks that try to double or triple the performance of their underlying indexes or sectors, fail to achieve their goals.   So, just to satisfy my curiosity, I compared the performance of the primary index ETF’s, SPY (S&P500) , DIA (Dow 30)   and QQQQ (Nasdaq 100) with those of the leveraged ETF’s.   There were exact comparisons for these indexes for   the 2X ETF’s, but I had to choose other, more general   indexes for the 3X ETF’s. The results blew me away…

The 2X and 3X Ultra ETF’s absolutely outperformed the standard index ETF’s in the period since the March bottom.   For example, while the QQQQ (Nasdax 100) index ETF rose 42.9% in this period, the QLD (2x QQQQ ETF) rose 99.2% and the TYH (technology bull 3X ETF) rose 179.4%.   In comparison, the top five individual stock performers in the Nasdaq 100 stocks rose from 138.8% (JAVA) to 180.57% ( STX).   In fact, only 16 stocks (16%) in the Nasdaq100 (and 23% in the S&P500) rose 80% or more.   So, the choice before us is to   search for the needle in the ultraetfperohaystack individual stock that might do really well in a bull rise, or to buy one of these 2X or 3X ultra long ETF’s and ride a basket of stocks with a lot more diversification and probably less risk than owning individual stocks.   The key is to discern the trend accurately and to then ride the ultra ETF with the most potential for following that trend.   Some ultra ETF’s also trade options…..

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QQQQ rally continues, in 14th day and up 8.7%, but 3X emerging bull ETF, EDC, up 28.2%

@ 8:36 pm
GMI4/6
GMI-R8/10
T210884%

There were 11 new highs and 4 new lows in my universe of 4,000 stocks on Monday.   Five of the 11 new highs were on the IBD100 list from March 30:   TNDN, NFLX, GMCR, NTES and CPSI.   All of these but CPSI hit all-time highs, an extraordinary accomplishment, given the market’s decline over the past year.   Any stock trading today at an all-time high is probably worthy of   attention.   I own GMCR and NFLX.   One other stock on the new high list Monday is TSYS, which I wrote about months ago.   It has huge recent earnings increases and has been in a steady up-trend.

I am putting more and more funds back into the market as this up-trend continues. By my indicators, the QQQQ   just completed the 14th day of its short term up-trend.   During that time, the QQQQ has advanced 8.7%, while the ultra long QQQQ ETF, QLD,   has advanced 17.6%.   During QQQQ up-trends I buy QLD.   During this same time period, the emerging markets bull 3X ETF, EDC, has advanced 28.2%.   Those who say the 3X ETF’s are worthless as trading vehicles (as in J. Cramer) should look at these data.