Chris Lau - Seeking Alpha

Monday, July 07, 2008

Is the Energy "Bubble" Ready to Burst?

ETFs are a tricky for assessing technical analysis, because the trading volume does not necessarily reflect that of the underlying index. Buy and sell signals should therefore be used with caution. If there is any validity in analyzing an ETF, it is that the ETF might indicate general hedging strategies for a portfolio.

Since my entry on June 25, 2008 that suggested taking a bear position on the TSX60, I came across a bear oil ETF Horizons BetaPro S&P/TSX Capped Energy Bear Plus ETF. In short, an investor will profit much better should oil prices correct.

Currently, the HED.TO is trading near the top of a downward resistance line. Should the stock surpass $14, consider taking a position to hedge against the potential impending correction in the energy sector.

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