Red-Hot Resources

"Luck is not chance, it’s toil; fortune’s expensive smile is earned.”

Tuesday, September 09, 2008

Charts on Current Hedge Positions

My Red-Hot Canadian Small-Caps and Red-Hot Global Small-Caps are long commodities with a long-term outlook. But in the short-term you can't argue with the fact that commodities are headed lower. So, I recently added hedges -- positions that are short commodity stocks -- to these portfolios. Let's check on how three of them are doing ...
HGD is short TSX gold stocks. It went ballistic today. The good news is that the 50-day moving average is crossing above the 200-day moving average. This is usually seen as a technically bullish indicator. The bad news is the big move up is coming on declining volume, so it can't be trusted.
Prognosis: This is a good ETF to be in while we wait for Canadian gold stocks to bottom. The reversal, when it comes, could come quickly, so stay alert.
Next ...

The DZZ, or double-short gold fund, was recommended as an alternative in RCS for people who couldn't buy the HGD, and was also a primary hedge position recommended in Red-Hot Global Small Caps. It is gapping higher, and it sure looks like it is breaking out of an inverse head-and-shoulders position. If true, this would indicate much lower prices on gold (I'd expect $750 an ounce or lower). Remember, that's a short-term target on gold -- longer-term, gold should go much higher. But the short-term swoon could be very profitable for DZZ.

Next, let's look at one of the positions in my Red-Hot Commodity ETF portfolio. This is a short-term portfolio, so it's currently all short.
The ProShares UltraShort Oil & Gas ETF (DUG) goes up as oil stocks go down. It rocketed higher on big volume today. Also, if this this continues we'll see the 50-day moving average cross above the 200-day moving average, another encouraging sign.
As I've been saying for awhile now, I fully expect oil to test $100. And recent bearishness shows that it could go lower than that for a bit. That lays out a higher path for DUG.

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