03-31-2021, 03:50 PM
Hi all,
I spent an hour or so pouring over financial charts of my beloved triples today, and I came up with a simple, effective algorithm to ideally make sure I don't get fleeced on these things. Basically, you plot a line between the most recent bottoms and sell when the price falls say more than 10% below that line. It doesn't work as well when they are moving horizontally, but this strategy should allow me to take maximum advantage of a spike. I wonder if this should apply to other equities as well.
Let's start with the poster child of spikiness - NAIL.
![[Image: 0acf7a0a-e9e2-451e-bccf-1d51b046bf3c.png]](http://village.photos/images/user/e757e3f7-e1e2-4d25-8832-1290825314d9/0acf7a0a-e9e2-451e-bccf-1d51b046bf3c.png)
In the great spike of 2018, had I owned it then, I would have looked to exit once it dropped below $100/share, because that's when the big advance ended.
In the covid drawdown of March 2020, the rule would have said exit around $85/share.
Currently, the line plotted by the two most recent bottoms points to an exit around $63/share, which it is well above.
Now let's move on to the old stalwart, TECL; arguably the "safest" triple.
![[Image: 2c2a7b1d-b1d9-430b-a20c-ee8c3c0da694.png]](http://village.photos/images/user/e757e3f7-e1e2-4d25-8832-1290825314d9/2c2a7b1d-b1d9-430b-a20c-ee8c3c0da694.png)
2018 had a relatively modest drawdown as far as triples go, but this rule would have still kicked in around $15/share.
The covid drawdown of March 2020 was massive, but I would have gotten out around $28. (Fun fact: I didn't. I watched it drop all the way down..., from the $40k I had at the start to about $12k at the bottom. Yes it did return in just a few months but that's missing the point.)
Currently the line I've plotted says get out around $38. Note that I'm using a bottom a little farther back than "the most recent two". Art more than science here.
Onto SOXL:
![[Image: aa92e776-5e8a-4c31-890c-22b3efa0d479.png]](http://village.photos/images/user/e757e3f7-e1e2-4d25-8832-1290825314d9/aa92e776-5e8a-4c31-890c-22b3efa0d479.png)
SOXL was very choppy in 2018.
2019 had a little spike, and I would have gotten out around $12.
The larger 2019-2020 spike going into the covid drawdown would have had me out around $17.
Current momentum points to a $36 exit point, which it is only slightly above.
And DFEN:
![[Image: 84edda8b-8474-4ca3-9dc1-5353815dfd07.png]](http://village.photos/images/user/e757e3f7-e1e2-4d25-8832-1290825314d9/84edda8b-8474-4ca3-9dc1-5353815dfd07.png)
A nice run from 2017 into 2019, and depending upon which bottoms you pick, of course, but I would have definitely been out by $47ish.
Then after the drawdown, 2019 into the covid bust - wow what a decimation!, I'm happy to report this rule gets you out at $59 or so.
Currently the line plots to a sell out rule around $17.50
Finally, we come to LABU:
![[Image: 638c7a76-49c8-4990-9218-0c9812a25a04.png]](http://village.photos/images/user/e757e3f7-e1e2-4d25-8832-1290825314d9/638c7a76-49c8-4990-9218-0c9812a25a04.png)
If I'd had this rule in place, I would have gotten out around $130. Sigh. But for someone buying this right now, it's trickier, so I plotted a line against some previous bottoms with the most recent one of just a few days ago. Current exit is a tight hook at $76. LABU is like that reliever who strikes out a lot of guys, but gives up the longball and loses the game for you too often.
*****
Not addressed yet is after you sell, how to know when to get back in. I think the logical answer is when you can plot an upward line again and state a new exit point which the stock is currently above.
I spent an hour or so pouring over financial charts of my beloved triples today, and I came up with a simple, effective algorithm to ideally make sure I don't get fleeced on these things. Basically, you plot a line between the most recent bottoms and sell when the price falls say more than 10% below that line. It doesn't work as well when they are moving horizontally, but this strategy should allow me to take maximum advantage of a spike. I wonder if this should apply to other equities as well.
Let's start with the poster child of spikiness - NAIL.
In the great spike of 2018, had I owned it then, I would have looked to exit once it dropped below $100/share, because that's when the big advance ended.
In the covid drawdown of March 2020, the rule would have said exit around $85/share.
Currently, the line plotted by the two most recent bottoms points to an exit around $63/share, which it is well above.
Now let's move on to the old stalwart, TECL; arguably the "safest" triple.
2018 had a relatively modest drawdown as far as triples go, but this rule would have still kicked in around $15/share.
The covid drawdown of March 2020 was massive, but I would have gotten out around $28. (Fun fact: I didn't. I watched it drop all the way down..., from the $40k I had at the start to about $12k at the bottom. Yes it did return in just a few months but that's missing the point.)
Currently the line I've plotted says get out around $38. Note that I'm using a bottom a little farther back than "the most recent two". Art more than science here.
Onto SOXL:
SOXL was very choppy in 2018.
2019 had a little spike, and I would have gotten out around $12.
The larger 2019-2020 spike going into the covid drawdown would have had me out around $17.
Current momentum points to a $36 exit point, which it is only slightly above.
And DFEN:
A nice run from 2017 into 2019, and depending upon which bottoms you pick, of course, but I would have definitely been out by $47ish.
Then after the drawdown, 2019 into the covid bust - wow what a decimation!, I'm happy to report this rule gets you out at $59 or so.
Currently the line plots to a sell out rule around $17.50
Finally, we come to LABU:
If I'd had this rule in place, I would have gotten out around $130. Sigh. But for someone buying this right now, it's trickier, so I plotted a line against some previous bottoms with the most recent one of just a few days ago. Current exit is a tight hook at $76. LABU is like that reliever who strikes out a lot of guys, but gives up the longball and loses the game for you too often.
*****
Not addressed yet is after you sell, how to know when to get back in. I think the logical answer is when you can plot an upward line again and state a new exit point which the stock is currently above.