Update on running positions

11 June

The Coca-Cola Femsa (KOF) v iShares Mexico (EWW) trade continued to move higher.

That was until 04 June. It had a divergence on the 14 day RSI, a reason to take more profit.

I don’t use daily RSI divergences to enter positions, only to take profit or as a reason to hold off from entering as position. This might continue higher over the coming months but it might not. I’ve identified the entry, now trade as you see fit.

The SPDR Health Care (XLV) v Teva Pharmaceuticals (TEVA) has shown some profit since entry. Not as prolific as the KOF trade. Again, this might continue higher in the medium term but you should have taken some profit and stop to break even on this by now.

This is a long U.S. short foreign market trade. I am looking at possibilities of opposite trades and by that logic, you might want to take remaining profit on this.

Of the four Bollinger band contractions shown on 14 May, two have failed to give an entry signal (CVD and CSX). One (Novartis) gave its signal and then did not follow through. I said on 28 May that this might be best left.

U.S. Steel (X) continued its breakdown.

I had given some second thoughts due to the relative strength nearing a bullish weekly RSI divergence. That divergence is now in place properly.

U.S. Steel v S&P 500 Index

So there is some contradiction there that I am aware of. Stocks that lag the market for months, breaking down from contracted Bollinger bands are also those that have weak relative strength, possibly oversold on relative strength, maybe even with a bullish RSI divergence.

There is no single answer to which of these two factors becomes the most important, it all depends on other market factors at the time.