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US Financial pair scrapped

October 16, 2013

I’m scrapping the long position in Real Estate (IYR) v Broker dealers (IAI). Prices at the time of closing (see Twitter) were: IYR: $66.14, IAI: $33.94, for a loss of 1.5%.

On 23 September, a long position in iShares Real Estate (IYR) v iShares Broker Dealers (IAI) was opened. Today, I closed this as I reconsidered the short side of the trade. Here is why.

Broker Dealers (IAI) v S&P 500 Index (SPX)

IAISPX

  • Whilst there was RSI divergence in July 2013, this has not had an effect. There has been an unwinding instead
  • The 50/60 week MACD has crossed above zero for the first time since 2007: a long term moving average crossover. I had overlooked that aspect
  • The better RSI divergence was in summer 2012 because

a) It came with MACD divergence
b) The MACD divergence formed after the MACD had been negative for a long time – meeting my moving average crossover trade criteria

  • Focusing on the chart of the pair means you can overlook the chart of each component against the market
  • Reviewing trades and why they aren’t working is important for improving results

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