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Materials sector trade updates

October 28, 2013

In early September, I set up some Performance ranking (PR) trades in the materials sector. I opened a short position in International Flavours & Fragrances (IFF) vs SPDR Materials (XLB) on 05 September.

Daily chart

The pair took a month to work off the short term oversold condition but given the longer term RSI and PR divergences, the decline resumed.

There is now a bullish divergence on the 14 day RSI, although no rally yet to say that a low has been reached. The pair has gained 4.7% so far.

I have identified bullish daily RSI divergences as a reason to take profit, but not good enough as an entry criterion – that required weekly divergences.

Therefore, I will take half of the position as profit and move the stop loss to break even.

The short position in Owens Illinios (OI) vs SPDR Materials (XLB) makes modest progress, a 2.3% gain.

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