Published October 11, 2012
October has an interesting reputation when it comes to the performance of stocks. The tenth month of the year is when some of the most wicked market plunges have taken place. Conversely, October is the month when some of the worst bear markets on record have gone to die.
Simply put, October can be a volatile month. It is the last month in the worst six months of the year cycle. In 2012, a presidential election will take place just days after October ends. It might still be too early to predict exactly where stocks will finish by the time the month ends. Eight trading days into the month things are not looking good, broadly speaking. Use these leveraged ETFs to survive and thrive this month.
ProShares UltraShort Silver (ZSL) Getting in front of the silver freight train has proven hazardous to one's health in recent months. In the past three months, the iShares Silver Trust (SLV), the largest EF backed by holdings of physical silver, is up nearly 26 percent.
There is no refuting that is an excellent run. There is also no refuting the fact that the global economy remains lethargic and approximately half of silver demand is industrial. The prescient trader that chooses to acknowledge and embrace seasonality will find that October is historically a dreadful month to be long silver. Be long ZSL instead.
ProShares Ultra DJ-UBS Natural Gas (BOIL) Given that the U.S. Natural Gas Fund (UNG) has been an utter disaster, the endorsement of an ETF that is essentially the bullish leveraged equivalent of it might seem perplexing. Fair concern. UNG has lost almost 89 percent of its value since debuting five-and-a-half years ago, but it the ETF is trying to shed that depressing status.
The fund has jumped 16.7 percent in the past month, sparking BOIL to a 35.2 percent gain in the process. Natural gas fundamentals, namely production, are not fully in favor of the bulls. The technicals might be though. Those that get involved with BOIL must pay attention to UNG. That means watching for a break of resistance at $22.72.
Should the fund manage to break resistance, look for a quick run to the next resistance level of $23.92. Beyond that, no resistance comes into play until $27.
Direxion Daily Healthcare Bull 3X Shares (CURE) CURE has average daily volume of just over 2,500 shares and that alone might be enough to keep some traders away. At least the ticker is easy to remember. Kidding aside, CURE is worth a look for a couple of reasons.
First, if market volatility increases, investors could and should continue embracing pharmaceuticals stocks. Second, pharmaceuticals names pay solid dividends and the sector is not expensive. The Health Care Select Sector SPDR (XLV), ETF that CURE is the leveraged equivalent of, trades for less than 14 times earnings.
Finally, CURE could be an interesting ETF to get involved with late this month on the assumption that pharmaceuticals names will rally if President Obama wins reelection. Regardless of one's political leanings, it cannot be ignored that XLV has been identified by analysts as an ETF winner if the President stays in office.
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