Update on ProShares Ultra Basic Materials ETF

ProShares Ultra Basic Materials ETF (AMEX: UYM)

Originally recommended on December 15, 2008 (IWB #2844) at $14.46.

Closed Friday at $26.45. (All figures in U.S. dollars.)

The price of this leveraged ETF has been bouncing around like the proverbial yo-yo in recent days, reflecting the volatility in the materials sector. When I last reviewed it, in the issue of August 24, the shares were priced at $24.68 and I advised buying more. They slipped below that level for a while but then had a big upward move that began on September 1. On September 22, they closed at $30.03 but they have fallen back since then as commodity prices weakened.

At this point, we are ahead by 82.9% based on Friday's closing price. I think it is time to take some of that money off the table. In a leveraged ETF such as this, gains can vanish quickly in a down market. However, don't sell your entire position. If we get a big drop, say to the $20-$22 range, consider adding more at that time.

Action now: Take half-profits.

Comments

[Lewis Whoke...:]

The commodity boom is based on two trends
1) the weakening dollar
2) Overseas (China) demand

The first trend won't end until the Fed raises rates. I'm keping my eye on China.

If US demand begins to recover, commodity prices may rise even faster.

Sep 30 07:35 AM

[User 493755:]

I don't think it will come down to $22.00. As the other post states it will go up as the hopes of the recovery goes up. I can see it hitting ~$35 mark in 3-4 months.

Sep 30 12:13 PM

[IRAWinner:]

This has been a great ETF. I concur with the above comments. I don't think it is a stretch to get into the 40s by year end assuming the status quo doesn't change with US recovery and dollar weakness.

Oct 07 09:50 AM

[User 434763:]

This is the best ETF around.
If The US raises rates, the absolute level is of no importance, it's the relative rate in comparison to Europe and Japan.
When The US does eventually raise rates, that would be because the economy is becoming more solid thus the need for all the materials.
Unless you believe we are to hit the March lows again, buy any dips below $24.
I bought at $11.30 in March and have been loading up on any 25% fall from the previous high since then. When it reaches $35, I will take some off, but not thill then. Remeber this was above $100 in June 2008 but I do not see it touching that level in several years, but I do believe 40-50 range is reachable by end of 2010.

Oct 29 09:17 PM