The Fitbit/UVXY Play

| About: ProShares Ultra (UVXY)

Summary

UVXY long timing important; strict stop losses curb risk.

Fitbit trade proves profitable in short order and with double digit returns.

Dow edges closer to 18,000 and S&P 500 edges closer to 2,100.

Since authoring "UVXY Proves To Be A Winning Trade With Careful Timing For Longs", I subsequently returned most of that profit to the market. I instituted another long ProShares Ultra VIX Short-Term Futures ETF (NYSEARCA:UVXY) trade shortly after the original one noted in the article with another strict Stop Loss in place. The Stop Loss was triggered and as a disciplined trader I let it go through. It happens sometimes, but what investors should take away from the article mentioned and the update is that trading UVXY from the long side takes careful timing and risk management. Optimally, UVXY is a dedicated short instrument that has generated great wealth for me and other investors/traders since 2011, when the instrument "came public". It seems counterintuitive doesn't it? The UVXY long trade actually takes greater timing and risk management than does shorting the instrument. In my 2-Part series I detail to investors and readers why this is the case.

As another update to my recent "UVXY Proves To Be A Winning Trade With Careful Timing For Longs" article, shares of Fitbit (NYSE:FIT) proved to be a worthwhile and profitable trade. Let's take a look back at what I articulated surrounding this opportunity from within the aforementioned article:

One such opportunity may come from Fitbit. While it is fair to say I'm bearish on the long-term prospects of the company, near term forecasted results from myself and the greater analyst community may provide traders with an opportunity to achieve strong returns in short order. Of course this assumes Fitbit achieves its forecast and that of the analyst community. My most recent trade on FIT was exercised with a purchase of shares at $12.12 and a sale of the total stake at $14.54. This occurred in less than two weeks…not a bad trade and return on capital. I tweeted out these trades through my Twitter (NYSE: TWTR) account in real time as the opportunity was at hand. My last trade represented three total, profitable trades on FIT from the long side, even as shares fell from my initial bearish publication on the company business model and products. It is important that readers and investors understand where Fitbit is in the business cycle presently in order to fully appreciate why I believe in the near term results and potential of trading the stock. If shares of FIT fall below $13.95 I will look to add shares to my portfolio. The plan would be to build a larger position if shares fall to $13 and, if necessary, hold shares until $16 can be achieved in the share price. To reiterate with regards to FIT trading, it would be advantageous to read my initial coverage publication linked and those which proceeded to understand my short-term and long-term analysis of FIT and Fitbit.

As indicated in my Twitter tweets , I was able to execute this trade idea greatly and after first purchasing shares at $13.84 a share. I purchased more at $13.02, but sold those in quick order and for a strong profit.

Date

Settlement Date

Symbol

Description

Commission/Fees

Interest

Amount

Avg Price

4/13/2016

4/18/2016

FIT

SOLD 354 SHARES OF FIT AT $17.00

($7.17)

$0.00

$6,010.83

Yes

Click to enlarge

With my core position held at $13.84, I purchased more shares as FIT rose over the next week to greater than $15 a share. As indicated in the table above, taken directly from my Scottrade account, I sold my entire position in FIT at $17 a share yesterday for a strong profit and in very little time. My return was greater than 20% in less than 30 days. I tweeted out the sale of this trade on 4/13 as well. For greater points of articulation surrounding the fundamentals of Fitbit, I would consider my many articles on the company and the stock. So let's move on to discuss the trading environment with a correlation to some of the economic data.

With the major indexes at 2016 highs and the S&P 500 approaching 2,100, investors and traders are looking for the next opportunity. A good deal of the recent stock rally has come from what may be perceived to be unwarranted and oversold market conditions that persisted back in January and February of this year. It's hard to mirror that sentiment with the economic data of the quarter that will possibly express a Q1 GDP below 1 percent. But jobs are abound and job growth remains strong in the United States. That sentiment and economic data point has proven to shield the markets from sustainable downturns. Today we learned that the number of Americans who applied for unemployment benefits last week fell by 13,000 to 253,000, matching the lowest mark since the end of the Great Recession and sinking to a level last seen in 1973.

With job growth consistently above 200,000 monthly and unemployment claims falling to all-time lows, investors continue to bid up the market. Within these variables mentioned, investors might be wise to recognize that a great majority of our economic data has been dependent upon the Federal Reserve's involvement in markets since the 2008 Financial Crisis. Additionally, it doesn't appear that any of the job growth in recent years has proven beneficial to overall economic conditions and our country's debt load, which now rests above $19 trillion.

Having said all of that, I added to my constant short, core position in shares of UVXY recently at $21.40 a share. Should the market continue to climb and seek out round numbers, UVXY could fall below $16 a share. I'm utilizing this sentiment that would define the Dow Jones Industrial Average exhibiting 18,000 and the S&P 500 exhibiting 2,100 in the coming weeks. Given those targets, UVXY should effectively fall further than where it currently trades.

It is likely going to be a bumpy road for investors and traders to navigate in 2016. The UVXY continues to be a valuable trading vehicle with few other trading instruments equaling its returns on capital invested. Additionally, investors should continue to scan the market for other trading opportunities as markets become overextended to the upside. Currently, I am heavily weighted with cash and looking for more short opportunities in the market given current levels. Hopefully some of my trading acumen and fundamental analysis can provide ample opportunities for investors and traders alike.

Disclosure: I am/we are short UVXY.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.