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Why we bought TBT and made 7% in the past 12 days(TBT,TLT,TBF)

|Includes: TBF, ProShares UltraShort 20+ Year Treasury ETF (TBT), TLT

Why we bought TBT and made 7% in 12 days

To those who follow TBT and TLT this trade may have been counterintuitive since nobody was saying to get long the TBT except us.

Everyone has been getting long TLT or short TBT based on the speculation of quantitative easing part 2.  This is a classic case of taking a trade based on what one thinks should happen based on news vs. reading the charts to tell you what odds favor will happen to a stock.

Regardless of what everyone on the street was saying, we saw TBT putting in a classic bottoming pattern starting back in early October.  At that point it was way too early to pick a bottom and we wanted to see further confirmation from the chart before we got long. 

Mid October we finally saw a break back above the 50 day moving average line and on heavy volume.  This was one more piece of confirmation showing us that we could have a bottom here. For us this was still a little  too early and we wanted to see if TBT could consolidate above that line turning old resistance into support. 

On October 26 we saw that we had enough support to finally get long TBT with a reasonable place to put our stops.  If it reversed and sold through recent support on heavy volume we would simply close the trade and move on but odds heavily favored us being correct.

Here we are 12 days later and we already have a comfortable 7% profit cushion while the rest of the street is about ready to cry uncle and close out their positions since they are on the wrong side of the trade.

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Brett Marsh

Disclosure: no positions