NEW DIRECTIONAL CALL PLAYS
ProShares Ultra Basic Materials - UYM - close 29.58 change +1.86 stop 27.20
ProShares Ultra Basic Materials seeks daily investment results that correspond to twice (200%) the daily performance of the Dow Jones U.S. Basic Materials Index (the Index). The Index measures the performance of the basic materials industry of the United States equity market. Component companies are involved in the production of aluminum, steel, non-ferrous metals, commodity chemicals, specialty chemicals, forest products, paper products, as well as the mining of precious metals and coal. The Fund takes positions in securities and/or financial instruments that, in combination, should have similar daily return characteristics as 200% of the daily return of the Index.
Target(s): 30.35, 31.20
Key Support/Resistance Areas: 31.30, 30.50, 29.00, 28.00, 27.25
Time Frame: 1 weeks
Why We Like It:
Today UYM closed and broke above its primary downtrend line and its 50-day SMA for the first time since April. The ETF surged +6.71% (2x normal returns). Basic material stocks have been beaten down and are gaining momentum. I expect UYM to retrace some of the gains before regaining momentum and testing its 200-day SMA which is near our most aggressive target $31.20. UYM also closed above a key support resistance level of $29.00. I suggest we use $29.10 as a trigger to enter long positions. Our stop will be $27.20 which is below the 50-day SMA and yesterday's lows. NOTE: This is a leveraged instrument so please use proper position size to manage risk. The bid/ask spread is a little wider than I normally like so I suggest using a limit order between the two and you should get filled.
Suggested Position: September $29.00 CALL, current ask $3.00, estimated ask at entry $2.60
Entry on July xx
Earnings Date 8/4/10 (unconfirmed)
Average Daily Volume: 1.0 million
Listed on 7/22/10