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SEA (Shipping ETF) Trade Idea

SEA (Guggenheim Shipping ETF) offers an objective long entry on this break above the yellow downtrend line. T1 (14.18) is the sole profit target at this time with a suggested stop below 11.90. It is highly recommended to view the both of the recent shipping stock video posted below if you have not already done so in addition to any other notes that were recently posted regarding diversity & position sizing within the shipping sector, especially if you plan to trade some of the individual stocks covered in those videos in lieu of, or in addition to SEA. More conservative traders & investors that would like exposure to the shipping sector might opt to keep it simple & just stick with SEA, which holds a basket of shipping related stocks and as such, provides for risk mitigation via diversity among various stocks.

SEA daily April 19th

SEA daily April 19th

Shipping Sector Overview & Trade Setups

http://rightsideofthechart.com/shipping-sector-overview-trade-setups/

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Apr 19, 2016 10:26am|Categories: Completed Trades - Long|Tags: |1 Comment

One Comment

  1. rsotc April 19, 2016 12:32 pm at 12:32 pm

    A very valid question that I received regarding the low volume in SEA, along with my reply:

    Q: Randy,Volume is 100k, sometimes less. Do you personally invest in these things?

    A: While it is typically a good idea to shy away from securities that trade such low volume, I don’t find that to be the case with most ETFs/ETPs, such as SEA. Despite the low volume, SEA typically trades with a relatively tight 1 – 2 cent spread. It seems that most ETF companies work to minimize the spreads on their more thinly traded ETPs as I would image it benefits them to do so, lest very few would want to trade or invest in those ETPs. Also keep in mind that unlike, say a thinly traded stock in which the “true valuation” can be very subjective & also dependent on a roughly equal offset of buyers & sellers at all times, the value of an ETF is simply the sum of its parts (components) at any given point in time & typically, the components of an ETF is very liquid stocks so the value of the ETF should be easily calculated throughout the trading day, allowing for very small spreads even if the ETF itself is thinly traded. I could be wrong but I believe that the ETF companies either directly or indirectly (via contracting with market makers) arranges for offsetting transactions to eliminate order imbalances & provide for relatively consistent liquidity in their ETFs during normal market conditions, thereby, keeping the spreads tight.

    To answer the other part of your question, I would have no problem taking SEA but as stated, my preference has been to gain exposure to & diversity within the shipping sector via a shotgun approach of buying relatively small positions in many individual shipping stocks.

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