My ETF Trading

part 4 How I use short ETF stocks in my best ETF trading system

Short ETF stocks are an important group of stocks I use in my ETF trading system.

These ETF shares allow me to easily enter short trade in case standard ETF stocks are hard to borrow for short selling

There are several short ETFs available.

Short ETF stocks for shorting US markets and sectors
Short ETF stocks for shorting bonds
Short ETF stock for shorting foreign markets
Short ETF stock for shorting commodities

I do most trades based on an ETF from the first group, which allows me to make a short trade in a sector poised for decline (based on my stock chart analysis).

I use relative strength analysis as my main tool for deciding which sector should be watched as a good candidate for decline.

This relative strength analysis is done in these steps:

relative analysis of whole markets, i.e., what is the prevailing stock market trading trend
analysis of relative performance between a stock market index (like the NASDAQ composite) and a related sector (like semiconductors or the Internet)

When possible candidates for short trade are selected, then I put them in a watchlist. I also use my stock chart analysis principles to find major support and resistance levels and a possible stock chart pattern. Based on these points, I prepare trade setups that are based mostly on a break of some of important support/resistance level or pullback from such levels.

How to analyze Ultra Short ETF for US markets and US sectors

These inverse ETFs are based on major market indexes or Dow Jones sector indexes. I have list of these indexes and chart them in my stock analysis software. Here is the list I use personally now:

$DJUSBM,$DJUSCY,$DJUSEN,$DJUSFN,$DJUSHC,$DJUSIN,
$DJUSNC,$DJUSRET,$DJUSTC,$DJUSUT,$DJUSSC,$TRAN,
$SPHOME,$DJINET

Here is example of a relative strength analysis by comparing of two charts. One is the major market index, the S&P500, and the second is DJUSUT, a utility sector index. You can see the relative weakness of the DJUSUT index against the SPX index in the last 2-3 weeks. So ultra short utility ETFs were worth watching for a possible trade.

SPX relative strength stock chart analysis

DJUSUT relative weakness stock chart analysis

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