If this fund isn't making money consistently, then there is trouble. As goes AOD, so goes the world.
| trend | adx | psar | pps | macd | macd trend | sto | sto trend | |
|---|---|---|---|---|---|---|---|---|
| AOD (daily) $7.44 |
Some times when AOD didn't make money:
* Mid-April to late May, the Greek-inspired euro panic.
* July 2007 to March 2008: The collapse of capitalist finance, an event so severe that for awhile Americans couldn't even borrow money to buy a car.
(I toss in the car bit because I've had people question my use of the word "collapse" to describe the events of 2007/08. If Americans can't buy a car, then the end of the world is surely upon us.)
The tragedy of AOD as an exchange-traded fund is that it entered the stage right before times turned bad, in January 2007. So it has shown a capital loss more months than it has a capital gain, mitigated by a huge dividend, yielding 19.35% at present.
But when it has made money, it has perfectly reflected the current state of the global economy.
That's a long of way of saying that AOD for the second straight week has risen on increasing volume, suggesting that the euro panic in its worst manifestations is now history.
The price rose 7.6% intra-day last week, closing within an easy shot of the high and dropping only slightly below the opening. The number of shares traded last week was 18% above the prior week, and 49% above two weeks ago.
By the chart, it is a real and pervasive rise.
So what's not to like? For one thing, the price is below the 13- and 26-week moving averages, both of which are pointing downward, and the 13-week is below the 26-week, a bearish configuration.
For another, the nature of the trend, or lack of one, isn't entirely clear. From the $4.22 swing low on March 2009, the price presented a clear uptrend to the $9.35 high in September 2009, and then sideways after that with a dip in February that touched $7.28.
The euro panic took the price well below that dip but kept it above the March 2009 swing low. Are we looking at a high, a higher low, and a move up preparing for a higher high? Or are we just jitterbugging like an EKG tracing the rhythms of a broken heart?
In one interpretation lies wealth. In the other, great sadness.
Reversal Levels
- $9.36, +25.8%
- $7.49, +0.7%
- $7.44 <== You are here.
- $6.42, -13.7%
The cautious trader will wait for a break past the 13-week moving average at $7.80, the more cautious for a break past the 26-week ma at $8.16, and the most cautious for the ma13 to cross above the ma26, whenever that might occur. At present both averages are declining.
I own AOD, and have traded it for some time, always being careful to treat it as I would any risky stock. Despite the high dividend, this not a safe parking place for ready cash because of it is a very volatile stock.
In the current configuration, I like it as a bull play up, but I'm nervous. I think that $9.36 resistance level will be hard to break because it has been tested many times since August 2009. There is bound to be a lot of shares for sale that were opened at that price, and in the intervening year people have collected nearly 20% in dividends. So the $7.45 - $7.50 more or less level is the breakeven for such folk.
Often the cautious trader misses out on the opportunity and ends up looking foolish. In this instance, a lot of caution may be the road to trading wisdom.
OK. The credit bubble burst. Housing, burst. Shockwaves reverberated. Markets collapsed. What lies ahead as we remerge from the wreckage.
Disclaimer
Tim Bovee, Private Trader tracks the trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment. No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.Abbreviations:
- psar - Parabolic Stop and Reverse
- adx - Average Directional Index
- pps - Person's Proprietary Signal
- ma20 - 20-day moving average
- macd - Moving Average Convergence-Divergence
- sto - Fast Stochastic
- trend: Determined by the 5-day moving average, green for up, red for down, yellow for sideways
- adx: orange for above 30-up, blue for 20-down, purple for in the middle. Red is most prone to whipsaws
- psar, pps, macd: green for bull mode, red for bear
- sto: green for overbought, red for oversold, yellow for the neutral zone.
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