This ETF is a great proxy for the mindset of money managers. By and large, they will buy as much garbage with Other People’s Money as they can get their hands on if it promises to add a few paltry basis points to the performance of their portfolios. However, this dumpster-quality vehicle, which tracks junk bonds, looks like it’s about to run out the clock on bulls. The 37.25 target shown has been confirmed by some very precise hits at the red and pink lines, respectively the midpoint and secondary pivots of the pattern, and JNK should therefore be shorted if and when it reaches the target.
The trade should be attempted only if you are able to short shares or naked calls, since we already know that buying puts will not produce a profit no matter how steeply JNK might subsequently fall. The puts are simply too knowledgeably priced to give buyers an edge. Accordingly, I’ll recommend offering 400 shares short at 37.22, stop 37.45, good till canceled. If I see an easy way to get long first for a profitable ride to the target, presumably using a ‘mechanical’ bid at the pink line, I’ll signal it in the chat room and via an email alert. Be sure to check ‘Email Notifications’ on your account page if you want to be apprised in real time.______ UPDATE (September 13, 2:18 p.m. EDT): I’m going to archive this tout, since it’s just wasting space on the home page. However, if it ever gets to my 37.25 target, please give me a nudge and we’ll short it together. It’s a good proxy for the criminally deranged mindset of hedge funds and institutional investors.