New Target for $UTIL Trade!

As regular readers know, I've been ga-ga over the short position in $UTIL.

I have examined this chart with fresh eyes, and I have decided it is time to take profits on this position.

The head and shoulders on this pattern has always been a bit sloppy. The retracement back to 8/29/2008 is my new neckline (shown as the purple horizontal line, below). The math is pretty simple. 8/29's high was 486.64; the ultimate peak on 1/8/2008 was 555.71; the difference is 69.07. Subtract this from the neckline value, and you get 417.57, the new target price.

Today's low was 420.25, which is extremely close to the target.

Importantly, I took a fresh look at the long-term chart back to 1929. My retracement goes from 4/28/1942 until 4/20/1965, and the extensions of this retracement are pretty remarkable. The 261.8% extension and the high price reached in December 2008 are virtually identical at the value of 418.25.

So, as you can see, there is a convergence at these levels. I will probably re-enter this trade on a serious bounce higher, but I am planning on liquidating my entire SDP position which has provided a nearly 20% return in a very short amount of time (and constitutes my entire retirement account right now!) I also intend to sell my XLU puts in the morning.

I wanted to make a special point of updating this trade as I have been so vocal about it.