HYG trade ideas
HYG Bearish RSI Divergence 9/6/2020HYG or junk bonds at the daily view.
This is a project that my trading team and I are conducting. This is 9 of 9 charts (available on Trading View) that searches for clues for an imminent correction by using both June and September 2020 cases. It's a comprehensive overview that connects the charts volatility , trends, divergences, credit, and currency strength.
It seems that the credit markets had a bearish RSI divergence since August. It was too hard to see with candles. However, putting it as a line shows where the closing prices and closing RSI levels were. It seems that bearish RSI divergence finally played out in September's correction. Had I saw this earlier, I would've scaled in more VIX longs.
Not sure how far this will go. However, HYG is at a critical level where it needs to maintain the trend supports or it's going to fall like a rock. If traders and the Fed are the sword (to prop the markets up), the credit markets are the shield that protects the major indices from selling off even more. If corporate credit breaks their vital supports, we might get more than just a small correction within the ES, NQ, and RTY.
HYG Calls SignalGot into HYG through flow bot in the trading group, looked at its chart and it has a lot of potential.
I Called it out at 81.60 in the group chat, made 40% took profits and I am looking for another good entry, target will be 83.97, then 86, then, 86.66, then final is 88
The group chat is having a 20% sell for the 4th of july ( Use coupon code: "July4" ) and will go on until sunday the 5th. I would , love to see anyone who supports my posts join our group and make even more money with us as we grow richer and richer by the day: IF your interested join through DMing me.
All you'll have to do is join the discord, then go to free chat room and type upgrade and set up your membership.
And of course Direct message me with any questions you have!
$HYG Options Call | Run It UpAs we wait for a correction, I'm looking at two pretty nice calls....
$88 Call 9/18 @ $68
or
$89 Call 10/16 @ $54
These may come down a bit, providing a better entry. $HYG
Do not trade this, you will lose money.
DotcomJack
HYG - High Yield US corporate bonds ETF s/r zonesHello traders,
Description of the analysis:
The ETF market for high-yielding corporate US bonds is currently in an important support area that was until recently a resistance. Resistance turned into support with a highly volatile upward movement supported by high volumes. This is a clear signal of a growing willingness to invest in riskier assets. This zone has a strong historical connection. If the market stays at or above this support, it means a positive outlook to allay market fears. The VIX index, as the main indicator of panic in the markets, is also slowly beginning to gradually return to its normal values. Market ties that were valid yesterday may not be valid tomorrow, so invest and trade wisely and carefully.
About me:
Hi, my name is Jacob Kovarik and I´m trading on stock exchange since 2008. I started with a capital of 3000 USD. My first strategy was based on OTM options. (American stock index and their ETF ). I´ve learnt on my path that professional trading is based on two main fundaments which have to complement each other, to make a bussiness attitude profitable. I´ve tried a lot of techniques and many manners how to analyze the market. From basic technical analysis to fundamental analysis of single title. My analytics gradually changed into professional attitude. I work with logical advantages of stock exchange (return of value back to average, volume , expected volatility , advantage of high stop-loss, the breakdown of time in options, statistics and cosistent thorough control of risk). At the moment, my main target is ITM on SPM index. Biggest part of my current bussiness activity comes from e mini futures (NQ, ES). I´m trader of positions. I´m from Czech republic and I take care of a private fund (4 000 000 USD). During my career I´ve earned a lot of valuable experience, such as functionality of strategies and what is more important, control of emotions. Professional trading is, in my opinion, certain kind of mental training and if we are able to control our emotions, accomplishment will show up. I will share with you my analysis and trades on my profile. I wish to all of you successul trades.
Jacob
HYG wedge"The Federal Reserve Bank of New York will finance a special purpose vehicle (SPV) for the SPV to purchase qualifying corporate bonds in the secondary market and qualifying ETFs. The Department of the Treasury will make a $75 billion equity investment in the SPV established by the Federal Reserve for this facility and the Primary Market Corporate Credit Facility."
"The SMCCF may purchase in the secondary market (i) corporate bonds issued by investment-grade U.S. companies; (ii) corporate bonds issued by companies that were investment-grade rated as of March 22, 2020, and that remain rated at least BB-/Ba3 at the time of purchase; (iii) U.S.-listed ETFs whose investment objective is to provide broad exposure to the market for U.S. investment-grade corporate bonds; and (iv) U.S.-listed ETFs whose primary investment objective is exposure to U.S. high-yield corporate bonds."
"The combined size of the CCFs will be up to $750 billion. The PMCCF will leverage Treasury’s equity at 10 to 1 when acquiring corporate bonds or syndicated loans from Eligible Issuers that are investment grade at the time of purchase. The PMCCF will leverage Treasury’s equity at 7 to 1 when acquiring corporate bonds or syndicated loans from Eligible Issuers that are rated below investment grade at the time of purchase.
The SMCCF will leverage Treasury’s equity at 10 to 1 when acquiring corporate bonds of issuers that are investment grade at the time of purchase and when acquiring ETFs whose primary investment objective is exposure to U.S. investment-grade corporate bonds. The SMCCF will leverage Treasury’s equity at 7 to 1 when acquiring corporate bonds of issuers that are rated below investment grade at the time of purchase and in a range between 3 to 1 and 7 to 1, depending on risk, when acquiring any other type of eligible asset."
HYG falls under the criteria for these purchases. It's rated BB which is above the ratings needed for the feds to purchase, it's a high yield ETF which also falls under the criteria. You can see there is a bullish wedge forming.
41% of HYG shares are short, which is insane. This could be an upcoming short squeeze. Shorts could be forced to cover because of these Fed purchases. HYG has also seen a 7% increase in units created this last week. All signs seem pretty bullish. I wouldn't normally touch this ETF, as it's literally a junk bond. Go ahead and take a look at its holdings and you'll see why.
I was originally holding 6/19 $84 calls but I swapped those for the $86 strike. Looking for a big move up soon from this slow mover.
Thanks for reading.
Fed high-yield buying might inflate the price somewhatThe prices of high-yield bond ETFs went through the roof after the Fed announced that it would be buying them, but they came back down as investors realized that the central bank hasn't actually purchased any yet. Word on the Street is that they're about to start, though, so I went ahead and picked up a couple May 15 calls, and we'll see what happens.
Here's the prospectus on the program, which says the Fed will buy junk-grade bonds with 7-to-1 leverage: www.newyorkfed.org
I kind of hate myself for buying this garbage with all the bankruptcies and default risk out there, but the market seems to be mostly an index of central bank stimulus right now, so... when in Rome. (I'm keeping my bet small and would not recommend anyone throw a lot of money at this.)
Junk bonds FED proved that it's wallstreet bitch when they started buying junk bonds too . so be careful guys if they break then stonk will go down
We Might Have a Problem (Shorting Junk Bonds, HYG)
These are BB graded junk corporate bonds that yield 5.42% during a low interest period, at the same time jobless claims claims are at 22M with almost 18% unemployment. This does not look like a good situation, we may have a problem. I bought a 6/19 expiration 72/68 Put spread for $0.40 each, if it continues to go up I will buy more.
OPENING (IRA): IRA HYG PUT LADDER.. for a 5.65 credit.
Notes: Here, looking to acquire HYG lower, if at all, to potentially replace some lower-yielding TLT that is at all-time-highs.
Not as liquid as I would have liked, in spite of the fact that 30 million shares traded hands so far today.
IGNORE JOBLESS CLAIMS; FOCUS ON THIS EARLY WARNING INSTEADTo gain an edge, this is what you need to know today.
JOBLESS CLAIMS
Jobless Claims came at 6.648 million vs. 2.8 million consensus.
In general, stock market investors should pay attention to jobless claims. In normal times for the stock market, jobless claims carry heavy weight in our Asset Allocation Model. There are two reasons for stock market investors to pay attention to jobless claims. First it is a leading indicator. Second it is released on a weekly basis; many economic indicators that impact the stock market are released on a monthly basis. Due to coronavirus shutdown, jobless claims numbers are shocking but they are already discounted in the stock market.
Our call in the prior week was also to ignore jobless claims that week because they were already discounted in the stock market. After the really bad jobless claims number was released, the overhang of the potential bad news was lifted from the stock market. Typically when the overhang over the stock market is lifted, the stock market rallies. This is exactly what happened in the prior week.
This week, once again, investors should ignore the shocking jobless claims. This week there is no overhang to lift because the jobless claims are roughly in line with the consensus. Instead investors should consider focusing on this early warning indicator. Let’s explore with the help of two charts.
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THE CHART
- The chart of junk bonds is a day chart giving investors a short term perspective.
- The chart shows the drop in the prices of junk bonds as the coronavirus dislocation spread across the markets.
- The chart shows countertrend rally in high yield bonds.
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EARLY WARNING INDICATOR
The chart is your early warning indicator for four reasons:
- In a recession, junk bonds tend to perform more like stocks.
- In my over 30 years in the markets, I have consistently experienced that credit analysts tend to be more accurate than the stock market analysts.
- There is a high probability that junk bonds will break the support shown on the second chart before the stock market breaks the mother of support zones if coronavirus situation worsens. I have previously written that the mother of support zones has an 80% probability of holding.
- If the junk bonds break above the resistance shown on the second chart, that will be an early indication that the coronavirus situation is getting better.
Semiconductor stocks have been leading indicators for the stock market. For this reason, it is important to watch semiconductor stocks such as AMD (AMD) and Micron (MU). It is also important to watch large-cap technology stocks such as Apple (AAPL) and Microsoft (MSFT).
Catch a Hot potato in Corp BondsNo one wants to be last one standing when the music stops. Studying the AD, money is fleeing Corp Bonds... They just got bailed out, and likely will resume share repurchase programs, and pension fund manager can continue to invest in high yield, why? Because the Gov't has shown us time and time again, they will come to the rescue.
There is a bearish divergence by the AD on this chart, bonds while up for the day sold off a little. This needs to stay above $71, I can't see a handle forming on this base just yet, due to the bearish divergence by the AD
