“The Dollar Sentiment Index for the Dollar Index reports just 3% bulls among traders, an extreme level only five times in the past 20 years, usually near an important low,” Prechter wrote on Aug. 5. “The last time we saw readings like this was March-July 2008, just before the dollar soared.” In other words, the “short the dollar” trade is overly crowded.

So that’s all the ‘research’ I put into this trade. I think it looks reasonable that the dollar is set for a rally, and at the very least the downside is probably limited at this level. I’ll be looking to make a few points on this and get out soon.

Here’s a chart where I made my buy (blue arrow):

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Apparently, I’m developing quite a knack for selling too soon. UYG closed the day up about 30 cents from the point I sold in the morning, which was a pretty big move to miss. Not that I’m complaining about a winning trade, but I definitely want to take note of transactions like this to hopefully learn something and do a little better the next time.

After commissions, and a dividend payment, my realized gain on this trade was 16.4%.

This post originally appeared at: Clear Trades. Follow me on Twitter

This post originally appeared at: Clear Trades. Follow me on Twitter

I took a shot at FAS this morning, but I picked the wrong dip to buy. It dropped to about 6.00 a little while after I bought, and that would have been a good entry point. I entered at the wrong time, but I’m happy I set a stop-loss and stuck with it.

Realized a loss of $63.00, for a return of -6.69%.

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Finally emptied my UYG position. This is another example of a trade that I let get away from me for way too long. I stuck with it, and kept averaging down. Things were painful for a while, but I was finally saved in the end by a nice Financial sector recovery. This trade worked out, but it wasn’t a smart way to go about it and I won’t soon forget the pain I was feeling on this one. Hopefully that is a lesson learned for good.

Realized a gain of $1,825.95, for a return of 31.42%

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Exited my FAS position. I got a little scared and felt like I had to take profits after being down so much on this one. That of course illustrates the problem of letting a bad trade run for so long and not going in with a stop-loss order. Lesson (hopefully) learned.

Realized a gain of $44.92, for a return of 1.93%.

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Averaging down and adding to my UYG position. I continue to believe the Financials are oversold and the bad news is being overblown. I would buy more, but this is all I could buy with the remaining cash in my account.

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I still expect to see a short-cover rally (there are 182 millions shares short according to shortsqueeze.com), but there is probably plenty more downside before that will happen.

Realized a loss of -$134.02, for a return of -15.73%.

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For the week of Feb 23 – 27 I had a realized loss of -$890.85. This was a result of cutting losers that should have been cut long ago. Lesson learned—always set stop loss orders after entering a trade.

This brings my all-time (since January 28, 2009) realized loss to -$1,741.77.

For purposes of this report, realized means the actual net dollars of closed positions, after commissions and fees.

This post originally appeared at: Clear Trades. Follow me on Twitter

This post originally appeared at: Clear Trades. Follow me on Twitter