Virtual Portfolio : On the hedge side again …


I Buy this morning a position of 2% (0,4 units) in the Nasdaq 100 CITI Knock OutPut certificate – Knock out level at 5549 – Open End – Current leverage of 25%+ – ISIN DE000CY1D3F9 – @ 1,97 EUR .  Stop Loss on this position on Nasdaq100 closing above recent top i.e. above 5400.

Technically and as already mentionned a few days ago, US markets are on some criteria at extreme levels : sentiment indicators , very low VIX level equivalent to investors complacency. Additional signs of reversals are adding up : On Nasdaq 100, MACD daily has turned down , RSI hitted all time highs a few days ago an reversing. ADX indicator is above DI+ & DI- which  testifies of a overheated market.

Snap IPO yesterday is another sign of market overheating and of investor sentiment : Company valued at USD 28B $ after first day of quotation. Zero profit since creation 6 years ago . None expected before years. Tech is a quickly evolving markets and competitors will not wait to propose same kind of app and probably bring other ideas that could kill such – for time being- no profit business.  Following Bloomberg, Snap went public at 21 times its 2017 Ads sales i.e. twice as expensive as Facebook and 4X compared to Twitter . Snap is likely NOT Facebook or Google . These latter are exceptions . Snap’ s current valuation is clearly driven by investor’s greed which translates the current state of psychology reigning in US markets .

In this environment the aim is to put a safety net below nice profits gathered last year and in 2017 so far .I nevertheless do not want to commit to much on the hedge as we have seen false signals on 2 occasions already in last 3 months so i put a SL on the trade so the risk is limited to around 0,50% of portfolio in value.