My Japanese Small Cap Trade

Early last week I began taking advantage of the massive Japanese stock sell-off with purchases of two Japanese small cap ETFs.  I talked about these buys on CNBC this past Wednesday (below)…

The trade was a monster – the entire Japanese equity market began a rally mid-week while the ETFs and ADRs were up 10-15% almost across the board.  Small caps led the charge as I had expected and by Friday I began adding stops to protect my gains.

I wasn’t the only one buying the weakness in Japan stocks this past week, according to Lipper (via Reuters):

* Investors pump record $956 mln into Japan equity funds

* iShares MSCI Japan fund record inflow of $860 million

Now as far as my exit strategy on the trade, using trailing stops, there is a potential flaw…

The big problem with stops on an international ETF like my $DFJ and $SCJ longs is that gaps down are a given – gaps that can render a stop loss completely worthless by turning it into a market order significantly lower than where you intended.  This is why opens must be watched like a hawk.

One alternative would be to use Sell Stop Limit orders, of course.  These would guarantee my intended stop-out price but in the event of a gap-down open, I am stuck long as the stop limit order does not become a market order if the price is violated on a gap through it.

Anyway, I think I’m OK going into the Monday open.  The news flow out of Fukushima seems unchanged and the Libyan bombing does not appear to be sending oil screaming or stocks plummeting so far.  In the meanwhile, as Barry noted, Barron’s has a massive cover story called Buy Japan Now on the newsstands.

I’m not sure if the fabled Barron’s Bounce will move stocks in Japan on Japanese markets but I suppose it’s possible.  If so, I may simply have to raise my stops on this trade.  This is something I’m more than happy to do, believe me.

Read Also:

Invest In Japan (Barron’s)

Barron’s: Buy Japan Now (TBP)

Media: Opportunity in Japan?  (TRB)

Tags: , ,

This content, which contains security-related opinions and/or information, is provided for informational purposes only and should not be relied upon in any manner as professional advice, or an endorsement of any practices, products or services. There can be no guarantees or assurances that the views expressed here will be applicable for any particular facts or circumstances, and should not be relied upon in any manner. You should consult your own advisers as to legal, business, tax, and other related matters concerning any investment.

The commentary in this “post” (including any related blog, podcasts, videos, and social media) reflects the personal opinions, viewpoints, and analyses of the Ritholtz Wealth Management employees providing such comments, and should not be regarded the views of Ritholtz Wealth Management LLC. or its respective affiliates or as a description of advisory services provided by Ritholtz Wealth Management or performance returns of any Ritholtz Wealth Management Investments client.

References to any securities or digital assets, or performance data, are for illustrative purposes only and do not constitute an investment recommendation or offer to provide investment advisory services. Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others.

Wealthcast Media, an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. Investments in securities involve the risk of loss. For additional advertisement disclaimers see here: https://www.ritholtzwealth.com/advertising-disclaimers

Please see disclosures here.

What's been said:

Discussions found on the web
  1. cum se trateaza commented on Oct 30

    … [Trackback]

    […] There you will find 77607 more Info on that Topic: thereformedbroker.com/2011/03/20/my-japanese-small-cap-trade/ […]

  2. buy dumps with pin commented on Nov 16

    … [Trackback]

    […] Read More Information here to that Topic: thereformedbroker.com/2011/03/20/my-japanese-small-cap-trade/ […]

  3. bmo online banking sign in commented on Nov 24

    … [Trackback]

    […] Information on that Topic: thereformedbroker.com/2011/03/20/my-japanese-small-cap-trade/ […]

  4. http://www.bmo.so/ commented on Dec 04

    … [Trackback]

    […] Find More to that Topic: thereformedbroker.com/2011/03/20/my-japanese-small-cap-trade/ […]

  5. best ddos commented on Dec 21

    … [Trackback]

    […] Read More on to that Topic: thereformedbroker.com/2011/03/20/my-japanese-small-cap-trade/ […]

  6. diamond painting commented on Dec 29

    … [Trackback]

    […] Find More on that Topic: thereformedbroker.com/2011/03/20/my-japanese-small-cap-trade/ […]

  7. car history commented on Jan 15

    … [Trackback]

    […] Read More on on that Topic: thereformedbroker.com/2011/03/20/my-japanese-small-cap-trade/ […]

  8. cheap wigs commented on Jan 19

    … [Trackback]

    […] Info on that Topic: thereformedbroker.com/2011/03/20/my-japanese-small-cap-trade/ […]