The Diamond-Cut QQQQ Trade

Readers love when columnists take a look back to how old trades performed because invariably there are some train wrecks in the inventory. Understandably, columnists tend to shy away for that same reason.

However, some trades -- the good ones, of course! -- need to be revisited. One proposal I was proud of was a trade discussed nine months ago. That trade, a paired trade that took advantage of the disparity between the Nasdaq 100 Trust (QQQQ - commentary - Cramer's Take) and Diamonds Trust (DIA - commentary - Cramer's Take), worked out nicely when I followed up on May 11 and has worked even more nicely since.

Recall that the trade had you shorting the DIA and going long QQQQ. By May, the QQQQ was closing the gap but not by much, and the trade had netted you only 0.48%. That was still better than what the market was giving you, but not enough to wow anyone.

But now the trade has paid off handsomely, with the trade netting a tidy 10.04%.

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What's next? It appears the situation has reversed, with the QQQQ ready to fall relative to the DIA. The new trade, then, would be to switch positions, shorting the QQQQ and going long the DIA. I'll look back in a few months to see how that fared.

Today, charts for the Dow Jones Industrial Average, Sara Lee (SLE - commentary - Cramer's Take), Boeing (BA - commentary - Cramer's Take), Affymetrix (AFFX - commentary - Cramer's Take), Redback Networks (RBAK - commentary - Cramer's Take) and Advanced Micro Devices (AMD - commentary - Cramer's Take).

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Charts produced by TC2000, which is a registered trademark of Worden Brothers Inc.

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And that is the final word from the Old Gray Lady, where after 10 years of loyal readership, I finally had to let go of my New York Times subscription. Three newspapers a day was always pushing it, and with so much available on the Internet, it just became redundant. Also, it's tough to replace "free" and that's basically what I can find online.

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At the time of publication, Smith was long Boeing, although holdings can change at any time.

Gary B. Smith is a freelance writer who trades for his own account from his Maryland home using technical analysis. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Smith writes a daily technical analysis column for RealMoney.com and also produces a daily premium product for TheStreet.com called The Chartman's Top Stocks -- click here for a free two-week trial. While Gary cannot provide investment advice or recommendations, he appreciates your feedback; click here to send him an email.