Investing in ETFs: Beware The Charts, The Charts Lie

As we posted earlier this week, the CYB (Yuan) ETF had its option strike prices dropped by 0.15, from $25 to 24.85, from $24 to $23.85 and so on. So now the strike prices are some very odd values. The reason for this is that CYB paid a distribution of $0.15 on December 22.

Weird option strike prices are easily identified. But what about the charts? This is CYB chart provided by Google Finance:

There is nothing too unusual around Dec 22nd. However, there is in fact a drop of $0.15 there, corresponding to the distribution. While this is small, if affects all the technicals.

Now consider a much more evident case: BZF (Brazilian real) ETF. It issued a distribution of $3.24 on the same day, Dec 22. Please see the chart:

There is  a large drop correspondingly roughly to $3.24. This gives the impression that BZF has performed poorly. There is no indication of any dividends given either. In fact, the chart shows the performance since Jul 21 as -3.39% or a drop of $0.92. Nothing could be further from the truth. The actual performance  (adding $3.24) is closer to +8.6%.

This discrepancy also skews all the technicals. Look at the very chart drop in the EMA 20 (red line):

This does not correspond to reality, the EMA did not drop.

The following chart is from TOS. It is not any better:

And these are from RBC:

BZF is now oversold!? NOT!


It's all wrong and misleading. Note that some vendors allow you to adjust the pricing on historical data (Yahoo has a adjusted option), whcih is great, but this is what they show for  a chart:

 Be careful out there.