OK - here is the straight talk - the market is in trouble. There are very few industries which warrant the risk of establishing new positions. Currently, the only possibilities for new longs are in the tech arena - specifically computers (DELL, HPQ) and semiconductor equipment (LRCX, KLAC, CYMI and BRKS). However, given this climate, the only side of the ball we are playing as of July 30th is the short side. On the next bounce, which will occur early this week, we will establish short positions in at least one more financial - most likely JPM. There are too many other industries from which to choose shorts, and hopefully the picture will clear up as the week develops.
The big problem we have now is that all of the Bullish Percent charts are signaling Bear. The only industry/indices not in Bear Mode are as follows:
S&P Information Technology, NASDAQ Composite.
Take your pick on the rest of the market - everything from Financials to Consumer Staples, they are all primed for shorts - even Energy (Oils, etc.).
For those who need a primer on the Bullish Percent Charts, I strongly recommend picking up Thomas Dorsey's book on Point and Figure Charting.
Sunday, July 29, 2007
Executions from Thursday and Friday
As planned, our trades were executed on Thursday as follows:
Short 250 shares of CFC at $29.25
Buy 200 shares of DELL at $28.75
In addition, due to the poor performance and meltdown last week, the following positions were closed as our stop orders were hit:
Sell 150 shares of RRGB at $39.75 - doesn't change the fact that I love their burgers.
TXRH releases earnings on Tuesday. With restaurant after restaurant finding the woodshed, we need to monitor that position as well.
Given the outlook for natural gas, we will need to keep a close eye on NBR as it is approaching the stop of $27.
Short 250 shares of CFC at $29.25
Buy 200 shares of DELL at $28.75
In addition, due to the poor performance and meltdown last week, the following positions were closed as our stop orders were hit:
Sell 150 shares of RRGB at $39.75 - doesn't change the fact that I love their burgers.
TXRH releases earnings on Tuesday. With restaurant after restaurant finding the woodshed, we need to monitor that position as well.
Given the outlook for natural gas, we will need to keep a close eye on NBR as it is approaching the stop of $27.
Executions - Short and Long
Our trades were initiated on Thursday as follows:
Short 250 shares of CFC at $29.20.
Buy 200 shares of DELL at $28.75
Short 250 shares of CFC at $29.20.
Buy 200 shares of DELL at $28.75
Thursday, July 26, 2007
CFC Short Update
While it will reduce our UD ratio a bit, the target for initiating the CFC short will be between $29 and $29.25, the stock looks to be opening down and we will not have an opportunity near $30.
Going to Start Wearing Shorts (And Another Long)
The current volatility sure makes the market a fun place to be. I suppose that will depend on how much pain you are enduring at the present time. The recent trading has setup a number of opportunities on both sides of the ledger. Today we will initiate our first short position and establish one more long. They are as follows:
(Short) CFC - Countrywide Financial is telling us that business is not just marginally bad, they are not even sure how bad it is. Couple this backdrop with the Financials Bullish Percent Chart's recent turn into Bear Confirmed status means it is the optimum time to put on some financial shorts. We will look to short 250 shares of CFC at the $30 level (frankly if it opens higher today we will want to execute the trade close to the market open). The downside on the short position is a very conservative $34 (although we cannot see how the stock rises to even the $32 level). The price target is $15 for a UD ratio of 3.75.
(Long) DELL - Perhaps Michael Dell is David Blaine in disguise. Ever since he re-appeared at the helm of DELL the company and the stock have moved forward. Granted, it is not at the lightning fast pace over the late 90's, but up and up nonetheless. While we would love to wait for a lower buy point, this position will be intitiated at a target of $28.75. We will allocate 200 shares. The downside is at $25.50 and the upside target is $44, a solid UD of 4.7.
More shorts to come over the next few trading days. While it is the optimum time to short JPM and a number of other financials, the P&F charts are not yet set up properly. Always stick to your trading rules as discipline is of paramount importance.
Stay calm.
(Short) CFC - Countrywide Financial is telling us that business is not just marginally bad, they are not even sure how bad it is. Couple this backdrop with the Financials Bullish Percent Chart's recent turn into Bear Confirmed status means it is the optimum time to put on some financial shorts. We will look to short 250 shares of CFC at the $30 level (frankly if it opens higher today we will want to execute the trade close to the market open). The downside on the short position is a very conservative $34 (although we cannot see how the stock rises to even the $32 level). The price target is $15 for a UD ratio of 3.75.
(Long) DELL - Perhaps Michael Dell is David Blaine in disguise. Ever since he re-appeared at the helm of DELL the company and the stock have moved forward. Granted, it is not at the lightning fast pace over the late 90's, but up and up nonetheless. While we would love to wait for a lower buy point, this position will be intitiated at a target of $28.75. We will allocate 200 shares. The downside is at $25.50 and the upside target is $44, a solid UD of 4.7.
More shorts to come over the next few trading days. While it is the optimum time to short JPM and a number of other financials, the P&F charts are not yet set up properly. Always stick to your trading rules as discipline is of paramount importance.
Stay calm.
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