BNI - Gone

Stopped out of BNI this morning at $83.

BNI - Change in Parameters

BNI has broken a triple bottom that was formed at 84 and the trade parameters have changed as a result. There is now a downside target and the trade will be closed at $83 if the level is breached again.

Housing Earnings

DHI reported earnings this morning, initially they were well received. However, folks seem ready to break the stocks. The Housing Index broke its prior low and although it rebounded at the end of the day, this index looks to head closer to 110 at a minimum.

We will keep an eye on the Fed as always since an ease by them will certainly cause another squeeze. However, it will be worth sticking with these shorts through the volatility.

Weekend Activities

This weekend, we will be taking a hard look at the weighting of the model portfolio as we have quite a large mix of shorts concentrated into a few troubled sectors. The temptation is there to add to the DHI short to raise the exposure to the equivalent of the MTG and BZH positions given the weakness in the HGX index.

From a P&F perspective, the HGX index has downside to at least 126 from its current perch of 144, but the damage to this group is so severe, we expect to see the HGX closer to 100 very soon unless there is some serious help from the Fed.

As always, we will take our overall look at the market to assess the level of opportunities that may exist on the long side. When going long in this environment, it will pay to think short term and try to play the bounces that will occur in RIMM, AAPL, GOOG and similar past winners.

Short Executions from Thursday

Based on the trade parameters set on Thursday morning, the following executions occurred in the model portfolio:

Short 100 shares of BZH at 10.10
Short 50 shares of MBI at $38
Short 100 shares of ABK at $30
Short 200 shares of MTG at $23

A couple of the above were added slightly under the targets set for the trade but the downside is so great that the cost of not entering the trade was too great.

BZH - Adding to short

Will add 100 shares to the BZH short position anywhere above $10.

Layer in more shorts

Adding another 50 shares to the MBI short around $39.75 and shorting 100 shares of ABK at a target of $30.

Also will add a short position of 200 shares of MTG aroud $23.50.

All targets are in the low single digits.

TBSI - Position Closed at $47

TBSI - Getting Creamed

TBSI took it on the chin yesterday like most other momentum names. While weare glad we sold two lots of 100 shares much higher from here, our worst fears have been realized. The stock is broken and the position will be closed out today on a pending bounce.

Gap Positive News Flow Trickling In

Yesterday, The Gap announced that while its October same store sales were quite lackluster (down 8% vs. the down 4.5% forecast), margins have improved. The stock's reaction was very positive and it is this type of trading behavior that leads to higher prices.

More Shorts

Once the market bounces a bit, additional short positions will be initiated or added to. MBI will be added to and one (or more) of the following short positions will be initiated:

MTG, ABK, RDN, WM

UPS - Gone

UPS hit our stop point of $72 on Wednesday and was removed from the model portfolio. This opens up some more cash - most likely to go into the retail sector based on how the charts are shaping up.

Watch the Gap

Retail positions need to be established when everyone thinks the game is over - which is now. One stock that has held up remarkably well is The Gap (GPS). This is a strong indicator that they will profit once the rate cuts take hold. Also of note, when you walk through the Gap's stores, it is clear that they have finally figured out that they need to go back to their core business of basics, and becoming the source of jeans again.

While a turnaround in sales will take some time to take hold, we would not be surprised if this holding became a core position in this portfolio.

The initial trade parameters are 300 shares at an entry at $18.75 with a target of $24 and a stop in at $17 (Decent UD of 3). However, this position could easily turn into a triple if in fact they are reversing the trend of 6 years of declining sales.

BZH Update

The short position trade parameters are still intact and we are considering adding another 100 shares to this short given the current squeeze and the fact that they suspended its dividend payout. This is not a suspension of the payout, but an elimination of it because the company is in serious trouble.

Will add 100 shares to the short at $11.00.

Starting the Shorts

We are getting a nice short squeeze on some of the mortgage insurers and started a short position in MBIA (MBI) at $36.50. 50 shares were sold short in the model portfolio. The stop order goes in at $41.50 and the price target is $1 - that is not a misprint.

Buy STX

Bought 200 shares of Seagate (STX) at $27.92. Price Target is $45.50, stop goes in at $25.50.

I am Thirsty

So 200 shares of Coca Cola Enterprises (CCE) at $25.70. The upside target for the stock is $39 and there is limited downside - stop goes in at $23.50.

New Positions to Be Established This Week

A number of new positions will be established in the model portfolio during the week of 11/5. They will be from both the long and short side as there are opportunities for each.

TBSI - Ringing the Register Again

The TBSI position was cut in half on Friday - sale of 100 shares at $60.50. The chart is showing a downside target of $49 at the moment and the gains need to be preserved. The last 100 shares will be held until further notice.

Positions Stopped Out

TXN at $31 on 10/23
NBR at $27 on 10/30

Wrong About Things Changing

The KBH and CF shorts should not have been closed. Lesson Learned - stick with the trade if the parameters you set upon opening were not violated.