Down Day, But Action Under The Surface

Another day at roller coaster amusement park. This time the roller coaster went down, but there were
plenty of big upside movers that ignored the general market. I must say that in general, I have had my best days during the period after the first day or two rally by the major indexes. I think that in a decent market, that is when the institutions are done pushing the major indexes for the time being and the market broadens out. Not that I'm so sure that this is a dent market, mind you.

SRPT was one of the big upside movers that I bought pre market. A tweeted about it at 8AM and jumped on it right after when it took out its AM highs. I'm still holding it, believing that it can run up another 6 points or so before it hits resistance at the gap down point and 200 day moving average. SRPT got FDA advisory panel report. That is not the same as FDA approval which usually - but not always - follows. Anyway, this is a stock that was busted that may become whole again.

GILD is a biotech superstar which finally broke out of the base I had highlighted in an earlier post. Great company. A keeper.

CANN went ballistic again, but without me. Who would chase a thinly traded parabolic fad company that gaps up on no volume? They rented a head shop and own some land to grow pot on in Colorado. They have no earnings or revenues to speak of. Yet CANN is trading like it is the new born HD of pot.

ASPS went up again and I will sell it tomorrow.

RESI lost a tad on it today when they announced a secondary. Out. I also did not buy NQ back sine my price alert was not met. And I sold KNDI & because I am keeping tight stops.

Other stocks like AOL, TSLA & SCTY made big moves. Here is AOL. AOL probably has another bit to run, but I should have bought it on the breakout. I did not have my price alert set and paid for it by missing the trade. One of the keys to making money is doing my stock scans each night and setting my price alerts at break out points. Homework is key. Many stock setups that I post will not make it. But nothing ventured, nothing lost. I live for the ones that do alert me.

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BIG Capital Advisors and Seaview Partners are not responsible for your investment decisions. We believe very strongly in our opinions, but you must perform your own due diligence in making your investment decisions.

Going With The Flow As I Scratch My Head

Who am I to fight the tape? I can make every intellectual argument in the world, but the tape is always right. With that in mind, I let my price alerts and special situations take me into long positions. Those positions are either day trades or short term swing trades. I'm still playing small and fast.

ASTC  I noted ASTC earlier and tweeted about it. Beautiful breakout.

CANN  This one is very dangerous and is strictly for day traders. The stock is thin and the company makes literally no money. But it is running on pot legalization mania. Cannabis Emptor! Strictly day trade small positions and off the day tic chart if the opportunity arises.

GTI  broke out and failed three days ago. But I stuck with it resetting my price alert.

KNDI is the new China auto rental vending machine company that has taken the momentum players by storm. It has to start to make some money, but their first huge auto vending machine is operational.

NQ shook me for a loss after it popped the cup handle on good news, only to fall back down. Ouch! Nevertheless, I have my price alert above today's high and may buy it back.

 

RDN keeps on inching up after breaking out

RESI I've followed this AAMC spin off for days and tweeted about it when it started to pop.

URI Nice little continuation pop.

BIG Capital Advisors and Seaview Partners are not responsible for your investment decisions. We believe very strongly in our opinions, but you must perform your own due diligence in making your investment decisions.

It's Yogi Time - Deja Vu All Over Again

Is this more of 2013 all over again? Every sell off last year was always met with fast "V" shaped reversals right back up which turned into rallies. This time the market bounced, but the jury is still out. Leadership is all over the place, but is mostly lacking. All of the concerns I listed in my last post still exist.

It's also Maytag time. Like some college kid jumping into an over sized dryer being shaken up and burned in an effort to set some sort of childlike longevity record? We are all in the dryer. Either way today's strong market was almost the opposite of yesterday's weak market. Almost being the operative word.

There were many signs of strength today and I'm kicking myself for taking the afternoon off to attend to some personal matters. There was plenty of action starting today stating with REGN and TSLA. Here are some selected charts:



REGN popped on good news but still below all time highs. In my opinion, the best way to get bang for the buck with high priced stocks is to day trade or swing trade the in the money options. The key is to find a stock whose options trade in volume with relatively tight spreads.

 

TSLA Took out resistance way below old highs on news of beating sales expectations. Still small numbers, but enough to make the shorts quake. The key will be if Elon musk can produce enough batteries to enable TSLA to really ramp up production.

RDN It looks like the breakout is real. RDN is not a fast volatile mover, but it gets there just the same

CSIQ So much for a wished for pull back. Strong stock.

YELP See CSIQ above

 

ABTL Nice pop.

XYL Nice breakout

There are many other set ups out there and many low priced stocks that are moving fast. The latest game has been the advent of on line trading "rooms" where enough day traders are present to literally corner a stock for short periods of time during the day. Nathan Michaud and Timothy Sykes have this
system down pat. They get a oodles of followers who all pile in and out together making their trades almost a fait accompli..

Lastly, there were some after hours fireworks with Chelsea Therapeutics. We shall see if there is anything to work with after it gaps up in the morning.




BIG Capital Advisors and Seaview Partners are not responsible for your investment decisions. We believe very strongly in our opinions, but you must perform your own due diligence in making your investment decisions.

Fear Of Pulling On A String?

No one knows how this years market is going to ultimately play out. All I can do is play the cards as they are dealt and use the odds at the present moment in time. So I am constantly reassessing my market view until some clarity sets in. I talked about the market's early 2014 situation in a recent post entitled "What Would Marty Zweig Do?"  In that post I spoke about the 3 part model that Zweig used. Today the market had its worst day in long time. So I think that its time to revisit Zweig's three pillars of the market

1 - The Fed

In normal times I would say that monetary policy is positive and it will take some real tightening to change things. Nevertheless, these are unique times in monetary land, and over the short to intermediate term, people are scared about the end of QE. It is one thing to taper when the economy appears to be getting stronger. It is quite another thing to taper when the economy is getting weaker.

Last week's jobs report scared the daylights out of investors. Statements today about the Fed being intent on tapering regardless of whether the anemic economy is cooling down are downright scary to many investors. We all know that one report does not make a trend. We also know that the employment numbers are flat out phony because the so called discouraged worker affect is off the wall higher than normal and is not accounted for today's the employment reports. Just a few days ago the crowd was fearful of rates going up. Now the fear of rates climbing has proven to be wrong. instead we see rates falling due to perceived economic weakness.

At the very moment that the Fed told us that the economy was improving, we see some signs of weakness. So rather than weaning us off of QE, the crowd now fears that the Fed is pushing on a string and is taking the proverbial punch bowl away. In short "pulling on the string," if you will. In addition, the new open Fed policy is making us all schizophrenic. Every day another Fed head says something different. She loves me, she loves me not. Score one for uncertainty with the Fed possibly boxed into a corner.

2 - Sentiment

The sentiment numbers are pretty much the same. There are too many bulls out there and the market is still extended way above its long term moving averages. Score one for the bears.


3 - The Tape

The tape has not been good since the new year began. Other than some special situations mostly in bio tech, There does not appear to be any leadership. Just look at GOOG today. or look at SBUX and NFLX.  Then look at today's negative action which may be the start of the tape finally cracking. There were many reversals today - including biotech. Score one for the bears - at least for the short term.

GOOG In Your Face! It looks minor so far, but all of the market's former leaders reversed and GOOG is a bit extended. Support levels are drawn on the chart.

 

S&P 500 whacked

I have let the market take me out of many trades and put me into a high cash position. That is simply a function of selling the rips and not finding many set ups to buy. Thus, in the last several days I sold stocks that I love when they whooshed up to high. Stocks like CSIQ and MONIF were sold and are coming down to earth. They are on my watch list, but in my opinion its too early to buy them and other great stocks.

One example of todays bad tape is GTI. Not that GTI is anything special,  but today's market was replete with stocks that reversed down like GTI with failed breakouts. Earlier in the day I tweeted that GTI was breaking out. But I also stressed that it is the closing price that counts. After making a new all time high, GTI was dragged down with the market and closed below the breakout point. Hence I did not buy it against the weak tape. Following the rules paid off.  It was the first day of the year where just about all stocks - except MRK - traded in correlation with the indexes.

GTI: In Your Face!

I am in no rush to buy stocks right now. But I am flexible and anything might happen to change my mind.  So it is possible that I will buy some stocks if the market reverses back up tomorrow, preferably later in the day but I doubt it. Instead I may go to the dark side and put on some shorts.

Maybe I'll even short IBM, which finally cracked a bit today. The breakout from a double bottom failed, it was repelled by its 200 day moving average, and it broke some minor support.

Or maybe I'll short the SPY as a liquid proxy for the market. But first I have to see how the tape plays out. I am not going to chase a gap down. On the other hand, I might short a dead cat bounce that starts to roll over. In any event, there is no rush to do anything and my cash is feeling very good right now. The SPY chart broke some tiny support within a trading range confined by its upper and lower Bollinger band. But the SPY does not exactly look terrible yet. There are support levels that it will have to break and until then all I can say is that maybe it will test support. This may be the start of something, but as of now this is no bear market or even a correction yet.

One last point. This market has had no memory from day to day recently. Right now, no major market downtrend is in effect yet and for all I know this sell off will be yet another buying opportunity. I need to see more evidence. Thus I shall continue to play small and fast. That means defense for now.




BIG Capital Advisors and Seaview Partners are not responsible for your investment decisions. We believe very strongly in our opinions, but you must perform your own due diligence in making your investment decisions.

Doc Holliday Says Don't Buy Ahead Of Earnings And Guidance

Earnings season is starting, so I thought that this post may be of value to investors and traders. We are in a mature bull market that may still continue, but 2014 is off to a strange start. The major averages are nowhere yet many speculative stocks are running and giving traders some great opportunities to profit. At the same time many leading stocks such as NFLX are off to a bad start.

Unless you know for sure that there will be a strong beat with great upside guidance, why take the chance of buying ahead of an earnings report?  In most cases, especially at this late stage of the bull market, there is just no edge. As the late Marty Zweig used to say, why be a hero?

In my experience, playing defense and risk control win the game. If I miss out on the first part of a move, there will be plenty of time to enter the trade. But if I get in before the earnings are announced and I am wrong, I am dead. I will have lost valuable capital that I will then have to work hard at making back while being in a depressed state of mind for being so stupid.

Don't get me wrong. I'm not some tight assed Ben Graham value player. I trade where the momentum is. I am looking for big returns on my capital. At my old Argo Explorer Hedge fund I made 36%  compounded annual returns for my partners over an 8 year period with no losing years. My largest draw down was around 5.5%. That meant that I had a great Sharpe Ratio and was viewed very favorably by the investment community. At Ironhorse Securities, my former Broker Dealer, I returned 113% compounded annually for 3 years in my proprietary trading account.  And before my professional money management days, I made the same type of several hundred percent compounded annual returns that the likes of Timothy Sykes ‏ @timothysykes  and Nathan Michaud ‏ @InvestorsLive  brag about every day on twitter. The point being that playing defense is a big part of making large returns no matter what your disciple is.

I promise you that you may kick yourself for missing the home run, but you may kill yourself after getting your head handed to you. Here are two examples:

BBBY is one of the great long term growth stock champions of the past two decades. It is now a mature company that does not have it's earlier pizzaz but it is still growing. It had recently broken out to new highs and was about to report earning. Look what happened to the stock after earnings and guidance were reported. Disaster avoided!

Micron Technology was a superstar in 2013. On the one hand they had purchased Elpida and literally had cornered the supply of DRMA chip making capacity. Famous investors like Steven Einhorn and the "Fast Money" crowd on CNBC led by Regis Philbin (lol) were bulling the stock. Others were countering by saying that new capacity from competition was coming on line. I do not believe that the new capacity will be an issue for at least a year or two. But the issue was strong enough to have made MU correct prior to the earnings release. In any event as reported on this blog, I waited for the earnings to come out and for guidance to be reported before buying the stock. I missed part of the move, but was able to purchase the stock after hours in enough time to make a good profit which I sold into the gap up open the next day. Low risk profit made on great earnings and guidance. In the stronger market earlier last year, I was able to buy many stocks after the earnings and guidance were reported and still get in early on big moves.

In short, wait to hear earnings and guidance and if things are not clear, listen to the conference call. There will be plenty of time to make money. and see how the stock reacts to the earnings report. Just look at TSLA last year. I bought it two weeks after its great earnings surprise of May 2013. It had made a huge move, had pulled back, and I had learned the story.  I was very late in understanding the implications of TSLA's breakthrough earnings. Yet I was still able to ride several swings up and more than doubled my investment in TSLA as it became one of the anointed ones. And if one misses one stock, there are thousands of others.

Val Kilmer as Doc Holliday said it best after shooting Johnny Ringo "Poor soul. You were just too high-strung."  http://www.youtube.com/watch?v=FSjvgSHK0f0  Don't be high strung before earnings or you might end up like Johnny Ringo.

BIG Capital Advisors and Seaview Partners are not responsible for your investment decisions. We believe very strongly in our opinions, but you must perform your own due diligence in making your investment decisions.