Friday, April 23, 2010

Don't Even Think About Shorting

Some of my readers have asked if they should look to short this market.  NO, NO, NO...Even though the market  has shown signs of a possible upcoming pullback or correction, you don't want to mess with this brake less locomotive.

Each night I look at my short and long screens.  I have found that, and this has been pretty common for some months now, short setups tend to break up, not down.  Or they will start to breakdown and squeeze hard over the next few days.  This is not the type of action you want if you're considering a short trade for more then a few hours.  In fact this is the only reason that I have continued to take long trades even though it seemed on several occasions the market was ready to correct.

Even if I knew the market was going to go down tomorrow I would not attempt to short for more then a day.  The bulls just have too much power right now to warrant the risk/reward.  The short side will be no different then the long side eventually.  You will see plenty of setups and evidence that it is working.

On the long side I continue to trade.  I do not want to get caught over invested.  If the market keeps rising I will participate as a swing trader.  Most of the stocks I'd like to own are just too extended to take long term positions.

Questions, comments, and suggestions always welcome.

Good Luck

Monday, April 19, 2010

$PETS Trade Reviewed 2005 - 2006

It is always important to review your winners and losers. Below is a chart of PETS, a trade we were in from 2005 - 2006 (click on the chart to enlarge it). Ignore the data on the left side of the page.  That was the data at the time the snapshot was taken and does not reflect the data present at the time of the trade (I don't have anything available to rebuild that information from the past).





Comments and Questions Always Welcome.

Friday, April 16, 2010

$IMAX - Sell Signal

IMAX has been a big winner in this rally.  But it seems that there are quite a few offensive sell signals (click on chart to enlarge) that dictate that it is time to protect your profit.  If you've recently entered the position, I'd be very vigilant with the stock.  If you were lucky enough to have bought the stock early, you could try and hang on for a possible second climax move.  But you'd probably be better off protecting yourself now, and re-entering later, since the second climax is not a sure thing and will need another few week to form.


Thursday, April 15, 2010

$NTRI - 2007

Here is a an article I wrote about NTRI in 2007.  Even during the best part of a bull market, a stock with fantastic fundamentals could top and head lower.  This is a good lesson why not falling in love with a stock is EXTREMELY important.  They can top at anytime.

http://capitalistbull.blogspot.com/2007/02/ntri-short_08.html

Wednesday, April 14, 2010

Don't Chase The Market

If you're still sitting out, the pain you feel is becoming unbearable.  You're ready to buy something just to feel better.  Well, don't do it.  Chasing many of the extended leaders is a high risk proposition.  Based on model studies most of the stocks will pullback at some point and most will be buyable right around this range.

So then why wait you ask?  I found overtime that it is easier to deal with missed profits then with lost profits.  If you're sitting in cash and waiting for the pullback and are ready to pull the trigger, it will be easier to do so.  If you're invested and have to sit through a pullback, even though you may understand it is normal, your EMOTIONS DO NOT.  They will force you to run for the exits just as you should be ready to add more.

I continue to swing trade this market and protect my profits and risk vigilantly.  I do not want to get or be fully invested just when the sellers and buyers decide enough is enough.  Stay patient and don't let those emotions get the best of you.

Comments always welcome...

Monday, April 12, 2010

The Market That Won't Pullback

We have seen quite a resilient market.  Considering the low volume in the market and on stocks, you would have expected some sort of pullback already, and yet both keep pushing higher.  It seems the sellers are holding out for more volume, because when they do come in from time to time, there is generally a very hard reaction.

So what if you've sat this one out?  About the only thing you can do at this time is to take multi day swing trades and patiently wait for the next pullback opportunity.  Is it possible this market just keeps going...sure.  But you will get rotation amongst the leaders pulling back to their 20 or 50 dma's.  Otherwise the risk is too high to enter the majority of stocks at this point to hold for an investment.

Unless we're going climactic, I can almost promise that you will get a chance to buy most of the leaders that have been moving higher at or near current prices after the next pullback.  Except you won't have to sit through the eventual pullback.  Now the only question is, will the next pullback be buyable?  Only time will tell.  I do know one thing, it will be at the worst moment when the best opportunities will present themselves.

Monday, April 05, 2010

A Bull Trap Setting Up or Setup

If you've been following my tweets, you know that I've been quite cautious with this rally most of the time. But, 2 weeks ago it seemed the market could sit around and consolidate into a new strong move, but that doesn't seem to be the case as of this weekend. I do expect the current tightness to resolve to the upside first, but would not be surprised to see sellers come in within the next week or two, if not few days. So there could be big trading gains to be had, but they need to be protected. So why the change of stance?

  1. Low volume - leading stock have been drifting higher in low volume for the past few weeks. Some will argue that it was due to the upcoming holiday weekend, but I've found historically that that excuse tends to be more of a trap then a valid reason.
  2. New bases are either too wild, have extremely low relative strength, or very late stage. The argument here could be that new leadership is setting up, but you generally want new leadership to setup during corrections and pullbacks not while the market has already made a significant move from the lows, and the late nature of the other bases tends to be failure prone.
  3. Many leaders have exhibited mini climactic action. Keep in mind, climactic action is not always obvious on the charts. But pay attention if you're stock has had any type of unusually large spike on heavy volume that would be out of the norm for the stock.
  4. There have been a bunch of attempted breakouts that have come on low volume and others are failing or have failed pretty quickly.
  5. Markets and stocks have been acting extremely erratic intra-day. In many cases stocks are round tripping there moves 2 to 3 times a day. This type of action tends to be more indicative of distribution.
  6. Market is heading into overhead from the 2006 - 2008 rally. Again one can argue that it doesn't matter anymore because of the time that has passed. But, the market fell and then rose so fast, there might not have been enough time to shake out the weak hands. Usually such severe bear markets are followed by mild bear markets, and we did not get that this time. So there could still be a large overhang of supply (but this is just opinion).
  7. The rally off the recent lows has had very little participation from your traditional fundamentally strong stocks. Now sometimes it does take up to a month plus for stocks to get going, but the above points kind of invalidate that theory.

Right now my game plan is pretty simple. I won't defy the market. But I have tightened up my stocks and will take only the trades that do not risk my other profits. Any large out of the ordinary moves by my stocks will be a sign to sell not cheer.

I've been through these types of situation before. They generally do not end well when they stop. Especially with recent purchases. So take it one day at a time and be careful.

Gennady Kupershteyn

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