"Water shapes its course according to the nature of the ground over which it flows; the soldier works out his victory in relation to the foe whom he is facing. Therefore, just as water retains no constant shape, so in warfare there are no constant conditions."
-
Sun Tzu

Monday, October 24, 2011

AAPL: Not Shorting Yet

I have to confess: this morning, I wanted to post a piece about why I think AAPL is a short. The headlines today however indicated a sense of optimism about the possibility of an upcoming Apple TV. This sentiment could support the stock for a while and shorting is off the table unless I see relative weakness in the stock. Still, AAPL stays on my watch list for a potential trade to the downside; I'm not pulling the trigger yet.

Monday, October 17, 2011

How to find the next Green Mountain?

Green Mountain Coffee sold off hard today after David Einhorn presented his short thesis. GMCR perfectly fit my criteria for a weakening stock, which is why I shorted the company in the Covestor Model Portfolio.

QQQ: Should you Buy the New High?

I asked the same question in my last blog post with respect to AMZN. The answer was that it wasn't a good idea from the risk/reward standpoint. Interestingly, the situation looks different when trading QQQ:

AMZN: Should you Buy the New High?

AMZN has closed at a new high last Friday. Does it make sense to buy the stocks at this point?
To answer the question, look at what happened when AMZN closed at similar multi-week new highs this year:

Sunday, October 16, 2011

Why I Might Short Silver but not Gold

Very interesting developments occurred in the precious metals markets in recent weeks and they bake the questions if one should engage in Gold or Silver these days. Let's discuss the yellow metal first:

Wednesday, October 5, 2011

Live Trade: Exit FDX

I covered my FDX short yesterday morning with a 7.06% gain (discussed entry here). Prices hit the target at the lower channel boundary and reversed on the intraday chart. Since markets are deeply oversold and momentum seemed to weaken, I didn't consider scaling out of the position. Moving forward, I keep FDX on my watchlist to re-enter on the short side . Let's see how price will behave around $71.


Tuesday, October 4, 2011

Doug Kass Calling a Bottom Again

Frequent readers of this blog know what I'm thinking about market pundit Doug Kass, a frequent CNBC guest who does not publish his investment track record. It was therefore difficult for me to understand how investors can even listen to him and other Fast & Mad Money talking heads (I understand now after reading more on the topic of crowd psychology).

Anyways, Kass has been calling a bottom again ("I believe that the lows of the year are in", Sep 26 2011). As discussed in other posts (March 23, 2010; Feb 7, 2011) , there is no statistical evidence that Kass' calls differ from random calls. In fact, we'll never forget his legendary call to buy Financials on Jan 14 2008.
Kass compares the current situation with the mood of the markets in February 2009.

Here is my comparison: one of the indicators I'm looking at is the number of new 52-week highs lows. In 2009, there was a clear divergence between price and the number of new high/lows: the the sell-off was loosing steam. The situation is entirely different now: there hasn't been any divergence in the last months. Also note that the number of new lows is not at extremes levels, compared to 2008/09. Based on this indicator, stocks have more room to fall in my opinion: 


The only positive is that indices are approaching major support levels, but this itself does not mean we'll see a bottom. (It's like driving on a highway: the fact that there is an exit coming up doesn't mean I will take it. Only when I start using my blinker, you can infer that I might be willing to leave the highway.)