Sunday, December 16, 2007

Year-End Contest

I'm sponsoring a year-end contest. Check it out here: Year-End Contest: Guess the Close

Wednesday, December 5, 2007

Bullish ADP Employment Report

Read it here.

ADP Employment Report

Seriously, do yourself a favor and at least scan the first page. The bulls really have something to sink their teeth into.

I am still waiting to see resistance pushed through before considering long positions again.

Saturday, December 1, 2007

My New Blog

In case I did not make it obvious enough previously, let me highlight my new blog, which I hope you'll check out over at i Bank Coin.

While I have not updated Trade While Working recently, I have not forgotten this blog. While it is not likely that I'll continue posting a lot of charts here, as that would be double duty, I will continue to post about my trading psychology, some testing of strategies, and what I am trading.

As what I believe is a sellable bounce has progressed, I have bought 6 Jan. expiry puts on the Qs and 2 on the SPY. I also rode AAPL long for over 10 points, but sold it Friday.

Other than that, over the past 2 weeks I've been an observer for the most part, and that has been very rejuvenating for my trading. I'm feeling my confidence return, and I've been able to work on some new strategies and get re-focused. I've accepted the reality that this year will likely be my first to not have double-digit gains. In fact, it would be nice to just do better than break even. Regardless of what I wanted to achieve this year, if I had not taken a break from trading, I would probably be looking at a negative return year over year. I'm not going to revenge trade through the last month of the year, trying to undo 11 months of mistakes.

Tuesday, November 20, 2007

Closed Out My Puts and Shorts

Today, around 3:20, I realized that the market had an incredibly strong bid developing. I thought to myself that the bulls would probably press the shorts into the close, and that if they were successful, it might set up for some follow-through tomorrow. On Monday I had purchased some SPY and DIA puts, so I closed those out, in addition to my QQQQ puts. I had already covered my EMN and GES shorts this morning.

I also shorted TUP and JOYG when the market reversed. When it reversed again I covered those shorts, ending up with a small profit.

So that leaves me completely in cash except for MVIS.

I am still bearish, but it seems that the bulls are still not ready to capitulate. I want to wait for a bounce and then decide what the next step should be.

My trading over the last couple of days has been more calm and patient, but I am still trading too much. MY GES and EMN shorts are some of the first decent profits I've made in weeks, so maybe things are turning around for me.

Saturday, November 17, 2007 Down?

Was it a revolt of the peanuts?

Did Danny and Woodshedder join the ranks of the writer's strike?

Did Fly attempt to fire Bilderburg, only to have the rich dude offer him a MRSA laden caviar cracker?

Did an errant laser beam bounce back and effectively destroy the one known as Fly?

The internets want to know...

Friday, November 16, 2007

Long Overdue Update

Well, as you know, MVIS took off without me. Luckily though I had set a buy-stop at $4.15 for 2K shares. Those filled, and I picked up another 1K at 4.22. The fact that it started moving the day after I sold out is just uncanny. The market really can make one question his own existence. Sometimes I think there is a super-computer at Scottrade that sends my trades to others so that they can trade directly against me. Of course, I know that is silly. But sometimes it certainly feels that every move I make is the exact opposite of what I should do.

I have managed to shake off my earlier blues, and have returned to a semi-calm and collected state of mind. What I have realized is that I cannot shake my belief that we are in a period of correction that will likely last for several months. I hesitate to call it a bear market. I feel I must be positioned for it. If I am to be a trader, I have to be able to profit in times when the market is not trending up. Granted, there is nothing wrong with going to cash, sitting on one's hands, etc. But for me, there has to be a marriage between all those elements.

For right now, realizing that I feel strongly that the market is in a downtrend, I must not take on any additional longs. Sure, I bought MVIS. I've also bought ALDN and OXPS. For the latter two trades, I have stops set well below the average daily range, and I will ride these out for better or worse. Consider them a long hedge against my belief that the market will continue correcting.

I have also begun buying puts. I bought 10 Jan 52s for the Qs. I will also be looking for puts on the SPX and the DOW.

I have also shorted GES and EMN. I will continue trolling daily for shorts.

Again, I want to thank everyone that leaves me comments here as they help more than you can imagine. Even contrary opinions are very valuable. Ticonderoga left an opinion that this is a bull market, and he begged me to quit shorting the market. On face value, what he says makes a lot of sense. It forced me to really think about what my knowledge and experience up to this point has prepared me for. After much deliberation, I have to realize that often I am right, but early, and that often I am right, but lose conviction before the trade becomes profitable. If my belief is that the market will trend down for a bit, then I must act and hold to that conviction.

This weekend I hope to dispense with all the ruminations and get back to some charts. Specifically, I want to chart out what the indexes are doing, focusing on my plan for the coming months.

Oh yeah, I'll have Stockalicious updated at some point today with all my recent trades and latest positions.

Tuesday, November 13, 2007

Sold Out of MVIS Today

I sold my other half right at the close. My reasoning? Well, my account is at breakeven for the year. It has been a year of colossal blunders and bad luck. The slow drip of MVIS, amidst the realization that I will probably not have a profitable year, became like the slow drip of a leaky showerhead. You can live with it for so long, but then in the middle of the night, you wake up to the dlop, dlop, dlop, and you jump out of bed and rip the whole contraption out of the wall.

But before all that, I decided to buy some QID. Then I bought some more. And then some more. You see, I had written that the Nasdaq would likely bounce today, for several reasons. So I was not shocked to see the futures in the a.m. and then the gap-up. Why I didn't buy some QLD at that moment, I'll never know. See, I've been buying a block of QLD near the low of the day, almost everyday for the past four, and then getting stopped out when it surpasses the low. I definitely wanted to be long it for this bounce. So the day the bounce comes, I don't buy it. What the hell? And then, to load up on QID?

One thing that I feel confident about is that there is always another leg down. Look at any correction. There is always another leg. Now, the second leg may not make new lows, but it generally heads back towards the previous low. I know this, so I wanted to get some QID. Actually, I want to have a lot of QID for the second leg. Anyway, where my patience went, I'll never know. It would have been good to get a block of it at the close. However, I bought some near the open. Again, WTF?

Yes, I'm bearish here. Therefore, I've been looking for weak stocks to short. On the strength today I shorted EMN and GES. I've also got a small short in GT. Due to the tech strength, I had the good sense to cover my AKAM short this a.m.

Whatever. This has been a terrible year, and If I continue to screw things up, then I am going to quit trading for some time, re-group, and start over.

Monday, November 12, 2007


Behold --

Fly On Wall Street Farewell

Be sure to be at Fly On Wall Street at 10:00a.m. ish EST Monday for his farewell post.

As Danny's killer video shows, I am a part of this new site. That fact, and the preparation required, and the fact that everyone in my family has been sick for almost a week with a horrible stomach bug has meant I haven't had much time to update this blog. Things will get back to normal here soon.

Thursday, November 8, 2007

Even Hedged, I Lost

I need to make this short, although I have a lot to say, as I need to be doing some research tonight.

The biggest news is that I sold half my MVIS. Of course it closed above where I sold it.

I closed out all of my inverse ETFs just before the market decided to run back up, this afternoon. All night last I kept thinking that I should have had double the size. I was right. I played the short side conservatively due to my long streak of losing trades. Had I put on decent sized positions, I would have done really well today. As it stands, the shorts just helped mitigate the MVIS pain.

All day long I was thinking the S&P seemed relatively strong. As it rallied into the close, I bought 100 SPY for a trade.

I also started a small short position in CAT, as it could not hold the 200 day average. I also started a small position in BZH. The chart for BZH is hard to argue with. It sure looks like it wants to trend up for a bit. And it held up very well today. I'm not sure what else can happen over the near term to push it below its recent range. I know, short CAT, long BZH seems to be an assinine move. I'm aware of the contradiction.

Wednesday, November 7, 2007

The Ugly Stick

That is what I'll call today's candle on the chart above.

Recently, following a big down day, the index has rallied. I would enjoy another 50 point down day. This up / down / up / down stuff will drive a man to drink.

Bear Rally Just Getting Started?

The fear-meter here is showing no signs of letting up. If one were to add a 10 and 20 day moving average to this chart, it would become evident that both are trying to cross over the 50 day average. Typically this is signal used to indicate the start of a new trend.

If this were the chart of decent equity, I'm sure many bulls would find it bullish. Too bad it is bearish. Keep that in mind as you position yourself over the coming days. If the VIX retests its August highs, it is safe to assume the indexes will be near the August lows.

I've included some Fib numbers here to suggest areas of resistance. It should be noted that the 50% retracement coincides nicely with previous resistance. We might expect the indexes to put in a few bullish days if the VIX pauses or reverses at that level. However, the question every trader should be asking himself or herself is if they believe the VIX will push through that resistance, and what will that mean for their positions.

Finally, bottoms are found quickly, while tops can take a long time to carve out, and are often coupled with grueling whipsaws and volatility as the bulls fight the good fight until they finally conquer, or capitulate. As the markets keep catching a bid in the afternoons, I'd say the bulls still have some fight left in them.

Tuesday, November 6, 2007

RSI(2) < 2 Screen

Last night the screen showed lots of results. My two favorites are TMX and FLR. I purchased TMX this morning, but am waiting on FLR due to its gap up.

Covered my GIGM short @ $22.30. May have let some profits on the table as it is really getting hit. However, it has been strong, and $22.30 is the 20 day moving average.

Monday, November 5, 2007

I Hate Being a Bear

I was watching my profits gather steam this afternoon as the indexes headed into fresh lows. As you might know, I'm short the indexes, so this was fun to watch. As expected, the indexes paused in areas which have provided support over the past 1.5 months. No big deal. I expected the pause. I considered covering my shorts. Nah, as it looked as if the indexes might close near the LOD, I decided to just let things ride, and hope for a bigger shake out in the morning.

Then, somebody with deep pockets came to the rescue. Was it Bernake? Goldman Sachs? Who knows. Whoever it was loaded up. I want to be on record saying I'm not a conspiracy theorist and I don't really believe that the Plunge Protection Team would come to work on a boring day like today. However, this type of action sure does leave me wondering if Helicopter Ben did not drop some cash on the markets this afternoon, and it definitely makes it hard to be a bear.

Above we have the S&P 500 represented by the SPY. At exactly 3:05, somebody began buying roughly 5.25 million shares, which cost approximately $7.9 billion.

Next we have the Dow, represented by the DIA. Again, right at 3:05, a large buyer steps in and picks up roughly 473K shares, costing them $63.8 million.

Here we have the Nasdaq Composite (QQQQ). At 3:05, a large order begins filling for roughly 3.2 million shares. This cost the buyer about $1.7 billion.

To sum this up, someone or a group of someones stepped up and placed a buy order across the indexes equating to almost $10 billion.


Sunday, November 4, 2007

One Step Forward, Three Steps Back

This year, and especially this month, has been very difficult for me. A run of bad luck coupled with some poor trading has resulted in my account being up only a few percent for the year. This is after being up almost 20%, twice.

In short, I feel much like this guy looks. Hat tip to Michelle Malkin for the image.

The run of bad luck started a few weeks ago with SLB closing down 10+ points after earnings. Then came TRAK, which gapped down 10 points, but managed to recover half of the loss. BLUD came along with its FCC investigation and cost me another 5 points. And who can forget BWLD, which cost me another 10 points? That's roughly 30 points lost, in positions which were worth almost 1/2 of my capital.

So when Friday comes, and the market looks like it might be gearing up for another leg down, my emotions got the better of me, and I liquidated most of my positions. This was pretty ridiculous, considering that I had charted out where I thought the Nasdaq might bounce, and the index conformed perfectly to the scenario I had charted.

But I didn't let the pain and frustration stop after liquidation. I then added index shorts. I should add that I did liquidate on bounces--it wasn't a free for all, and I did get some relatively decent prices on the double inverse shorts. However, this adding of index shorts likely just added another level of complexity for this coming week's trading. Complexity is not good right now.

As I consider where I am going wrong, I keep coming back to the emotional trading. In fact, the traders that I follow who are systems-oriented are all doing well for the year. I feel even more strongly now than I did earlier in the year that I have to decide on a system and stick with it. I could probably allocate capital to several different profitable systems and do okay. The fact is, I have to become more mechanical, and less emotional.

I definitely do not want to get back in negative territory on the year, so what I will be doing over the next several weeks needs to be done well, and done without emotion. To that end, I've polished off some old filters and screens I used to use. One in particular has backtested very well. I may start taking some of those signals again, as it has 74% win rate, and I really need some high probability trades to undo all the major gap downs and sell-offs I've endured.

The chart shows a perfectly executed pull-back on the Nasdaq. Most indicators are in neutral territory, with the Stochs showing overbought/sell signal. I still have the distinct feeling that the market is topping. However, the indexes may move too far against my shorts in the nearterm for me to hold them long enough to see any gains.

Friday, November 2, 2007

Selling Out

I have sold out of, or gotten stopped out of every position except my GLD, SLW, MVIS, and MSFT.

I have purchased QID, DXD, SDS, and TWM.

Thursday, November 1, 2007

ADP Employment Report

The report was released Wednesday at 8:15 a.m. This indicator is better than any other indicator in effectively predicting the BLS's own monthly estimates on private, non-farm hiring. In other words, if you want a heads-up on what tomorrow's labor data may be, take a close look at the ADP report. Although I think it is going to take a much stronger employment situation than what the ADP is suggesting will be reported tomorrow to juice the market.

You can read the ADP Employment Report here.

If you are into chart-chomping, the report provides some nifty charts for your consideration.

Gunning It

Picked 100 SWHC and 100 RGR as they both were screened on the RSI(2)<2.

Both sold off this morning, but found some quick support.


Stopped out of both trades for small losses. Note to self: This strategy is bound to work better when overall market conditions are more stable than they are today. Also, I may add a component to the screen which requires the RSI(2)<2 and then a bounce before entering.

Wednesday, October 31, 2007

Wild, Wild Day

BWLD hurt me today. What more can I say? I will sell my remaining shares when it catches a bounce.

The RSI(2)<2 filter identified IMA last night. The stock closed up 8+% today. I ran the filter again tonight, but out of 16 stocks, the only one that I would buy is RGR. I may pick up some shares in the morning.

I sold out of my CATS today when it did not rally after the Fed announcement. I took a small gain from the trade. You may recall that was my second RSI(2)<2 trade.

Speaking of the Fed, on the dip after the announcement, I bought 100 QLD @ 118.81 and then sold it for 121.11. While the trade was excellent, it did little to ameliorate the pain caused by BWLD missing.

I really want to go into tomorrow with a few breakout plays, but right now, after a long evening of trick-or-treating, I don't know if I'm going to run any screens or not. If I do, and I find some promising charts, I'll post the names here later this evening.

Tuesday, October 30, 2007

Bashers Mean Business

It is very interesting to me that at least one, and possibly several, anonymous "leavers of comments" have arrived on board here and have begun their somewhat muted assault. Their arrival means the blog is getting more popular, as I never really see bad or unpopular blogs with bashers. But don't get me wrong. I've bashed other bloggers too, although my style is not one of outright rudeness and hostility. My style typically consists of a subtle layer of sarcasm sprinkled with a dash of humility, followed with a strong finish of incontrovertible truth. That's a recipe for good bashing. Unfortunately, most bashing lacks the eloquence, efficiency, and poetic twist of word and phrase necessary to be at all entertaining.

Put Money Where My Mouth Is

I picked up 100 WCG @ $26.65 for a trade. I'm trying out the RSI(2) indicator. However, due to the nasty investigation, I'm using a tight stop.

I'm out of the office for most of the day.

Evening Update

For some reason, it felt silly to do a new post just to update what the rest of my day was like.

BWLD gapped up this morning on weak volume so I sold 1/3rd of my position above $40.00 Had I sold all of it, I'd be around 1 grand richer right now, as the stock is trading 6 points lower after a .2 miss.

After looking at a chart of CATS (thanks Andy from the comments section) and watching the stock trade for 20 minutes or so, I decided to try out another RSI(2) trade. I bought 200 @ $6.06. I set a stop at $5.93, which was just below the low established the previous day. Then I left the office.

When I returned to the office about 15 minutes before the close, I saw that I was stopped out on WCG, for a $200.00 loss. CATS, on the other hand was up 6+%. Obviously, as some here have wanted to point out, the fundamental situation concerning WCG overrode any possible technicals. I liked the CATS bounce, so I left the position on overnight.

I also saw VDSI up 10+%, so I sold the shares I bought near the bottom, and left 2/3rds for later. It felt really good to have my patience rewarded here as I've felt like a fool for trying to catch this falling knife.

CPHD was also up 10+%, so I took 1/3 off before the earnings report tomorrow.

This leaves me with about 35% cash. I'd like to put some of that cash into more Gold and Silver.

As learning how to buy weakness has been a goal of mine all year, I am glad to see some of these buy-low trades start to turn a profit. I am especially excited about developing a screen to use with the RSI(2) setting.

Monday, October 29, 2007

New Research On RSI(2): A Profitable Indicator?

As many traders know, many indicators are often representations of similar measures. I prefer to not get bogged down with multiple measures of a trend. To keep things simple, I typically monitor price and volume, MACD, RSI, and sometimes the Stochastics. While the MACD can help traders judge the strength of a trend and also identify when a new trend is beginning, the RSI is often used to help with timing, i.e., when to get in, and when to get out of a trade.

Because of its simplicity, the Relative Strength Index (RSI) is one indicator that has always made intuitive sense to me. The calculation is simply the average of x days up closes / x days down closes. What traders have often differed on is what average to use. The default with most charting software is 14 days. However, several bloggers have advocated, or at least discussed using a 2 day average. I know Bill Rempel, Bullish Jim, and Marlyn from Filtering Wall Street (no longer being updated) have all presented trades using the 2 day RSI.

Finally I have come upon some research which shows the benefit of using a 2 day RSI average. In the November issue of Technical Analysis of Stocks and Commodities, an article by Larry Connors and Ashton Dorkins describes the results of testing more than eight million trades from January 1, 1995, to December 31, 2006. The average one week percentage gain or loss for all stocks during the period tested was +0.25%.

After quantifying overbought and oversold conditions (RSI above 98 is overbought; RSI below 2 is oversold), their research showed that stocks with a 2 period RSI below 2 averaged a gain of +0.88% one week later (beating the benchmark average by more than 3:1). Conversely, stocks that were overbought with a 2 day RSI greater than 98 lost money (-0.17%) one week later as well as underperforming the benchmark.

The implications of this research are crystal clear: Traders should use a 2 period RSI if they want the indicator to actually give them an edge.

After reading this article, I set out to find a stock with a 2 day RSI below 2. I could have just programmed Stockfetcher (I think) to find some. However, that would have been too easy. I instead decided to pull up some stocks that have recently taken a beating. After the plunge VDSI experienced, I was certain it would make a good RSI<2 candidate. No luck there, as the RSI(2) was at 9.5.

Then I remembered WCG. Bingo! The RSI(2) is at 1.14.

The chart, which shows WCG losing 70% of its value in three trading days, shows why the RSI(2) works so well. When a stock is trading at extremely oversold levels, the most likely direction for it to go is up. While WCG would definitely be a buy if one was trading using the RSI(2), the fact that the stock is under a government investigation for alleged Medicare and Medicaid fraud right before the start of the enrollment period may mean that the normal bouncing process may not follow through in this particular name.

I intend to incorporate the RSI(2) in all future technical analysis.

2006. Connors, L. and Ashton Dorkins. "Does the RSI give you an edge?" Technical Analysis of Stocks and Commodities. 48-52, November, 2007.

Friday, October 26, 2007

Nasdaq Breaks Above Recent Range

Read about it here at Trading Goddess's blog.

Nasdaq Breaks Above Recent Range.

In other news, I took a body blow on BLUD today, and then had VDSI pour more salt in some wounds. I plan to post a recap of recent events, as well as some thoughts I'm having about trading, on Sunday.

Thursday, October 25, 2007

Buying VDSI Panic

Picked up 200 shares @ 29.63 average.

More updates later.

***Update*** OWWWW. That really hurt. Nothing like losing 700 bucks on VDSI when I was just hoping for some quick profits on a bounce. VDSI, meet everyone in my "core" portfolio. All my long-term holdings (MVIS), meet VDSI.

I initially only bought 100 shares, being wary of the picking the bottom, but when the stock started screaming upward, I bought another 100 shares...Oh well. I think there is a high probability that I will get out of this break even, within a week's time.

In other news, yesterday I added to my BLUD and BWLD positions. I also started positions in CPHD and IIG, and I added to IIG today on the news.

I'm hearing that MSFT posted good numbers this evening, and the stock is trading up over $2.50 in after hours. The QQQs are up in after hours, erasing all of today's losses. As long as BIDU does not disappoint, it looks like more of the same tug-o-war between bulls and bears for Friday.

Tuesday, October 23, 2007

X Marks The Spot

The Nasdaq put forward a very strong move today. Volume accompanied the move, the first time in several months that the index has seen good volume on a move up.

In my previous post here at Trading Goddess's, I suggested an area which the Nasdaq might find support. The index did not yet make it down to those levels. This shows a great deal of strength, though it is certainly possible the Nasdaq may dip from here and visit the 2600-2650 area.

In the chart above, the bottom line represents the uptrend established from the August low. This uptrend was firmly punched through on Friday, October 19th. The upper line is the resistance set from the October high.

This analysis shows the index at a critical moment. The Nasdaq managed to close just slightly above resistance (or right at it, depending on where you draw your line), and closed just below, (or right on) the uptrend line.

A strong showing over the next few days should put the Nasdaq above both lines, and will mean the recent pullback was just another buying opportunity. Failure to overcome the resistance line suggests further retracement is likely.

Basically, if you are short, this is where you stick it to the bulls. If you are long, this is where you ram it to the bears.

The next few days should be very entertaining as both camps fight for dominance.

Microvision Enters Development Agreement with Asian Consumer Electronics Manufacturer

Microvision Enters Development Agreement with Asian Consumer Electronics Manufacturer to Create Accessory Pico Projector for Mobile Phones and Other Devices.

I hope those options I bought yesterday go through the roof!

Monday, October 22, 2007

Going To Cash

I've liquidated most of my speculative positions, ALLI and EHTH.

I also sold half of my AAPL.

Sold all my GME on the nice bounce this morning.

Long story short, I've gotten punished, especially in positions like BLUD, where I've watched nice gains erode into losses. I will typically never allow a gain to erode to a loss, but in my endeavor to use more patience and give positions longer to run, I've succumbed. And that is the difficulty in trading. Its as if Mother Market new I was going to hold onto things longer...

The stockalicious widget is up-to-date and lists what I'm still holding. If you care to click on it, it will also give you the prices I got for my sells.

I'm now 45% in cash.

***Update*** I bought back ALLI 1 penny cheaper than I sold. I'm going to try and grab some cash back on a bounce.

***Update*** Took another loss on the ALLI. Dammit!

Bought 10 MVIS December 5s.

Sunday, October 21, 2007

Friday, October 19, 2007

*DJ Microvision Started At Buy By Maxim Group >MVIS

That is all for now. I'm blogging remotely as my car is in the shop.


What a terrible day. The icing is clearly the latest SEC filing for MVIS. For now, I'm going to bed.

Wednesday, October 17, 2007

Forget Everything I Ever Wrote About MVIS

Especially, forget this post I made the other day. I was stupid to apply technical analysis to a stock which has shown ZERO buying interest. What good is an indicator when the stock moves only one direction?

I'm assuming that the company's news blackout is either because they have no news, or because Alex Tokman is uber confident and knows he is sitting on the most disruptive technology of the decade. Either way, I don't like it.

Who does Tokman think was pushing this stock up over $5.29 so the warrants could be called? There certainly was not a lack of PRs during that period. I checked the institutional interest regularly during the first 2 quarters of 2007 via and what I saw told me that the stock was being propped up by the small trader. Institutional interest never soared. So where is the little guy now? I tell you where he is: Right here, watching 25% of his capital rot and disintegrate.

I keep hearing about Tokman being a miracle worker. Well he certainly has turned the company around. However, there seems to be some chinks in the armor, specifically with the other announcements which were supposed to come by the end of Summer, and the release of the ROV. My understanding was that the ROV was to be released already. Maybe I am wrong about that. Still, what happened to the other announcements? One would not be concerned if the stock was trading like there was even one iota of institutional interest.

Wouldn't it have been nice if Tokman would have said during the MOT announcement to sell, as there will not be any news anytime soon? It sure seems like that fact was communicated to some, as the selling has not abated since that day.

So what's a person to do? Luckily I have this blog to rant on. Also, I stopped by Ben's blog and ranted there (sorry Ben- you've got a great blog) in hopes that my sentiments go somewhere. But what do I know? Nothing. I certainly do not know how to run Microvision. All I can do is trust that Tokman is not running a bait and switch, and hope that his uber confidence will one day translate into profits for me and other investors.

Tuesday, October 16, 2007

Running Off TRAK

TRAK gapped down 10 bucks this morning. The stock climbed up about 5 points, where I sold the other half of my position. Which reminds me, I don't care what anyone says, when a stock runs up 20+% in a matter of weeks, you have to take some off the table. I'm glad I sold half of my TRAK last week, or I would have been really really mad this morning. As it stands, instead of averaging 20% on the trade, I probably netted around 15%. Still not bad. Read my first post on TRAK here.

Also, I sold XFML today. I still have the distinct feeling that it will bounce tomorrow.

My 20-Day Play, DAR, broke out today, so I bought 500 shares.

Most everything else I own is either consolidating or has pulled back a bit. Tomorrow may be the bounce day, after the INTC, YHOO, and IBM reports.

Monday, October 15, 2007

MVIS Printing Multiple Bullish Divergences

Today MVIS had a swell in volume to levels not seen since August. The stock dropped and retested its August lows. While this breakdown from tight Bollinger Bands could cause one to be concerned, the chart is showing many bullish divergences.

While the stock has continued to make lower lows since the end of August, the MACD, RS, and Stochastics have all bottomed and have turned up. As buyers stepped in today and picked the stock up from its lows, its probable that a trend change is near.

Also, it was within a few days of today's date in October of 2006 that MVIS began its run which saw it rise 125% by the January CES show.

Technical Difficulties and an Update

It has come to my attention that my blog is not displaying correctly with Firefox browser. In fact, I downloaded Firefox and checked it out, and the blog looks like hell. I'm not sure why it is not displaying properly in Firefox, but I have an email in to Blogger support, and am doing some research on the net. For now, you'll have to use Explorer.

I'm tired, so I'm going to make this fairly uninteresting. Last week, I picked up some SLW. It has been doing well for me. Also, based on Fly's pumping of the stock, I joined the Chinese lottery with a 300 share position in XFML.

It seems to me the Nasdaq is likely to break through the trendline I referenced in this post. While I'm not expecting anything other than a pullback, it makes sense for me to lighten up a bit and sell some stocks that I either was not feeling good about or were showing signs of rolling over. To that end, I sold my small position in KTEC, and I sold out of LWAY. Both gave me very small losses. KTEC I sold because the biggest volume has come on the down days, and LWAY looks like it might want to consolidate a bit before moving up again.

I bought 50 shares of SLB today at $111.43. Of course I owned this stock and sold out last week right before the move. Anyway, with oil prices rising and IBD pumping it, SLB should continue to do well. I did not have any exposure to the black gold, so it seems a logical buy.

I also bought 100 shares of EHTH as this morning it seemed to be bucking the trend. Well it quit bucking that trend as soon as I bought it, but I held on anyway as the stock still looks strong. This afternoon I added 50 shares of ADY, as it also looks poised to continue up.

ALLI made my screen Sunday evening. I watched it all day, and it started to break out this afternoon. I bought an initial 500 shares, and then the move looked so perfect, I bought another 500 shares. I have big hopes for this one.

As always, all of my individual buys and sells are posted with prices on my Stockalicious widget.

Last week, I did an interview for WallSt. Radio's Financial Blog Watch. It should air Wednesday, October 17th. I am excited about this as it places my blog among some serious blogger company.

Sunday, October 14, 2007

20-Day Play: EHTH

In order for a stock to make The 20-Day Play, it must trade above its 20-day simple moving average for at least 20 days, and then bounce on or near the 20-day average.

EHTH saw its IPO just one year ago. After finishing a cup-shaped pattern, the stock has pulled back to its 20 DSMA. This touchdown is also a revisit of a pivot point.

Last week's 20-Day Play, DAR, is still in play.

Thursday, October 11, 2007

Bob, Bears, Bulls, and Buys

Come writers and critics
Who prophesize with your pen
And keep your eyes wide
The chance won't come again
And don't speak too soon
For the wheel's still in spin
And there's no tellin' who
That it's namin'.
For the loser now
Will be later to win
For the times they are a-changin'.
Bob Dylan

With the bears now growling about the onset of Armageddon, I felt Bob's timeless lyrics were appropriate. Take a look at Tim Knight's post Sweet Relief if you care to read about the dark side.

My day started with me putting a market order in to sell my QID at the open, as I saw the futures were up, and I was going to be out of the office and away from a computer until the afternoon. Bad timing on that one. After my meeting, I met my wife at her office, pulled up a quote screen, and did a little dance as I was up another 1.5% or so. I decided to celebrate my unrealized gains by taking her out for a nice lunch. Again, bad timing.

By the time I got home, AAPL was in an all-out free fall. Rather ran reacting instantly and buying the panic dip, I went searching for news. Of course, there really was not any. I spent probably thirty minutes just watching things and looking for an explanation for the selloff. Now don't get me wrong, I knew things were extended and due for a pullback. It just looked a little more violent than usual.

Anyway, I did use the weakness to sell off some losers. I sold the rest of my PTT at $7.94, which means I was able to get rid of most my shares for a smallish loss. I also sold 500 AKRX @ $7.50 for an even smaller loss.

In the past, I have participated in panic selling. Today I remained fairly calm and objective. This is a big improvement for me. Now that doesn't mean I did everything correctly. I did sell 200 LLNW @ $11.02, which was not a good move, especially since they raised guidance after hours. I also sold my AAPL @ $160.80, when it looked like it was going to continue down into the close. I still got a nice gain on the sale. However, I bought back 2/3rds of the position for a tiny bit higher than I sold when it showed strength going into the close.

Another move that I am proud of, even if it turns out in the future to be wrong, is that I bought this dip. I added shares to my BLUD and BWLD positions. This is crucial for me because it is damn near impossible to buy low and sell high if I can't buy during panic. I did today.

As for the Nasdaq, I view today's move as a much needed pullback.

The chart shows support on the 10 day simple moving average. The strength of this rally can be measured by the fact that this is the first touch down on the 10DSMA since September 18th. The blue line I drew shows the lower trend line established from the August low.

The volume today absolutely shows distribution, and the Stochastics and RSI are overbought. However, there have likely been a lot of traders waiting for a pullback to get in on this rally. In fact, our very own Ragin' Cajun has been waiting with 50% cash. In short, I am still bullish here, but will be watching the moving averages and trend lines very carefully. If the Nasdaq looks like it wants to trade below the blue trend line, I will likely continue taking profits (assuming I still have some at that point) and will liquidate speculative plays.

Tuesday, October 9, 2007

Wood Buy: KTEC

Yesterday I established a small position in KTEC after Fly mentioned it. He even offered up this research report from Needham.

The stock broke out to a new 52 week high today, although the volume was weak. In fact, volume has been weak during the wedge created in September and October. Due to the weak volume and wedging action, I've only committed 100 shares to this stock.

The Bollinger Bands (not shown) are tighter than they have been in 6 months. As you know, tight bands mean a greater likelihood of increased volatility. Should volume move in, I think there is the possibility of a large upside move.

Monday, October 8, 2007

Raised Some Cash

Today I sold half my SLB and GLD, making a small profit in both. While I think SLB is a great company, the chart is suggesting that there might be some consolidation ahead until the company reports earnings in a couple of weeks. GLD also looks toppy here, and barring any economic shocks, looks like it might retrace a bit before moving up again. Long story short: neither looked as if they were going to go anywhere big anytime soon. With so many stocks making double-digit percentage gains, I felt it was best to move some money elsewhere.

PTT, the gentleman's club play, has been causing me some grief. It was my second largest position, after MVIS. The stock has been very fickle of late, and has several times approached my maximum pain level before bouncing. Today I got tired of flirting with a large loss, so I sold 500 shares, or 1/3 of the position, for a small loss. I now feel better about holding the rest a bit longer.

Over lunch today, I was reading Sierra Mountain Investor's blog, and noticed he was buying LLNW. I looked at the chart, and it looked like a decent bottom feeder play. Also, Fly has been buying it. Well the stock went berzerk around 1:30. The momentum was unmistakable, so I bought 300 shares on the first pullback. I really wish I would have bought 1000. Anyway, LLNW was a pleasant surprise today.

Finally, I'm frontrunning Fly with my 100 share purchase of KTEC.

It is important to note that I own more stocks right now that I ever have. I used to scoff at diversification. However, I'm liking owning a nice group of solid stocks, mainly due to the fact that any given morning I may get caught up in a meeting, and not be able to log in to the account. Now, one stock tanking won't take my portfolio down 5%.

20-Day Play: DAR

The 20-Day Play seeks to capture a stock that has consolidated momentum and is ready for another leg up. Specifically, the stock will have traded above the 20-day simple moving average for at least 20 days and will be set up to bounce from the average.

DAR certainly meets the basic screen necessary for the 20 Day Play. However, the RSI and MACD are both showing signs of possible weakness ahead. Be careful as more consolidation maybe required before DAR can continue moving up.

Also present is the almost symmetrical reverse head and shoulders pattern.

Overall, I find this stock worth watching to determine if the 20 day average will begin to offer support as it did in March, April, May, and June.

Saturday, October 6, 2007

New Position: AKRX

This position was initiated purely for technical reasons.

The stock was pointed out to me in the comments section by Brent, of Sierra Mountain Investor fame. I'd hyperlink to his blog, except that he has it offline right now. I have to say Brent has some fantastic picks, and we'd all be doing better if he'd put his blog back up.

As you can see, AKRX has been consolidating near resistance, and depending on where you drawn your lines, has either pierced resistance, or is bumping its head on it.

The blue arrows show the high volume days over the last 6 months. If the stock were to see another high volume day as it did in the past, it might be launched upward, making a clean breakout. And that is what I'm looking for this one to do, breakout.

Fundamentally, this stock is a biotech, and because of that, can be prone to surprises which may be deleterious to one's account value.

Update: Sierra has his blog back up.

Friday, October 5, 2007

New Post At The Goddess's House

I made a late night visit over to Trading Goddess's place. You can go here to see what transpired.

Warning: the post is about economics and jobs reports. However, there is a graph included, to keep you chart-chompers interested.

Thursday, October 4, 2007

Position Update: PTT

I've added a suggested trading range to the chart. It looks to me as if PTT has completed a pullback to support. While the pullback swung my account to a loss of $500.00 in the position, I stayed with it. I do not typically let trades turn into losses much greater than $500.00, so it was do or die. Indeed, PTT bounced, albeit from about .35 cents lower than I had hoped it would find support.

As long as the indexes do not begin a new leg down, and PTT continues to move back up, I am looking to see $10.00 before another pullback.

Out With Kefir; In With Apple

Last night's reporting of sales from LWAY caught me off guard. I did not realize they were reporting. Anyway, I resisted the urge to sell in after hours (their revenues missed analyst's targets). This morning there was a weak bid, so I hit it first thing, as soon as the premarket opened, selling the final half of my shares .5 cents less than the stock closed the day before. The stock tanked first thing, but has recovered nicely. I may get back into the position at some point.

BLUD also reported last night, and I held through the report. I was rewarded for that today as it up 9%. If it holds these levels, it will have completed a clean breakout, on volume. It is interesting to note that it broke out 2 weeks ago, and then revisted the pivot point. I think that action makes for an even stronger breakout.

Today AAPL dropped about 4 points in just a few minutes, so I scooped up 25 shares right at the current LOD. I've been wanting to add to that position.

PTT is also up 4% today. I bought the pullback, and was punished a bit for it, but it looks like the uptrend is resuming. My buy on the pullback is now back in the green.

I should note that I'm home with a sick 1 year old, and that has allowed me greater access to trading than I would normally have at work.

Wednesday, October 3, 2007

ADP Employment Report

The report was released today at 8:15 a.m. This indicator is better than any other indicator in effectively predicting the BLS's own monthly estimates on private, non-farm hiring. In other words, if you want a heads-up on what Friday's labor data may be, take a close look at the ADP report.

You can read the ADP Employment Report here.

If you are into chart-chomping, the report provides some nifty charts for your consideration.

Tuesday, October 2, 2007

I Love the 20 Day Simple Moving Average

The 20 day average is a favorite of mine. As the center line for the Bollinger Band (or the average of 2 STD of volatility), the average can alert traders when a stock has reached a normal price range, relative to recent movement. This positioning of price in the not too hot, not too cold, but just right range seems to propel stocks that have momentum.

A recent example is LWAY. This stock has been a phenomenal earnings and momentum play. The gigantic breakouts on killer volume should have been enough to earn this stock a place on any breakout trader's watch list.

I missed the first move to 17, but resolved myself to keep watching the stock for a pullback, as stocks that breakout on huge volume tend to keep going up for a while.

I made the first purchase on September 19th, as the price was approaching the 20 day simple moving average. I was immediately rewarded with a huge move. The stock spent the next week or so consolidating the move, and I again waited for the price to approach the 20 day average. On Friday, I added to my position as LWAY look primed to move again.

I was rewarded Monday with a huge move. Today, I sold half my position for a ~30% gain.

I have extended a hypothetical 20 day moving average on the chart so that one might imagine what LWAY will do next.

Monday, October 1, 2007

Hmmmm. Nasdaq Makes 52 Week High. What To Do?

I'm not sure I know what to do right now except for hang on. I've been waiting for a dip to buy more. The dip has never really happened, just some sideways consolidation. I'm really glad that a couple of weeks ago I put most of my cash to work, save ~10%. I would be kicking myself right now if I had not. If MVIS would decide to make a move, my account would be near a YTD high.

Many times today I was tempted to sell parts of my positions, especially the ones that I'm up over 10%. I ended up not selling anything, mainly because I often sell too early. If the market wants to run through the year-end, I'm fairly certain my stocks that have just broken out will run with it. That being said, the damn indexes will have to pullback at some point, so I'm going to have to sell something in order to buy when that happens.

I did buy 500 more PTT right near the LOD. I think the pullback is likely about over. I gauge when its time to buy a pullback based on my fear from my existing position. Because today I started to worry about my existing PTT position, it must mean its time to buy more. We'll know soon.

I also covered my GES position, taking a small loss. When the market is screaming, I don't want to get caught with my pants down (not Guess brand) if GES is a boat that gets lifted with the tide.

Sunday, September 30, 2007

Weekend Wrap Up

Last week saw my account value churn quite a bit. While my breakout plays are doing well, MVIS's poor performance hurt the account value.

During the week I added to my long positions in LWAY and SLB, added to my short position in GES, and sold SHW on a bounce after its 4 day free fall. Even though I lost money on SHW, I'm happy with the trade as I did not panic. Instead, I patiently waited for the bounce, and got out with a much better price than I would had had I panicked.

This week I would like to add to LWAY, PTT, and AAPL.

Monday, September 24, 2007

New Position: GES Short

Why short GES? I mean, the stock has been a serious retail powerhouse, right? And in the process of achieving a greater than 100% return in a year's time, the stock split, institutions accumulated, so on and so forth. The stock still has a huge insider sponsorship, and good revenues and earnings.

So why short it?

Simply put, because their advertisements for men make me want to spew.

Consider the above gem as an example of everything that is just plain wrong. Is this dude looking for some man-boy love in a freaking desert? "Come here, and watch me ride this gnarly 3 inch thick manilla rope...You don't mind a few slivers of manilla in my craw, do you?"

Do I need to mention that a rope that size is used to tie up huge ships?When is the last time you saw one of those docked in a desert? Makes you wonder what or who he plans on tying up. Maybe he is a chubby chaser.

Look closely and you'll see he is holding a leopard print scarf. What the hell is he going to use that for? "Hey boy, let me blindfold you with this leopard print bandanna, stuff you in my beat up pressboard trunk, and ship you over to my basement apartment for some good times. Oh, and don't mind the sand in your crotch."

Looking at the chart, I find many things that make me want to hit the short side, such as the massive triple top, the declining relative strength, negative MACD divergence, and the large-volume sell-off after earnings. Not to mention, the retail sector as a whole is not looking very hot.

I sold short on Friday, and will look to add to the position if it gets anywhere close to $50.00 As a target, I see 43.00 as a good place to cover.

Keep in mind that GES has been strong and may have a few good jabs to the upside left, although I would be really surprised to see the stock get anywhere near new highs anytime soon.

Sunday, September 23, 2007

New Position: BLUD

I have watched BLUD for a break to new highs since January. Its appearance last week in the IBD 100 (ranked 98, I believe) may have been what it need to break out to new highs.

This 3-year weekly chart shows a long saucer bottom, followed by a break out. The stock has consolidated the previous breakout for 9 months.

This 1-year daily chart shows BLUD breaking out out from a 9 month rectangle consolidation.

If a stock makes the IBD 100, one should know that the metrics are strong, but I'll make it easy and link to them here.

New Position: TRAK

TRAK caught my eye last week in the IBD 100. It was one of few stocks which were not over-extended above a recent base. The chart looked prime for a breakout, so I added it to my watch list.

The stock has completed a clean breakout, although the volume on the move was not spectacular. The company DealerTrack Holdings has no debt and is growing revenues and quarterly earnings at a pace of 35% year-over-year.

Watch Wallstrip tackle TRAK here.

Blogging at Trading Goddess's House

You can read my weekend post here.

I hope to get Sunday evening for an update of some of my positions and a wrap-up of last week's trading results.

Thursday, September 20, 2007

Titties and Beer

Thank god I ain't queer.

No offense to women, alcoholics, or homosexuals.

If the chart is not enough to make you happy, then look at these metrics. I mean, what's not to like? A low-float company with 32% insider ownership and 36% institutional ownership, growing quarterly earnings year over year at 236%? Surely that's enough to give one a woody (no pun intended), even if you are not into strip clubs.

By the way, for any of you out there who are too high class, or moral, or whatever, and have not visited a titty bar, let me tell you that the jokers that visit these places spend loads of cash, and they are typically repeat customers. For a lot of the clients, visiting a gentlemen's club is equally addictive as drugs or alcohol.

I'm long PTT with what is likely a half position. I would like to see resistance broken around $9.00, and then buy more on a pullback. Hat tip to Sierra for this one.

Watch tonight's CNBC video on RICK right here.

Indexes Close Outside of Bollinger Bands

The Nasdaq formed a nasty looking little spinning top doji.

Looks like some retracement will happen tomorrow.

Hopefully you were more patient than me, and have waited for this pullback before blowing some cash.

Maybe you even had the guts to maintain some short positions.


Damn its got to be tough to be a bear here. CPI numbers were good. Jobless claims were down. GS has a decent report.

With the exception of the broken jaw RBC gave me when they downgraded VDSI, most everything is looking good today.

So far I'm just waiting for more of a pullback before buying much more. However, I doubled my position in PTT, buying 500 @ $8.28

Wednesday, September 19, 2007

Bought Many Stocks From My Watchlist

I established small positions in the following stocks:













I still maintain a ~25% cash position.

MVIS- Volatility Squeeze Please

Tuesday, September 18, 2007

Today Could Have Been Worse

While it turned out to be dumb to go into today with index shorts, at least they were small positions. I covered them on the first dip after the Helicopter Ben announcement. All in all, I lost about $1,500 on my shorts. However, due to my purchase the other day of SLB and GLD, and my purchase today of VDSI, I finished down for the day only about 500 bucks. Not bad, but I know other traders who went into the day long and made a killing.

So what is my strategy here? Fully, everything I've done over the past 2 weeks has been completely wrong. Keeping that in mind, I'm going to do the opposite of what I want to do. What I want to do is to go on a buying spree tomorrow, so what I will do is mostly nothing. I intend to watch the action tomorrow, possibly establishing a few small, initial positions. I'm finding that starting small positions fulfills my desire to stay in the market, yet allows the position to move against me without causing me any real pain. That is important because usually I sell near the low of the dip. If I can hang on, typically the position moves back into profit, and then I can decide whether I want to add shares.

I intend to continue working on a watchlish of long candidates. Many of them are breakout plays, or pullback plays.

Update: Here is my updated watch list. Some of these are breakout plays, some have broken out and need a pullback, and some have pulled back and might be near a good buy point.


Monday, September 17, 2007

Will The Other Shoe Drop?

I'm anxiously awaiting tomorrow. I'm still convinced that the markets will drop no matter what decision the fed makes. The question is, how far will it drop, and for how long will it stay depressed? I'm not so sure that any melt down will last more than a day or so while the rest of the brokers are reporting.

Today I bought small lots of SRS, SLB, and GLD. I did not add to my index shorts.

I'm working on some watchlists, but it is hard to do, not knowing whether I will be buying or shorting later in the week.

MVIS- the volatility squeeze seems imminent. Maybe the investor summits and growth conferences will give it the push it needs to break out from the squeeze. Or maybe if the markets melt down due to the fed report and investment banks earnings MVIS will get dragged down with the rest.

MVIS and MOT- If MOT is going to announce an equity stake in MVIS as it has been rumored, the trading action of the last 2 months may not be so strange. My assumption is that the shares would be bought in the open market, but that may be erroneous. If the shares have been purchased in the open market, it would certainly have provided the floor of support we have witnessed in the $4.70 range. Also, I would think the traders responsible for buying the shares would place large blocks on the ask to depress the price, and would paint the tape at opportune times to allow purchase of the equity stake at favorable prices. I've witnessed both in the recent trading.

Bringing Back the Bears from Grandma's

I am glad to be back home, but it is always good to visit Grandma. While there, I had the distinct pleasure (not really) of watching CNBC, which showed me the markets moving against my index shorts. I could find no wi-fi anywhere near her house, and I seriously doubted whether any of her neighbors had internet access. This break from the markets, while difficult initially, is usually a good thing as one can focus on the important things in life.

Undoubtedly, some of you questioned my comment about going to an area of Missouri with "lead mines and tar paper shacks." I took this picture of a house which is about 2 blocks from my Grandma's house. Yes, it is inhabited. I did not get any good pictures of the lead mines.

One standout evening from my adventure was going to watch the local lawnmower races. I'm not much of a photographer, and it was night, but I think you can see from the picture that they are indeed racing lawnmowers. These lawnmowers average about 45 miles per hour. Keep 'em peeled as I hear this is the biggest up-and-coming addition to racing.

As a child, I was always fascinated with this barn. It is across the street from Grandma's house. Exploring it is on my list of things to do before I kick. I thought it made a pretty picture with the goldenrods blooming. In the background, you will notice the rise of a small mountain. Most of you probably do not know that the Ozark Mountains are the only raised area of the U.S. not caused by upheaval. These mountains were formed as water eroded away the softer, more porous rocks, leaving the more dense, weather resistant rocks behind.

Another favorite spot of mine to visit when staying with Grandma is Elephant Rocks State Park. This park features huge granite boulders which have survived the erosion and weathering processes. As you can see, just like his Daddy, my 6 year old son is very strong. He definitely does not know his own strength. I told him to set that rock back down before someone got hurt.

My Grandmother is 96 years old, and there is some doubt as to how much longer she'll make it. It is very grounding to go stay with her and get back in touch with my roots. While she, and that side of my family are very poor, they experience a way of life which I'm sure they feel to be very satisfying. It is certainly important to keep in mind that material goods and all the trappings of modernity do not necessarily make anyone more happy than they might be were they born to a different station in life.

Tuesday, September 11, 2007

Going To Visit Grandma

I will be in the area of the Ozarks of Missouri through Monday, September 17th. I will try to get grandma to tell me some good stories about grandpa, although she's already disclosed that he used to love to kick the butts of Italians from New York.

I have never tried to find a wi-fi signal while in the land of lead mines and tar paper shacks (no offense to those who live in that area, but you know what I say is true). I have no idea if I will be able to go online while staying with my grandmother. She truly lives in a depressed area of the country, but hopefully there will be a Starbucks or something within an hour or so of where she lives.

I am leaving my index shorts on. I have no idea why the market rallied today. I mean, okay, so the Nasdaq puts on 15-20 points. No big deal. That's the natural way of things. But almost 40 friggin' points? It almost blew my mind. The whole ordeal left me very frustrated. Unfortunately I don't have the time or energy at this moment to launch into any self-analysis as it applies to my trading.

If there is any justice in this universe we inhabit, upon my return, I will come back to find the indexes lower and my shorts profitable, as one does not put this kind of message out to the universe and not get something equal in return. However, if you are long, I still wish you big profits. See, I wish that everyone gets what they want. That's the type of guy I am.

Please disregard the Stockalicious widget, as I've been too lazy to update the positions.

Note: When the volatility squeeze that has been building in MVIS over the last 1.5 months eventually happens (the stock can not continue to trade in such a tight range for much longer), someone is going to get their legs cut off. I hope that I am not on the wrong side of the trade when the squeeze occurs, because it is going to be a tremendous move.

Monday, September 10, 2007

Going Short

First, thanks for all of your comments re: Real-Life House Flipping Horrors. I really appreciated them.

I don't have a lot of time this evening, but I did want to note that I sold off all of my longs Friday and today (except for MVIS). I have not updated Stockalicious to reflect these changes. A side note: Stockalicious has moved and changed to a new and supposedly better format. More on this after I explore the changes.

On Friday I went short GES. That has so far turned out to be a great short. Today I bought the QID and SDS.

I feel extremely confident that the trend has been established, and it is down. Typically, when I feel strongly about anything, it is time to do the opposite of what I'm doing. For some reason, I'm certain that this time it is different.

Covered my GES short @ $45.17, netting $2.61. I will likely short it again higher.

Bought more QID @ $43.80, as at this level, the $COMP is busting its head on the 50 day average. I am betting it has trouble at this area.

Sunday, September 9, 2007

Real-Life House Flipping Horrors

My Dad retired from an international purveyor of paper products about 4 years ago. He was almost 60 when he retired. He had worked his way up to a vice president position after being with the company over 30 years. I'm fairly certain it was the first real job he had after graduating from University of Missouri.

Having grown up in the foothills of the Ozarks, his mother and father with 8th and 6th grade educations (respectively), the fact that he even went to college was amazing. His father, my grandfather, was a drunk. No one has been extremely forthright about my grandfather, but from what I've gleaned he was probably abusive to his children and his wife. I know he commonly exhibited classy behavior like borrowing money from my Dad when he was in college. My Dad literally saved his lunch money so that he could escape what he must have seen as hell on Earth, and when he finally escapes, his own father is borrowing money from him. My Dad had no scholarships. He put himself through college on his saved lunch money and money he had made from his milk-cow business, as well as working at the cafeteria at U of M. My grandfather died of Lou Gehrig's disease 5 or 6 years before I was born. I do not believe he ever paid back the loans he took from my Dad.

When my Dad retired, he had about 750K in his 401K and IRA. Like most successful men, when he retired, he was immediately looking for something to do, although he and my mother were taking monthly trips to exotic locations around the world. He knew a friend of the family, a young guy in his early 30s, who wanted to start a house-flipping and renovation business. This friend of the family, we'll call him John, was a handy type, with basic carpentry, tile, plumbing, and painting skills. While John did not have any of his own capital, in fact, he was living paycheck to paycheck, he did have a strong desire to become better off, and provide more for his family-- hence, the desire to jump on the house-flipping bandwagon. My Dad likely saw in this young man what he thought was a little of himself. And I'm sure my Dad remembered how he had wished to have someone who believed in him when he was just getting started back in Missouri.

My Dad and John went into business, forming an LLC. My Dad would provide the capital, and John would contribute the bulk of the labor. I should mention that as a kid, my Dad did help his brother-in-law build houses, so he does have some basic skills. Their first house, which they would have made some money on, was found to have an issue with the title, right before they closed with the buyer. The title insurance company, whose job it was to perform the title search, screwed up. The title insurance company, believing that this company would probably go under within a year or two, chose not to pay the damages. My Dad is still in litigation with this company. Long story short, they made little or no money on the first house due to the carrying costs incurred while they battled with the title insurance company.

I believe they made some money on the 2nd house, probably 30-40K. Keep in mind though, all this time, John is getting paid for his labor, at $15.00/hr. and also gets to split the profits, less any interest my Dad paid. Also, right after they sold the second house, my Dad's tax attorney advised him to no longer contribute any sweat-equity on the houses due to possible tax implications. Therefore, he decided to step back from the jobs, and let John run things.

While working on the 3rd house, which was basically being built from the foundation up, with John acting as general contractor, John decided that the money wasn't coming in fast enough, and that he wanted to take on some renovations-- jobs like termite repair, for example. He hired a couple of other workers to help him. At some point, John decided he needed some money, likely so that he wouldn't have to float payroll, or to buy some tools for a particular job, and he drew this money against the loan on the 3rd house. Basically, he borrowed money from the business. For whatever reason, John continued visiting the money tree, never telling his business partner what he was doing. My Dad, to this day, is still not sure about how much money he ended up taking against the house as John will still not turn over any records, but he figures it was probably around 70K. It was not until the house was finished and on the market that my Dad figured out what was going on. When the house sold, my Dad had to kick in some cash, due to all the money that was borrowed.

At this point my Mom was absolutely horrified. She begged my Dad to end the partnership, take his loss, and move on. She told him things such as, "Don't throw good money after bad." I advised my Dad the same thing. My Dad, being the perennial optimist, still had some faith in John (I can not begin to figure that out, to this day), and decided to go in on one more house.

The last house was a beautiful place in Mt. Pleasant, S.C., not far from the Charleston harbor. John had already secured financing for buying the house by partnering with one of the men with whom he'd been performing renovations. The problem was that neither John nor his partner, we'll call him Carl, had enough money to cover the renovations or carrying costs. My Dad worked out a deal with John and Carl where if he threw in more capital so the house could be finished, John and Carl could still keep the labor, but my Dad would receive all the profit, effectively returning him his money lost on the previous deal. I believe that Carl initially bought the house for around 350K, and my Dad threw in another 125K for all other costs. Obviously my Dad screwed up again by providing such a huge budget for renovations. It is important to note that they bought this house at the top of the housing boom in 2006.

John and Carl both took forever completing the house, and why not? With my Dad providing basically free money, why not work slow and profit from the labor? The house was finished in December of 2006, and went on the market in January 2007. It was listed at 700K. At that price, my Dad would break even, and he would close out his partnership with John.

Well, January of 2007 was not a good time to be listing a house. It made things worse that Carl and his wife, being idiots, did not want to reduce the price of the house. And so the house sat. And the relationship between my Dad and John began to deteriorate. With no more houses to work on, my Dad began trying to straighten out the books. This was made impossible by John who had either kept no receipts, or was deliberately deceitful. In April, it was time to file taxes. No taxes were filed as none of the bookkeeping was able to be completed. Meanwhile, Carl was still paying the mortgage on the house.

In May, I believe that John and Carl finally decided to lower the price to 650K. There had been zero interested buyers, and the new price brought in maybe one or two. In June, Carl began getting really nervous as he and his wife could barely make the payment on the loan, and so the price was reduced again. Meanwhile, the relationship between all the partners had become so volatile, that my Dad became concerned that if the house was sold, that Carl may be able to walk away with the cash, and not give him his profits. My Dad began seeking legal counsel, and his attorney told him that because the loan was in Carl's name, that indeed, if the house sold, Carl could walk away from the closing with the check, and short of beat the crap out of him, there was really nothing my Dad could do to get his money. If that scenario were to occur, then there would be future legal battles between my Dad and Carl, with no guarantees he would ever see his money. The attorney advised my Dad to buy the house from Carl, to ensure that when the house sells, that he will get his money.

As of last week, my Dad is now the owner of this house. He has reduced the price to 580K. There have been one or two buyers who have looked at the house. If it sells at this price, my Dad figures he is out roughly 150K. I seriously doubt the house will sell above 500K.

He has also had to pay off 20K in credit card debt that John ran up on the business account. The attorney advised him to go ahead and pay this off to avoid damaging his credit. Of course, he is in the process of dissolving the LLC.

Meanwhile, John is back working at his old job, but driving a late model vehicle which he likely bought with the money he stole from my father. He is still insisting that my Dad will owe him money when the house sells.

I am writing all of this because I do not know how else to get rid of my anger and frustration. I am so pissed off that my Dad will likely lose 1/3rd or more of his life's savings, and the idiot he believed in, and trusted to go into business with, has lost nothing. I am absolutely sick to my stomach, that my father, who worked hard and played it safe his entire life, planning for retirement so that he and my mother could fulfill some of their dreams, has had to suffer through such a painful and embarrassing loss.

Thursday, September 6, 2007

Rich or Famous?

I'm posting charts of some recently initiated positions.

PRFT raised guidance in August, and had a good ER. However, the stock appears to be near overbought in the short term. I have some dry powder, so I will try to double my current position on any pullback. I have 300 shares at $23.94 average.

ONNN is likely familiar to many momentum traders. It looks to me like the big move has consolidated. ONNN guided sales down for Q3, but the stock has stayed strong despite this, and has held up well during the market weakness. I think it goes higher. I added shares today, bringing me up to 700 @ $12.29 average. Unfortunately, I bought my first lot yesterday during what I thought was a breakout. The breakout failed (yikes) and I bought near the HOD. I will try and buy a future dip rather than sell it.

The Fly, in the comments section of the previous post, seems to want to make me famous. See, he thinks that I typically buy high and sell low. Which is true. However, I am very good about taking losses, and if you follow my trades, you'll see I have more losers than winners, but the losers are small, and winners are bigger. You see, its a numbers game. Loeb states, "The most important single thing I learned is that accepting losses promptly is the first key to success." So I'm not sure why Fly wants me to sit on losers, violate a trading fundamental, and discontinue the only part of trading at which I'm particularly good, but I'm sure he has his reasons. Stay tuned...

Still Buying Here

Yesterday I picked up 200 PRFT @ $23.90 and 500 ONNN @ average of $12.35

Both of these are breakout plays.

The Nasdaq is holding above the 50 day moving average. Until something changes, such as an index breakdown below a major moving average, I will continue to nibble and build positions.

Tuesday, September 4, 2007

MVIS- Volatility Squeezes

Everyone knows I'm a big fan of MVIS. For better or worse, it has been a core position of mine for 2007. I've noticed that the stock responds well to volatility squeezes. As I noted in a previous post, MVIS was setting up for another squeeze. It looks as if the move came to fruition in today's trading.

What is a volatility squeeze?

As a stock consolidates, the daily ranges begin to decrease. As these ranges get smaller and smaller, eventually the 20 day moving average will catch up with the price. As the stock hovers around the 20 day average, the Bollinger Bands will begin to tighten around the price. Tightening of the Bollinger Bands show that the standard deviation of movement (volatility), measured relative to the 20 day moving average, has decreased. For more information on Bollinger Bands, go here.

Like all things in the market, volatility comes and goes. But before a stock can become volatile, it must have consolidated. The volatility squeeze, as measured by tightening Bolligner Bands, shows that a stock has consolidated and is possibly subject to increasing volatility. Keep in mind that increasing volatility does not mean that the stock will go up. It could just as easily go down. I typically trade with the trend, so if the trend is up, I expect a squeeze will be to the upside.

On this chart of MVIS, I've put blue arrows everytime the Bollinger Bands tightened. With a couple of exceptions (notably the big move in July) tightening Bollinger Bands have brought higher prices.

The volatility squeeze is an easy play and can be identified with an indicator which is readily available on charting software. A stock with a strong uptrend will typically experience many squeezes over the course of its rise. However, a stock in a downtrend will experience the same squeezes, which will typically lead to lower prices. Finally, a stock which has experienced a fantastic rise and eventually rolled over may experience a prolonged period (many months or even years) of tightening bands, while never breaking out of the range. Take a look at ERS to see what that looks like. When ERS finally breaks out from its volatility squeeze, you can see it follows the primary trend- down.

Step Away From the Blog- Nothing to See Here

Thanks for the concern from a few other bloggers and readers out there about my welfare. I do appreciate you checking up on me! I have no stories to tell. I just took several days away from the blog to spend time with my family and do work around the house. Although, when mowing the grass, I did develop a theory on the similarities between grass left to grow too long and a market left unchecked in its upward momentum. More on that in another post.

Last week, I continued to nibble on select stocks. I added 400 shares to my ANAD position. This morning, I added another 200 shares @ $17.17. So far, the stock is moving nicely this morning.

I also picked up 200 shares of SWHC on Friday. I think it might run into earnings, although this morning it is not showing much signs of life.

Also this a.m. I picked up 300 shares of ALVR @ $11.99

So while this market is hard to understand, the Nasdaq is trading above all of its major moving averages. I see no other way to deal with this than to leg into some positions, keeping my size small. I do not know what would have to happen to get me back in 100%, but I doubt there will ever be a clear sign. Likely I will just keep adding until Mother Market slaps me around a bit. As of today, I am still 50% cash.

***Update*** Added another 200 shares of ALVR @ $12.27

Tuesday, August 28, 2007

Bulls Still At The Beach?

I can not find even one reason to be significantly long right now. The only people that I believe are making money in this market are those that are adept at shorting, and those that are successful at trading volatility.

I mean really, why be long, right now? Every where one looks, there is uncertainty. And I'm not talking about the kind of uncertainty that allows one to look beyond it. There are just some events which have to take place before the uncertainty can be discounted. The market is dying to see some pricing of the CDOs. Everyone wants to know how badly Goldman and Bear are going to be hit. More GDP readings would not hurt, either.

If dozens of weather people said they saw a large category 5 hurricane predicted to head towards your town, yet it was still months away, what would you do? Would you put a new roof on your house now? Would you schedule a vacation during the projected arrival? Would you spend your life savings on plywood and screws? Probably not. You would likely just keep your eyes on the news, and develop plans for multiple scenarios.

I think that is what it makes sense to do here. Undoubtably, going to 100% cash is probably hard for traders and investors. No matter how bad things get, it is very difficult to not keep dipping one's toes in the pool, testing the waters. And if you are not under-capitalized, and you are able to take quick losses, it is probaby okay to keep testing these waters.

For the contrarians, I have picked up the 2nd Edition of Irrational Exuberance. The fact that I'm reading this most definitive bear story might mean we are near a bottom. Nonetheless, the 2nd edition is updated to cover the housing boom (bubble), and I'm finding that section to be rather frightening, but thought provoking.

As for the Nasdaq, the bulls were unable to push the index to the 50 day average. That is very weak. For now, the downtrend is still intact. While volume has been slight, it can not be ignored. While normally, light volume would be the statistical equivalent of a small sample size, in this instance, I feel it means that more traders are choosing to sit on their hands, rather than trade. Looking at it in those terms, the large sample is choosing not to participate. This is probably what everyone should be doing. It is not as if the market is just going to come roaring back, with all the uncertainty mentioned above.

If one is able to trade regularly, this correction has been extremely tradeable with a swing trading style, by using the QLD, QID, and corresponding Dow and Spy inverse ETFs. It simply takes patience, discipline to enter positions near trendlines, and a willingness to take small profits, and smaller losses.

Today, my stop hit on my QLD position, taking me out above $91.00, for a very small (<$50.00) loss. I still have a very small position in ANAD, which, incidentally did see the volatility I was expecting (except in the wrong direction). Of course, I'm still long MVIS.

Sunday, August 26, 2007

Updates to Blogroll

I'm adding Sierra Mountain Investor, The dk Report, and TSX Trends to my blogroll.

I encourage you to visit them, if you do not already.

I am especially impressed with the recent analysis of market action by DK. Sierra has a great grasp on the real estate market, and TSX is interesting to me because of the mechanical systems testing.