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