Portfolio as of 5/2/2012

STX – 4% (Sold some today)

WDC – 7%

APA – 6% (Super Long Term)

QCOM – 6%  (Super Long Term)

ALLT – 5% ( Added some more after recent earnings)

GNC – 5%

FFIV – 7%  (Super Long Term)

URI – 7%

HAL – 6%  (Super Long Term)

VMW – 7%  ( Long Term)

TXRH – 3% (Initiated Yesterday)

UA – 3% ( Stop set at $93 and will add if it goes above $103)

TLT – 6%

F – 7%  (Super Long Term)

SWI – 3% ( Will add more around $43.9)

PCLN – 3% (Took significant profit off the table recently)  (Long Term)

CASH – 10%

Stocks which make up less than 5% of PORTFOLIO might be sold or added based on criteria, market condition, etc. I am very nimble and hence very low turn around time.

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Shorts in the Making – GMCR, DECK, NFLX and Double Top!

Let’s quickly look at some of the stocks. PLease enlarge the images to get the entry points.

ON 5/3/2012 – I initiated a short of decker at $54.7 – 3% position. Stop loss is set at $57

On 5/3/2012 – with stop loss set at $31, I initiated a short of GMCR at $29.5.

Lastly, why so many shorts – DOUBLE TOP in the making?

How, When and Why I jumped a ship named Herbalife – HLF

Last few days have shown why trading momo stocks can be as dangerous as rope walking  in Nepal –

Check out the charts of – DECK, NFLX, GMCR, HLF, SCSS, etc. You think that it cant get uglier then this – Oh! you are so wrong.

Decker is going below $50, GMCR is going below $20, rest are also staring at slide if not doom. These all were once the darling of Wall Street.

Anyways I have owned quite a few of them myself and fortunately, most of the times I have been on the right side, the correct side.

Herbalife was my favourite for sometime –

Amazing quarterly profits and surprises – quarter after quarter, year after year. An excellent CANSLIM, IBD50 candidate. I  bought it after Feb 21st earnings beat at $64.3. It was a beautiful break out.

Rode it till 70s and started taking profits.

  1. Market started to slow down and
  2. all other leaders started going sideways.

so I took 60-70% profit off the table.

On April 30th , it delivered another stellar earning. It beat street by almost 10% but the guidance for Q3 was just inline with consensus.

Stock started correction, but I left a buy order for HLF at $68.5 untouched. These stocks tend to bounce off 50DMA and the report wasn’t as bad as Decker’s report. The stock purchase happened at $68.4. But in morning the tide seemed to have changed.

  1. Stock breached the 50 DMA on heavy volume and
  2. It ripped through the previous support.

Both these event signaled selling by institution had begun. So I bailed out. See a screenshot of actual account trades for 5/1/2012.

Moral of the story is – Never hope and never bring emotion in trading. There is no room for oops!

 

If you plan on entering HLF, I would suggest that you wait. I think HLF might go lower if $50 is breached. This is not the first time people have had negative opinion about HLF. It seems that they really dont have any product – just a marketing company. Moreover Mr. Einhorn does not have a dubious record.

Remember stock price is a speculation of what is going to happen in future. We have plenty of examples as mentioned above such as GMCR, NFLX, DECK,etc.

Dont just blindly follow IBD50. IBD50 is primarily a stock list with fundamentally good companies that are showing good RS (relative Strength). It will just take them one issue to drop the stock from the list but by that time damage will be done to your portfolio.

Lastly if market tells you something then we need to respect it.

There are plenty of companies, which are doing good such as ALLT, TXRH, GNC, WWWW, CRUS etc. Of couse we have oldies that are ready to BO – LULU, ALXN, ULTA, TSCO, UA, URI, etc.

Good Luck!

Deja Vu!

Before we move forward let’s review the market

If you look at the half-hourly chart of S & P 500 for last few weeks you will observe a lot of indecision. This can stem from a market that is awaiting a jobs report or the one that has rallied almost 25% since October bottom but bumping into some bad data or a market that is just waiting for earnings to come out. This is a typical sideways movement that needs just one or two catalysts to either jump up or break down.

Till Friday morning, we were all hunky dory – raising toast to the best quarter since 1998.

But by now, you guys must have heard, read and pondered about the jobs report that came out on Friday morning. Entire market was expecting creation of 205000 jobs with lowest estimate being 193K but to everyone’s disappointment the number came in at 120000. This is exactly the catalyst that I mentioned above. Following is the S & P 500 futures –

Going Forward –

The question is where are we heading from here. Let’s look at the slightly bigger picture –

We will definitely get temporary support at 1375-1370. But that floor might not last long if Alcoa comes out with bad numbers on Tuesday after close. I personally expect the floor to crack on Monday itself. This market might turn into a sideways market or 5-7% correction if this is just one-off jobs miss and not a trend.

The real correction will start if –

  1. We get more of such job reports.
  2. The companies fail to meet Q1 numbers.
  3. Manufacturing margins start contracting.
  4. The inventories start piling up.
  5. Europe’s problem resurfaces.
  6. Israel goes after Iran.

All these events individually have the capability of turning a flat market in to an intermediate/full blown correction. A correction that can go beyond 12-15% – That’s spooky.

In terms of technicals if we fail to hold on to 1336, we are looking at lower lows and lower highs. This means that we are in correction. The breakouts will fail, the industrial sector & commodities will sink and we will stare at repeat of 2011.

Deja Vu!

There is a stark resemblance between job numbers & rally at the beginning of 2011 and the similar macro economic data points in 2012. All of them  fizzled out, making 2011 one of the worst trading year in last 20 years. In case 2012 tries to follow the suit of 2011, I suggest that please sit on the sidelines unless you are nimble (like really really nimble) or you are willing to take 15-20% loss or you want to buy stocks such as QCOM,APA, EMC, etc for long-term. The top traders have always said that it’s good to sit out when market goes sideways and hop in when the direction is confirmed.

This is the kind of summer where I would use the old adage -“Sell in Summer and go away”.

Question is why side ways and why not a full fledged correction?

Never underestimate the Printing Press. One off job report might not bring back QE3 from dead but few of such reports will definitely get Feds going.

 

 

 

 

 

 

Lastly what do we do with current portfolio?

Just as not all fingers are alike similarly different kinds of stock in a portfolio deserve different treatment.

  1. Reduce all the momo stocks such as LULU, ALLT, SCSS, TPX, HLF, ULTA, CLR, ALXN, etc to 1/3 of original position. A risk averse investor might sell all. The reason is the panic grips the owners of such stocks with higher multiples faster than does the rest of the market. Just a reminder, small cap stocks corrects more than larger cap stocks during a correction.
  2. Stick with oldies such as HAL, APA, STX, WDC, PG, COV,etc unless the fundamentals show a major shift such as margins contraction trend,etc. Some of them have already seen fair share of correction.
  3. To defend your portfolio you can buy long term US treasury bonds such as BLV, TLT, etc. They tend to be haven during such corrections.
  4. A very active trader might try putting in shorts such as SH, HDGE, RWM, etc.
  5. Keep an eye on the leaders of this bull and see how they perform during the correction. By leaders I mean – AAPL, ISRG, CMG, SCSS, ULTA, LULU, TSCO, FFIV, etc.
  6. Start running scans to look for stocks with excellent fundamentals that are holding up well. They might be the future leaders.
  7. Lastly add to your existing value positions or buy new ones (after fishing for course) after market has gone corrected by 10%. But remember an oversold market can become more oversold!
  8. Again, In case 2012 tries to follow the suit of 2011, I would suggest that please sit on the sidelines unless you are nimble (like really really nimble) or you are willing to take 15-20% loss or you want to buy stocks such as QCOM,APA, EMC, etc for long-term.

I believe that capital preserved is the capital created for future investment opportunities.

If you are really, really lost, I will talk more about correction, handling of stocks during corrections and going short later on in the week.

By the what do you think?

Thanks For participating!

Top 10% stocks of 2012 Q1

The following stocks have been filtered on basis of following Criteria –

  1. Last three month returns in top 10%.
  2. Price Above 50 DMA.
  3. Prica Above 200 DMA
  4. 20 Day Average Volume > 150000
  5. Earnings Latest Quarter > 0
  6. Price > 10
  7. Price is within 20% of 52 Week High.
  8. Market Cap > 200 Million

The one’s flagged are currently part of my portfolio. Stocks that are highlighted in green were part of my portfolio in last three months. And the stocks highlighted in blue are the ones that I am eyeing. Most of these “featured” companies have outstanding earnings/revenue growth  such as LULU, TPX, INFA, EMC, AAPL, etc. Some of these companies might continue to rally for next 6-12 months depending on market.

Back from the dead?

Last night I pointed out that the poster stock of 2009 bull,BIDU, might be in for a rally. So I looked around, there are quite a few 2009 stalwarts that are coming back from dead e.g GS. Latest to join the band wagon might be AMZN.

Even though the revenue continued to grow at brisk pace, AMZN was hit by margin contraction in last quarter of 2011. The company has raised its capital expenditure – it is adding Distribution centers and is working on a gaint head quarter in downtown Seattle.

Another Stock that might be up for rally – BJRI.

FaceOff – China data vs US data

And the winner is China PMI. The Dow ended lower for a third consecutive session dropping 78 points as concerns mount over China’s manufacturing index being down for the 5th month in a row.  The S&P 500 lost 10 points today and the NASDAQ lost 12 points. This was despite the fact that new jobless claims fell more than expected last week, while an index of leading economic indicators for February rose more than forecast.

China’s manufacturing activity shrank in March for the fifth straight month, while manufacturing in the 17-member euro zone contracted more than expected, led by declines in France and Germany. This took toll on sectors such as energy, materials and industrial.

But despite all this we are still in bull as long as we hang onto 1370 in S&P 500. This current mild weakness in the averages is not unexpected given the magnitude of the market move from October of last year.  It would not surprise me to see continued short term sideways action over the near term or even a drop of 2% points.

So if you look at charts above 1370 will act as pivot point. The reasons are – you have previous high support, 50 DMA and the trend line support. Moreover the breakouts did not disappoint today – look at LNKD, WDC, ALLT and GNC. Surprisingly LULU reversed even after not so weak guidance. LULU might have lost it’s momo status.

Good Reads. Tons of them today –

China & Eurozone factories shrink (REU)

Another day of Copper beating (BL)

Keystone XL – Again! (BL)

US Economy and Sentiment (BL)

Hunger Games (MW)

Oil lower amid talk of tapping reserves (FIN)

Gold in tandem with China as well! (REU)