Ready to Fold some – Portfolio as of 08/13/2012

I guess it’s time to take some profits my friends. Cash = 25%. Portfolio as of 08/03/2012

I still see opportunities such as LNKD@$102, MELI @$84, TDC@75.1, ROST@65, DKS@50.5, HIBB@63  and UTHR@52.1. But I would suggest that purchases of ROST, DKS and HIBB should be avoided till the earnings are out.

Earning’s gain. See CRUS below.


Earning’s Pain. See Priceline below.

If you can take a hit please feel free to buy 50% position in ROST and DKS.

JPM=3% (Entered at $33.9)

DG = 5% (Enetered at $51)

TFM=5% (Entered at $59.5)

WWWW=3% (Entered at $17.5 AND Will add more after $20)

STX = 1% (Sold some at $33.1). Why Did I buy?

EMC = 4% (Expect it to reach $29.5) . Reasons of purchase.

AAPL = 4% (Set more buy @ $569)

WDC = 6% (Expect it to reach $49.5) Why Did I buy?

QCOM=5% (Expect it to reach $69, if it stays over $59 for few more days) Why Did I buy?

APA=3% (Sold some at $88) Reasons

HAL =5% (Expect it to reach $40) Reasons

UA=3% (Set additional buys @ $54.9) Reasons of purchase.

SCSS=2% (Set additional buys at $25.9) Reasons of purchase.

SWKS=4% (Will add more at $25.9) Reasons of purchase.

EQIX=5% Reasons of purchase.

ALLT=4% – Will it miss next quarter’s earnings?

ALXN=6% Reasons

FFIV =3% (In Red) Reasons

F=5% (In Red) – Worst Mistake Ever

TLT=2% (Sold most TLT last week)

Lastly, I got this in the email today morning –

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Bernanke does it again!

There is just too much to write. So I will split this post into two – Bernanke and Non-Bernanke (vis-a-vis the earnings).

After being down 82 points in the early going the Dow reversed course and closed 78 points higher on Tuesday. Wow! Then the Nasdaq surged 1.1% as the technology sector led the market today.

The reversal was due to Fed Bernanke’s testimony this morning that the Fed is willing to do what it takes if the economy and labor markets do not improve.  He expects historically low rates to remain in place at least until the end of 2014 and most importantly he convinced the participants that the policymakers at the central bank seem to be preparing for additional moves to spur the economy in the weeks or months ahead.

This low interest rate environment should help stem any serious correction in the market averages.

So, where does yesterday’s trading action leave us now? First, I don’t think that this is a short squeeze anymore. Second, yesterday qualified as a decent follow through day from Friday’s key reversal which is a positive development.

Moreover, the basing action in some stocks and the sector rotation is almost clear now. One last thing to notice is that the junta seems to have realized that the tech and oil & gas stocks have been beaten to death. See below –

In fact we see rise or less “severe” damage to stocks even after the poor guidance.

  1. To exemplify, look at the the turn around in STX after it pre-announced a revenue miss by 0.5 Billion dollars (seriously!) or even QCOM which reported fiscal Q3 revenue and earnings per share a little light of consensus, and a Q4 view below analysts’ estimates.
  2. And of course an earnings beat is amply getting rewarded. e.g. MLNX – up 43% after hours, SCSS – up 17% after hours and SWKS – up 10% after hours.

So step in but be cautious.

Food for thought –

  • FDA approves Vivus’s diet pill (ABC)
  • Over 70% of earnings beating estimates (REU)

 

 

 

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.

Portfolio As of 4/12/2012

Cash 40%.

Portfolio –

AAPL – 3%

PCLN- 4%

STX – 6%

WDC – 6%

HLF – 3%

SCSS – 4%

SXCI – 4%

QCOM – 6%

BLV – 3%

TLT – 3%

RWM – 3%

FFIV – 3%

F – 6%

APA – 6%

Sold last week –

CLR, WLL, ALLT, GNC, LNKD (I know!)

Reasons for the sale –

  1. Market broke 2 critical supports last week – 4 month old trendline and 50 DMA. Let’s wait till the market moves above 50 MA and makes new high, convincingly  (no double tops please:().
  2. The earnings season is underway. It’s better to reduce the high fliers by 50% to avoid losing profits.
  3. Quite a few breakouts in last couple of weeks have stalled, failed and occurred at below average volume – such as SWI, WDC, LVS, etc.
  4. Old adage – Sell in summer and go somewhere ( dont ask me where!.)

Lastly I added small positions of defensive stocks as mentioned earlier – BLV, TLT and RWM.

Week ahead –

  1. Stay defensive, preserve capital below the prior trading range. Above the range, expect a move back to and above the prior highs.
  2. Do not trade intraday, but rather focus on setups and keep an eye on earnings
  3. U.S. week ahead (Reuters)
  4. Next week’s trading radar (Minyanville)

Good Reads –

Didn’t I tell you?

Before we move forward –

  • First thing that I did on Sunday night after posting “Deja Vu!” is – I followed my instruction.
  • I sold 60% to 100% of my holdings in most stocks. The ones left untouched were – QCOM, STX and APA.
  • I will add some APA around $85 and some QCOM around $63.9
  • I even parted ways with some of AAPL and PCLN shares. I plan on adding some of them after they correct by 5% or market corrects shows direction .
  • I sold a major portion of my most profitable stocks of the quarter such as AAPL, PCLN, SCSS, CLR, SXCI, HLF, GNC, ALLT, FFIV, F and RHT.
  • I will wait and see the action of top stocks before I make new purchases or additional purchases. Top stocks that I will be eyeing –
    • SXCI
    • AAPL
    • PCLN
    • ULTA
    • TSCO
    • SCSS
    • TPX
    • HLF
    • GNC
    • KORS
    • LNKD
    • FFIV
    • CMI
    • RHT
    • PII
    • ALXN
    • UA
    • STX
    • WDC
    • URI
    • FOSL
  • I sold all the shares of LNKD (a minor portion), WLL (took a major hit), URI and FOSL (recently opened). Last two had gone under water prior to sale.
  • I bought TLT, BLV and RWM as mentioned on Monday morning. First thing in the morning 😉

So this is where we stand today.

  • The market averages fell sharply as the Dow dropped for the fifth day in a row losing 214 points -1.65%.  The S&P 500 lost -1.71% and the NASDAQ was down -1.83%.
  • Down volume swamped up volume on the NYSE by a 13 to 1 margin and by 12 to 1 on the NASDAQ.  Declining stocks outnumbered advancing issues by a 5.6 to 1 margin on the NYSE and 4.6 to 1 on the NASDAQ.
  • Number of stocks above 50 DMA are on a decline.
  • Let’s look at the sectors
Sector name Price from 52 Week high Price from 3 month high
XLE Energy -15.21 -10.48
XLB Materials -13.95 -7.07
XLI Industrial -7.93 -6.58
XLF Financial -10.3 -6.32
IYZ Telecom -16.48 -6.05
SPY Market Index -4.22 -4.22
XLY Consumer Disc -4.12 -4.12
XLU Utilities -5.46 -4.01
XLK Technology -3.08 -3.08
XLV Health Care -2.99 -2.99
XLP Staples -2.65 -2.65

  • The market is approaching oversold territory. Below is the graph of overbought vs oversold stocks.
  • The number of stocks declining to 52 week lows have started to exceed the number of stocks new 52 week highs.
  • Let’s look at some of the declines encountered by the leading stocks.

Good Reads –

  • China surprises with trade surplus (REU)
  • German exports unexpectedly rose (BL)
  • French economy grinds to a halt (REU)
  • European investor confidence sees decline (BW)
  • Top forecasters see euro weakness (BL)
  • U.S. small business optimism falls (NFIB)
  • Weekly retail store sales up +0.5%(ICSC)
  • Skilled-worker visas see surge in demand (WSJ)
  • U.S. profit growth still expected to stall (BL)
  • Goldman’s Dominic Wilson sees more danger (BI)

Poll Time –

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!