Friday, November 23, 2007

Bookkeeping: Closing Fluor (FLR)

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I am closing out my smallish position in Fluor (FLR) late in the abbreviated session today. The price I sold at was $135 and this was a 1.1% stake ($12.2K). Fluor was part of my basket of infrastructure names, but this was a recent addition, added very early this month and due to the technical breakdown in this name, along with the fact it is the most expensive in the group I am going to close it out for now and stick to stronger names in the group. (not that many left are strong)

Fluor had dropped from $176 (in late October) to $146 which was its 50 day moving average, so I bought at the time (early November) with the intention of seeing the 50 day moving average hold. This is always the risk on buying stocks on pullbacks - sometimes they bounce sometimes they falter and continue downward. In Fluor's case it was the latter, and while the stock has been stable trading in the $132-$136 range for the better part of the last week, despite a lot of weakness in the market, I am simply going to focus on stocks with better charts in the near term in this group. While it sounds like a fancy term, one negative situation that has just occurred in the Fluor chart is a death cross, which is simply when a shorter term moving average crosses below a long term - in this case the 20 day has moved below the 50 day, which is a sign of near term weakness. While the stock has held up quite well, if the market further weakens, the stock might not be holding up going forward.

The 200 day moving average is $116 and thats where August lows were as well, so *if* the market continues its downward trend, this could be an area where Fluor weakens to. Conversely a quick move back above $142 (50 day moving average) would be bullish, but right now the stock could go either way - so I am taking the cautious road. I will book this 9% loss with hopes it saves me from a potentially larger loss. Again, for those who do not use technical analysis it might seem strange to prefer to buy something at $142 rather than $135, but a move above a trend line would be a show of strength so paying up a bit for this insurance is worth it. Most of the major positions (>2%) in the fund are still above their 50 day moving average trend line, even in this extremely poor market.

I still like this group as a whole, but the multi year backlogs and international exposure to governments and companies flush with cash is being ignored at this time.

I did buy some more UltraShort positions going into the close with this cash since I had lightened up a lot Wednesday; as the S&P500 once again jumped back to 1440 (the magic number)...

No position


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