So how I treat this is until the trend is broke, 1490 is the floor. The trend has been to bounce off this level and Wall Street is a game of percentages. The winning play has been to play this as a bottom; until this no longer proves true - it's the way to go. As I mentioned last week, if we get a break of this level we have quite a ways down to go (1440s/1450s) so you have to turn near term bearish. But, considering the carnage in financials, and how much of the major indexes (S&P 500 and DJIA) they represent it's actually been quite a stand here. If these financials get any sort of near term bid, the indexes should rally quite nicely. The 'teflon' stocks also refuse to quit, Baidu.com (BIDU) and Google (GOOG) - they did not turn red at all today from what I saw, nor did they Friday. Amazing strength. When they go, I'll get worried.
So after my early morning buys of refiners, foreign index ETFs, and my 2 new foreign names, my 11% cash position quickly eroded. Unlike most of last Thursday where I was picking my spots, I've started to allocate larger chunks of cash on Friday and today. So for the near term I'd appreciate if the powers that be could throw in a nice 3-4% rally on the indexes. ;) (where's the Batman phone when I need it?)
Some other transactions I did today are outlined below
On the sell side I needed to raise cash to buy more equities that were being discounted so I sold, along with some more of my short ETF exposure, 3 stocks that had been stomped on post earnings: Cummins Engine (CMI), NII Holdings (NIHD), and General Cable (BGC). All 3 got whacked, so I averaged down, and now today sold those new positions off as they had spiked up nicely.
Still strapped for cash I had to sell down my Blue Coat Systems (BCSI). I did a pretty serious scalping and I will explain why. Technically, Blue Coat is at a critical near term juncture. While the stock had sold off in the past two weeks it still held above its 50 day moving average ($40) until Thursday. Once it broke below, the near term chart gets bearish very quickly. The stock dipped all the way down to $36, before rallying today to... (drum roll) $40. Support had become resistance. So it could go either way from here. If the stock clears back above this trend line we are in good shape - this could happen off the wings of Cisco (CSCO) report Wednesday which I anticipate will be great. Or it could break down from here, and in theory drop to the low $30s. I have no idea which way it goes, but the stock is in no man's land so for near term determination of direction - it is impossible to call. Hence when given the opportunity of upper $30s today I took some off the table, 1/3rd in fact - 500 of the 1500 shares I held. Aside from the reasons above, I am just low on cash after a rash of buying this morning so this raised $20K. So from here, one would be interested in Blue Coat Systems either after it clears and holds this very key technical average of $40 or after it breaks down and creates a bottom (looks like low $30s). This is purely a technical call as I still believe the fundamentals are clearly in place.
With these proceeds I added to current positions of: New Oriental Education (EDU), Crocs (CROX), Ciena (CIEN), McDermott (MDR), Potash (POT), Garmin (GRMN), Excel Maritime (EXM) - as mentioned in a previous blog entry, and Foster Wheeler (FWLT)
So I was able to get into some stocks in favored sectors which had finally shown some weakness, along with the continuously smacked Crocs. (falling knife, bloody hands) Hence it was a good trade off... as long as we rally from here. :) Unlike a real mutual fund where you have new money coming in weekly, I only have this same pot of money, so when cash gets low - something must be found to sell to buy newly created opportunities. Today was my largest swig of buying in a while. Hopefully sentiment is washing out a bit here, and we can have a return to unicorns and butterflies to get some of these stocks rolling again. I do believe Cisco will give the market something to cheer about mid week; in fact if I had more cash I would of bought this stock ahead of earnings - the relative strength of its stock is telling us there is a very great chance for some solid earnings.
Long all names ex- Cisco, Google, Baidu; long Crocs and Blue Coat Systems in personal account
2 comments:
I was thinking 44 was the support for CROX, but I was wrong.
Did manage to nibble a little this morning at 45.50.
It got eaten up alive today. Thinking 40 will hold or this is going to hit 30?
I was surprised at the continued weakness but then I looked at darling like Under Armour and lulumon (LULU) and retail is getting destroyed. Across the board - not helping Crox. Its hard to call a bottom in this mess, but in terms of value I am comfortable with it at any point under $55 - so each time it drops I am allocating another layer to it. Eventually sense will return. Its a retail rout right now along with panicked investors. I think we are in the 7th/8th inning of this push down; if nothing else should be good for a dead cat bounce soon - if uncomfortable you could get out nearer to $45 and then try to buy back lower once it bounces. This is why I scale in and out - impossible to tell what the lemmings do. They take stocks much too high and much too low. :)
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