Wednesday, August 6, 2008

Bookkeeping: Closing Mercadolibre (MELI) and Goodrich Petroleum (GDP)

We own 2 stocks that are up today. You know what that means folks. We need to sell them immediately because tomorrow they will be trashed. Or maybe in the next few hours they will be trashed. Because the fundamental story is clearly changing 5-10-15% by the day.

We started Mercadolibre (MELI) Jan 7, 2008 after a huge pullback. Good thing we did not drink the Kool Aid in December 07 when the stock was near $80.

We are closing the remaining 0.4% stake and took a $4500 loss with a sell in the $35.30s. Considering the chart I consider that a minor miracle; we had some decent trades along the way to offset some quite large losses.

This stock is dead to me until it closes above $42 (on good volume), since it's dead to hedge fund computers until it close above $42.

We started Goodrich Petroleum (GDP) in mid July after a first pullback, on a huge run. That was an massive error since natural gas is now clearly headed for $1.00.

We are closing the remaining 0.8% stake and took a $5900 loss with a sell in the $44.60s

This stock is dead to me until it closes above $52 (on good volume), since it's dead to hedge fund computers until it closes above $52. It might be forming a base here above the 200 day moving average. Or not. I don't know nor care. I'll only buy on strength.

While all losses make us unhappy, these are "manageable" losses and until the charts show breakouts or breakdowns they are in limbo. The only things working are buying the few stocks in strong uptrends or timing a buy of a broken down sector nearly perfect knowing there will be short covering/rotation and then a short term lift. So these stocks are in neither of these 2 conditions. It is not so much I have a serious worry of a major breakdown in stock price - maybe they will, maybe they won't - but it is just sort of dead money for now. I'll be willing to pay up when HAL 9000 decides he wants to own these stocks in scale. Otherwise they just are taking up space. The less chances we have for HAL 9000 to blind side us the better in this environment. Someone else can be the hero. (To Mr. Shax - yes it's capitulation)

I won't bore you to death with fundamental reasons such as the fastest growing e-commerce play in Latin America or a jewel in the Haynesville shale and potential acquisition target in the natural gas space. We're not using the f word around here anymore. Frankly I think the move down in natural gas is probably 80% of the way complete, but even more frankly it doesn't matter until the chart improves. Even if nat gas and crude rebounds all people have to say is who cares - thats only this week, the global economy enters anarchy and rioting in 2009 - and HAL 9000 will obey and sell these off in favor of autos, airlines, retailers, Freddie Mac (oops did you see those awful earnings) and the like.

Why sell natural gas off and not coal / fertilizer? Because while oblivious to HAL 9000, there is a difference. But don't you worry - on the next pop up I'll be cutting any of those as well since their charts have now been corrupted by a virus... called HAL 9000. In fact everything I bought yesterday I should be selling today - they are almost all up. Why? Because tomorrow they will all be down - because as you know that's the new and improved market ;) But I'm still stubborn and hope the computers can give us a 48 hour rally instead of the typical 24 hour.

[May 14: Mercadolibre Reports]
[Mar 31: Mercadolibre with 3PM Spike/Forbes Article]
[Jul 16: Bookkeeping: Starting New Stake in Natural Gas Player Goodrich Petroleum]

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