Last Thursday, I initiated this short [Jan 22: Bookkeeping: Short ITT Educational] on nothing other than "it went too far" (excessive optimism). This was a short term technical scalp if you will. It has worked out in under 48 hours.
Here is my strategy - I am going to short a 3% stake here just at $130. A gap was created in the chart this morning - I am going to cover at $117 to make sure I get inside that gap as it fills. It could go a lot lower than that, as the 20 day moving average is down at $103 (20% lower) but good enough for me. My stop loss is set at $135. So if I'm correct, 10% gain. If I'm wrong 3.7% loss. If the market starts to take off on "hope" again I expect to be stopped out very quickly.
So that worked out quite perfectly, and quickly. If I were sitting watching the screen all day I would of taken maybe only half the order at $117 and see if I could get an even better price (as I wrote the 20 day moving average was down at $103) but this is the price you pay for being a part time fake mutual fund manager. You leave a lot of partial profits on the table. But limit orders keep me able to do this. Obviously with the website I am trying to show the thinking behind the trades - the execution leaves a lot to be desired.
We made 10% in about a day and a quarter of market life so I won't complain too much. Even better the market has been up since I put the short on showing why it is far superior to short individual names then use these lousy Ultrashort ETFs that only work when the market is dropping like a rock.
Again, Investopedia.com is NOT updating today so I cannot tell if the trade executed - it better have. The stock is down 15% from where I put on the short Thursday afternoon. I am now out of the position (I assume)
@*()*#@)*@#(@#*(!@!!! stock tracking systems
p.s. a reader informs me Barron's might of helped me on this trade with a cautionary blurb
THIS IS THE KIND OF MARKET where if a trade seems too easy, it probably is, and where price/earnings multiples at or near 20, even for acknowledged growth stocks, represent a high hurdle for future outperformance.
The excessively easy-seeming trade in pricey stocks applies to the private education sector, one of the very few strong groups of the past year and week, with members approaching or carving out new highs lately. The relevant names include ITT Educational Services (ESI), Apollo Group (APOL), Devry (DV) and Corinthian Colleges (COCO). They offer online and in-person courses, mostly vocational, and the Street loves them at the moment.
