Playbook for the Week

Now that the market has lightened up a bit on the "student body left" (or right) trading ("sell everything! buy everything!") we can spend some more time sorting out good charts from bad. Except in times of extremes - this is a market of stocks, not a stock market. Below I'll break out some of the stocks that we made some changes to last week, and others of interest with commentary....

1) We had been holding off on adding to Emergent BioSolutions (EBS) as noted Thursday waiting to see if it was reading to break up, or down... the answer the next morning was down. The answer was down, but after flushing out to $20 it bounced right back to $22, where we took the position from 1.3% to just under 3%... later in the day as the stock bounced near $23 and seemed strong we added more and took it over 5%. In a perfect world I'd like to see this name recapture $25 in short order - I have some limit sells waiting @ $26... we have a lot of locked in gains here, and I'd be comfortable with the name down to $20 which was Friday's intraday low. If that breaks we'll take some losses from Fridays $22-$23 buys and wait for the dust to settle.

2) We were able to add a second batch to our initial stake of Thoratec (THOR) - both this week - to make this a 2.9% stake. I like buying this chart since I'm not a pure momentum chaser and prefer stocks in uptrends consolidating instead... but each time you buy this setup you run the risk of a break down (which is why momentum chasers never buy this chart). I feel comfortable up to $26.50 on the downside which were early December intraday lows - below that I'd have to take some losses and cut bait since it could fall to $24 or so. The stock was downgraded Friday but volume was not immense...

3) EZCORP (EZPW) was an interesting stock this week - our limit order @ $17 hit Monday so we were able to get out of part of our position but the stock fell through the floor this week on fears of Obamamania touching it - but in a bad way. Ironically, its peers have more cash advance store exposure but EZPW fell more than its peers.... I added some in the high $14s that we are already down on - but since stocks below resistance can stay there a long while, I am not going to add more here in the $13s. I'd rather add over $15 when the stock regains its mojo.

4) AeroVironment (AVAV) - see Thoratec chart; exactly the same commentary except we have the backstop of the nanny state (federal government) behind us; we added some late in the week as it bounced around at its 20 day moving average in $35s, I'd like to add more around $34 or even better $30.

5) 2 names we added this week - Indian bank HDFC (HDB) and small airline Allegiant (ALGT). Thus far both have held in ok considering how bad the market was; we snared HDB on the Satyam scandal and so far so good; although if the market weakens people will flee risk and the stock will break down - it will have nothing to do with the company; when the rats run they sell everything. Earnings are this week.

Allegiant is so far ok, but has some risk to it... despite oil falling through the floor last week the stock did not respond in kind (it should go up on that news) - further hedge fund manager Doug Kass went short Friday it appears and probably a lot of people jump in behind him. I'm willing to hold until $38 and then we'll have to cut back if it breaks through. I'd like to see it back north of $42 and hold it to feel comfortable.

6) Interesting week with Illumina (ILMN) - we've been waiting for a breakout after a long period of consolidation and it sort of did a very similar headfake as the market as a whole - we jumped in Monday when it "broke out" (>3% position) but in our "better to be safe than sorry" ethos we said the stock could risk breaking down and we cut right back to a 1.1% and took a small loss... I further cut it to a 0.4% stake as it further weakened.... unfortunately the chart now looks like a short (again) as it has been for many weeks. Until proven otherwise a bounce to upper $25s should be shorted and then you can stop loss maybe $26.50 - bah. This could be headed back to that $20-$21 range.

7) A few names from last week's prospect list [Potential Portfolio Candidates] are still out there - and in fact at levels I *could* buy but have not yet pulled the trigger - O'Reilly (ORLY) is like AutoZone (AZO) - a play on people keeping their cars longer; and then we have two home title firms who make money the more houses change hands - both plays on the (ahem) coming housing boom. Best case scenario I would like to get FNF on a pullback to $14.


8) Commodities/Infrastructure: Late Tuesday when all commodity stocks went ballistic I had a nice trade to take off half our Jacobs Engineering (JEC) right near its high at $54, and then got some back in the $51s near the end of the week. Not as much as we sold, but we are just churning around. My worry here are the prospects for a double top forming near mid $54s/$55. Plus it's an Obama-stock.

Many of these commodity stocks actually have quite solid charts now as they pull back - remember Obama will ignite global growth (source: pundits) as will China (source: Jim Cramer). I think its a farce but thats what HAL9000 is buying. We sold Mosaic (MOS) and I wanted to roll it into Potash (POT) but I missed that pullback Thursday morning...instead I threw some cash back into James River Coal (JRCC) Friday as we hit a "make or break" level.

9) As you can see global growth is BACK! by the recovery of the Baltic Dry Index... by recovery I mean a shipping rate that has dropped 90% is back up 0.000002% - hence the daytraders scream RECOVERY!

Almost every day the past two weeks you wake up and see DryShips trading up 10% premarket - daytraders special.

10) Oh yes, if the global growth thesis was anywhere near true we'd really need China to help... FXI seems to be rolling over again. Remember, one of my calls for 2009 is China will be FAR worse than the punditry believe as they have some of their own bubbles to work through, along with a heavy reliance on US and European consumers... which are not coming back "in 6 months". But you can't talk to daytraders who insist on their DryShips. Now FXI is a basket of stocks, but if it breaks below $25.50ish we have another useless thesis blown to bits. This chart looks like a short to me with a stop loss over $29 (I'm playing this through FXP which is the double inverse) It simply does not make sense for commodity stocks to rally without the engines of either the US or China... ah yes! Obama is more powerful than China and US combined.

11) Names I want to come in so I can buy more of - Sequenom (SQNM), Linn Energy (LINE)

12) Solar got a bid underneath it last week ... the fundamentals in this sector are PUTRID for most - it is so bad in China that they are trying to give money to the larger players to consolidate the 150 smaller players.... you heard me 150! But ObamaSolar power will create enough aura for all the world to be awash in solar panels. Yep. Daytraders will run into First Solar (FSLR) as the speculation of choice... I am just plain worried about the prospects of this sector for 2009 but LDK Solar (LDK) warned and Obamamania was enough to shake off "facts".


13) American Science & Engineering (ASEI) is a stock I see myself putting a foothold down into early this week... for those of us on the sideline it reversed nicely Friday - probably will create a starter position and then hope we can get some in the upper $60s to low $70s. I don't know if the contract signing late this week is in analysts report but in 2009 we want to clutch on the nipple of government (nanny state) and ASEI is another company that lives there.

14) Monsanto (MON) had a very fine report - and after the gap up, I am awaiting this gap to fill with a limit order. I actually would of preferred to see the stock run a bit, since it seems quite weak for a stock to fall so quickly after such a solid report... but I like this one for the long run, not a "buy and flip". Come to papa.

15) Off the back of a strong earnings report from Apollo Group (APOL) the "re-education" or "adult education" stocks went ballistic this week. Zach does not believe in the thesis and I share some concerns - really how are these people paying for these courses (credit card?) without jobs. That can't end well. But for now it's a thesis, a hot thesis, and the speculators of America converge on the group. I suspect by end of 2009 there will be a major blowup in this sector as analysts ratchet up estimates and we start to see inability to pay by customers. Until then - party on Garth; I would not get in front of a steaming train of thesis.

16) As I drove around this weekend in the 92 feet of snow we enjoyed, I was scratching my head at gasoline prices. A month ago when crude was near $40 gas was $1.49-$1.59. Now its $1.99. Hmmm... that says one things, REFINERS! I used to have a chart that linked to "crack spreads" on the blog but must of erased it... refiners used to be a good trade 2-3x a year until hedge funds went wild last year and blasted oil to $140+. I don't know what the crack spread chart is saying, but I can only assume based on my anecdotal evidence the spread is widening (bullish) since the stocks are behaving very well. I've always favored Frontier Oil (FTO) for the location of its refining plants, and its ability to make money when many of its peers could not. Oh well, so much for the "great tax credit for the American consumer".

17) On the short side - 3 names we pointed out over the past week

Good fundamentals, Bad chart

Bad fundamentals (and chart) - headfake north of 50 day moving average; oh HAL9000 - so tricky.

Bad fundamentals that was driven up in the late stage of a bear rally as people run to "junk" - a quick $9 to $7 move in just days.

******

Outside of those I have a couple of other smaller names on my radar as well...

So that's about 30% of what's in my head this week - without stop losses in Marketocracy.com the past year and a half this is the amount of stuff I need to keep straight mentally (PLUS all the names I am interested in on my watch lists) ; it is insane. But makes your mind work like a banshee.

The other 70% of what is on my mind is proprietary.... what's in your wallet?