Fund My Mutual Fund: Potential Portfolio Candidates

Saturday, January 3, 2009

Potential Portfolio Candidates

Posted by TraderMark at 1:45 PM

I've been jettisoning some names this week to make way for new kids on the block; or in some cases, old friends we've once owned. I am still working through a lengthy list of newer Obamamania stocks; some of which are very alluring - but below are names I like from a fundamental basis, that I've followed for a long time and whose charts are singing "my time is coming" (maybe). This list has grown quite a bit with the recent rally as a lot of charts have finally improved to a point one can jump on the train with clearly defined risk (ready to exit if support is broken)

Although I believe this stock market has become more and more technically focused (and or stocks are trading on hope - rather than fundamentals), I am not a pure technical trader who buys any sort of merchandise regardless of the company business (although there are people who make money doing just this thing). I still like the security blanket of understanding the business and in fact, liking the business prospects.

I've touched on a few of these the past week or two, but having them all in 1 spot will not only help make me transparent, but also helps me keep them all in 1 spot since my watch lists are so numerous and I miss a lot of these stocks when they hit a key spot I should be alerted. One day I'll have minions who ring bells when stocks hit levels I need to be aware of; but it's not currently in my budget (of $0).

*I excluded commodity stocks since HAL9000 trades** almost all of them in 1 group; if oil and/or the Baltic Dry Index is up 0.0002% you can buy any of 100 stocks and ride the gravy train; if oil or BDI falls you get trounced. These are just day traders paradise for now. Remember, to HAL9000 oil = coal = iron ore = wheat = corn = natural gas = copper = steel = coffee = dry bulk shipping = potash. To HAL's programming, it is all "1 stock". They are hence all trading as one "horde" - buy one and you pretty much just wait your turn for the day your commodity stock is run up 15% by HAL and friends. The charts are almost all identical.

** If you are newer to the blog, HAL9000 is the PhD programmed algorithmic computer bots that have started to dominate the daily trading the past few years. Nonsensical 180 degree moves, punctuated by "student body left" (sell everything! buy everything!) are his latest trademark on the markets. You cannot fight HAL - he makes more trades in the time you move your finger from scratching your nose to touch the keyboard, than you will make in 10 days.

I'm splitting these into 2 categories - (a) stocks that have run away from support and I'd like to buy on a pullback and (b) stocks potentially beginning a breakout. Further in this age of government "assistance" and the free market relying on the nanny state, I've split domestic stocks into Obama and non Obama categories. Group (a) are the stocks that have been breaking out while the market went sideways much of the past month (the pillars of longer term strength in my eyes)... group (b) are the more speculative stuff that is now catching attention as the rally "widens". The later into a move, the more speculative the type of merchandise that gets run up... we are now entering that stage.

My favorite buys are type (A)s that pullback to the 20 day or preferably 50 day moving average for low risk entries that I can escape if the stock breaks down. This is what we've been doing with Sequenom (SQNM), Emergent BioSolutions (EBS), and AeroVironment (AVAV) multiple times the past month.

A) Waiting for a pullback

---->Domestic - non Obama

(this is an airline so therefore in the hedge fund age it is simply a trade on oil - it is almost like an Ultrashort on oil; when oil goes down this goes up since the airline is more profitable (and vice versa))

---->Domestic - Obama

[Dec 26: Ways to Play the Housing "Boom" - Title Insurance]

B) Potential New Breakouts - this is dominated by foreign issues which HAL9000 also seems to trade as 1 group, I mean what's the difference between a Latin America e-commerce company, an Indian bank, and a Chinese hog producer? All the same to good ole HAL.

HAL's programming: E=mc squared. Baltic Dry Index Up 0.0002% = must purchase all foreign emerging market equities. Run all said equities up, drive in humans with "breakout" action, than sell to humans, while simulteneously shorting until said humans curse market and shake fist in air on "false breakout" action. Continue process until all humans eliminated.

---->Emerging Markets