Monday, March 30, 2009

Bookkeeping: Covering Freeport McMoran (FCX) and Most of Capital One Financial (COF), Pulte Homes (PHM)

Once more, horde trading dominates - everyone sell everything, or everyone buy everything. The gap up or downs in the morning are 2/3rds of every day's move and guessing which way it goes is just random casino action.

I am going to cover my Freeport McMoran Copper & Gold (FCX) short here in the $38.30s. My goal was $38... [Mar 19: Short Freeport McMoran Copper & Gold]

I am entering around $41.70 (4% allocation) and my target is $38 at least... no stop loss on this as its nowhere near any support level and believe it or not, the market does go down every so often ...

....but it's close enough. I've stayed away from shorting "strong charts" of late - even if overbought - and tried to focus on weak charts below key moving averages which has worked out quite well. But this was an exception - perhaps more for show than dough. Although dough was claimed as well ;). I do believe there could be more downside as everyone's favorite group (or one of them) last week - commodities - now gets obliterated. And in a few days it will be everyone's favorite sector again as the student body rushes back into the sector. I got a terrible fill on this; I thought I shorted at $41.70s but it was in the $41.20s so it's just a 7% gain when it should of been over 8%. But for a week and a half's "work" I'll take it. Again, I do think there is potentially more downside here but I want to focus on other charts - so I am completely out of this short. Again, I don't really believe in the whole "commodities are back as global growth returns around the corner" thesis but this is where hot money goes each time we bounce, hence my long exposure in this space and the relative strength it shows. But FCX just got out of hand and overextended so I could not resist taking a quick pound of flesh. There is a nasty gap down there below $30 which in the next bear raid I expect to get filled.

I am also covering the vast majority of Capital One Financial (COF) in the $11.30s but keeping a small holding position, as she is back to her old tricks, down a cool 20% in 1 session. Much of last week's Kool Aid seems to have disappeared. I do still own American Express (AXP) as a short which is also working and still gives me exposure to the space if tomorrow is another bad day in credit cards. COF is a "permanent short" and on the next rally we'll be buying this exposure back and keep playing this trade over and over.

I covered most of my Pulte Homes (PHM) for a tiny profit, until I figure out the trading could be ready to rollover so I'll jump back in if the current pattern continues

All the names I stopped out of last week in the consumer discretionary space are of course falling today, but you need to have a discipline and not let 7,8,9% losses turn into 25% losses. That said, of the names the Kool Aid drinkers chased me out of, Whirlpool's (WHR) chart turned from "good" to "bad" immediately. I will see how the stock reacts on the next rally - if it does what it should do, I'll be right back into this short. $28 is important for WHR to hold if you are a bull. I guess refrigerator sales must of leveled off this weekend. Whole Food Markets (WFMI) and Harley Davidson (HOG) are still holding up above key support levels.

Short Capital One Financial, American Express in fund; no personal position

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