If you've been reading along for any period of time, you know that a lot of old technical analysis rules have become moot - especially for trend traders (those who like to hold positions for weeks or indeed months). What has been working although very difficult to time are buying broken charts and then selling on rebounds. This is what I've been doing with homebuilder
Lennar (LEN). I
took some off the table yesterday, and I am going to sell more into todays 20%+ move. It is now down to about a 0.6% stake - what I've been doing is buying near $6 and best case we can try to sell north of $9. But I am not greedy, and gains are so fleeting nowadays I am doing a layer in and layer out approach. If the stock gets somewhere north of $8.50 I'll exit the vast majority of what remains and take it down to a 0.1% stake and try to rebuild the position on the next swoon. If you connect a trend line of its 2 most recent highs (early Jan, early Feb) you will see somewhere in the upper $8s would be the next area it would stall as it makes a series of "lower" highs. A push through that sort of trend line would mark a change in character.
Due to this pattern I might start a short of Lennar and create a constant hedge trading the long versus the short depending on where the stock is within its chart... trying to make money on both sides of this very volatile name. It's like an Ultra ETF.
Here are the areas of highest strength in the market today:
REITs, Las Vegas casinos, financials (these are 'worst of breed' which always rally on major short covering when the market turns),
coal, solar, Russian telecom, homebuilders.
The market has resistance at first S&P 724, and then 741 if it continues up. I'll be selling into both levels and if/when we get to 741 will begin rebuilding short exposure assuming a failure there. If we blast through 741 to the upside, we can party like its 1929.
Long Lennar in fund, no personal position
