Wednesday, June 17, 2009

Bookkeeping: Short Thoratec (THOR)

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I am short Thoratec (THOR) for technical reasons only (I like the story if not the valuation) - the stock is actually up today go figure... so my limit order to short at $25.50 hit just a few minutes ago. That is the 20 day moving average - the 50 day is $25.80, and the 200 day is $26.20. My stop loss will be $26.35 where I'll exit out. This is about a 3% position.

I am however shaking my head at myself right now, so many missed trades - I had shorted Sherwin Williams (SHW) a few weeks ago, and the day I posted that trade I said I could of chosen Royal Carribean (RCL) or Black & Decker (BKD) - I just flipped a coin...both of those charts are in free fall; instead of those 2 I chose the one that has basically been flat. (and was stopped out - for a small loss no less).

Right idea - wrong horse; flipped coin among these candidates - heads I lost.

Sometimes you are simply ice cold and that remains the case here. Whole Foods Markets (WFMI) finally broke down the past week, as did a bevy of retailers i.e. Macys (M), Nordstrom (JWN)... as did the Las Vegas casinos. But not until they inflicted massive amount of pain on short sellers.

As for the S&P 500, once that 20 day moving average was broken yesterday we have not had any buyers show up. Squiggly lines dominate this era... I see the 50 day moving average at 890 and that would be my intermediate term target... but we could be prone to a bounce first. I've increased index shorts along with adding SMN and DTO (which is a short against oil itself). While I had been saying for a few weeks that the commodity trade was extremely crowded betting against the crowd would of lost you money... but when it turns, it turns extremely fast as the extreme hits in coal, fertilizer, oil, et al have been their usual dramatic self.

So in the big picture we've moved on the S&P between the range of the 20 day (as support) to the 200 day (as resistance).... INTO a new range where the 20 day has turned into resistance and the 50 day as support. So in my eyes, until proven otherwise we now want to be sellers of stocks into bounces up to the 20 day moving average (low S&P 920s), until proven that is the wrong condition. If the 50 day MA support breaks (S&P 890) then you will see sweat form on the bulls brow for the first time in 3 months, and it will be time to go whole hog on the short side in my opinion.

From S&P 940 where we sat most of the past 2 weeks, a 10% move down would take you to S&P 850. So it's not outrageous to support that theory. Looking at our holy trio of NASDAQ stocks, Google (GOOG) has broken down below its 20 day and Research in Motion (RIMM) has today joined. Apple (AAPL) is the last holdout, holding firm at $135 (20 day).

We've fallen very quickly the past few days so let's judge the nature of the cursory intraday bounce that is bound to happen.

EDIT 11:45 AM - have to say completely conflicting stories if you use simple moving average versus exponential... in the simple we just bounced off support and its time to buy buy buy. Exponential not so much. Can't remember such a divergence before; makes this twice as hard as usual. So here is our cursory bounce, now what happens late today will be the interesting part.

EXPONENTIAL

SIMPLE



Short Thoratec, long Research in Motion in fund; no personal position

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