Tuesday, July 21, 2009

Bookkeeping: Selling Most of BHP Billiton (BHP) and Going Short

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A lot of charts exhibited reversals this morning; we'll see how lasting they are. Apple (AAPL) reports tonight and bulls expect the party to keep on going; we're on the first 9 day NASDAQ rally in a decade now. It can't be that simple, can it?

I am going to sell most of our 1.5% stake in BHP Billiton (BHP) here; this is a very "gappy" stock the past 3-4 months since its one of the "go to" names for computers and hedge funds to run into when reflation is the hot theme of the day. The Freeport news sent it up to $60 but now its back to a touch below $59, where I am both selling 90%+ of our stake and going short with a 3% allocation. On the long side I'd like to rebuy just over the 200 day moving average if possible when and if it gets there - for now I'll place a limit order at $52 to buyback what I just sold near $59.

Initial target for the short will be that gap below $55, and better yet would be filling below $53. We'll stop out over $61.25 which would be about a 3.5% loss potential.

This chart should look very familiar to you - as I keep saying, it is NOT a stock pickers market - I've shown in the past 3 sessions 5 different holdings of ours that all jumped between 20-30% in 5-7 sessions. They have been in completely different sectors - anything from US housing to Chinese gaming to metals to Brazilian houses. This is a 'fish in a barrel market' - and has been for over a year. The computers buy (almost everything) when its an up day / week, and vice versa. Market direction is 70% of the battle - fundamentals have unfortunately become quite useless. While its sad for me to see, its reality and we're adjusting to it.

I've also added some index shorts / puts which I'll stop out of if we turn green on the day. (EDIT 3:20 PM - market strong like ox, so I've been stopped out on these intraday tries) The Las Vegas casinos have also reversed intraday and look compelling as shorts but they are so wickedly volatile ...

That gap at S&P 906 *will* fill and we *will* make a lot of coin when it does.

Long/short BHP Billiton in fund; short BHP Billiton in personal account

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