Thursday, July 30, 2009

Bookkeeping: Short Riverbed Technology (RVBD); Adding to Skyworks Solutions (SWKS) and RF Micro Devices (RFMD)

I've decided to keep on my shorts and will add the higher we go - believe it or not S&P 906 still will fill. I do see some decent earning reports out there from the likes of Mastercard (MA) but I don't see the reason behind the euphoria other than technical reasons on charts for the move. I am going to be slowly building a short book up in the coming weeks up to S&P 1050 if need be. As I said the past few days my strategy is to be net short north of S&P 1000 in a material way. We're almost there, and you have to be willing to take some pain if this is your game plan since you won't nail the timing.

Most of the shorts I have on are intermediate term - today's is more of a technical scalp idea. Riverbed Technology (RVBD) has rallied back to a resistance area after a gap down - this is one of the best setups you can ask for. If it doesn't work, it doesn't work but you go with probability - the S&P gapping up 3% a day from here, will make the chart meaningless of course.

RVBD has the 50 day at $21.50, I'm short just over $21.00 and we'll stop out just over $22.00 risking a 4%ish loss. I'm doing just under a 4% allocation - my target is ultimately that gap in the chart below $16. There is really no support here so its going to take the market bringing along all boats to make this one fail I believe.

I've added some cursory exposure in Skyworks Solutions (SWKS) and RF Micro Devices (RFMD) although reluctantly simply to keep somewhat hedged - about 2% long exposure. I mentioned these names yesterday - I was looking at all 3 holdings and these were the 2 that broke over recent highs, TriQuint Semi (TQNT) has not (yet). I want to emphasize I am a very relucant buyer here since this is pure momentum chasing. While that style is working wonders for everyone doing it right now, when it reverses it gets ugly fast.

Overall, I am now net short - while today is a trend day up, these are longer term thought processes I outlined above. If we do a new leg up later in the day I'll go with some short term SPY calls for a quick trade which will offset short losses we would suffer on a new burst upward. If this is just another typical day, we are now setting up a mid day base after the morning explosion higher. Once we break to a new high for the day in the afternoon all the world's hedge fund and investment banking computers will chase in and off to the races we will go. I will repeat what I said this morning - in the old days these very obvious "trend days" would eventually stop working and trap a lot of longs. I don't know why it doesn't happen anymore, but I am sure many of the changes to the market we discuss ad naseum are contributing to it. When everyone is on 1 side of a trade it should stop working. Or... that's how it worked before.

Short Riverbed Technology, Long Skyworks Solutions, RF Micro Devices in fund; short Riverbed Technology, long RF Micro Devices in personal account

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