Tuesday, November 24, 2009

Bookkeeping: Looking to Take Some Profits Today

Speculation week is off to a roaring start, to wit please see Chinese seed company Origin Agritech (SEED) which always is a place daytraders congregate when agriculture stocks are in favor....

.... now yesterday's performance was somewhat news driven but basically it ran from mid $6s "on the news" to $10+ on "momentum".  And this is why I say Thanksgiving week is the week of speculative fervor, the indexes are relatively meaningless...if you put your chip on the correct red or black market, you win - big.

With that said, I am seeing many extended charts and am going to begin another round of profit taking.  As of this moment S&P 1111ish has been a decent ceiling and if the market breaks over that level, I expect a new round of piling in but we are starting to see some parabolic moves in things such as gold, so it is prudent to lock in some profits and look to buy back lower in the future.  On any breakout over S&P 1111 I'll probably just focus on index plays for now unless I find new opportunities in individual equities.

Let me stress, I am doing these transactions within the context of the fund's portfolio, locking in profit and sailing into the year end.  If you look at any as individual trades i.e. "how dare you sell gold which has a perfect chart!"... you are looking at differently than I am.


Here are the names I'll be culling today:

1) Powershares DB Gold Double Long (DGP) - I have a bad habit that is pretty typical of most investors, and that is to cut winners off at the knees to soon.  But that is part and parcel with cutting losers off quickly as well, and overall the strategy is fine.  I've been able to let gold run without the compulsion of taking profits so I'm content with participating in this epic run, but obviously wish we had a larger stake. I don't have trailing stops in my tracking mechanism, Investopedia.com, so in a real life situation I might just slap a 5% trailing stop and let it run - but I have to work within the confines of what I have.  I am down to a 1% position after earlier profit taking so I'm going to take profits on 90% of the position after a 25% run in 1 month as the chart of gold begins to hit parabolic range.  Any upside from here, I'll let others enjoy and try to catch it on a pullback in the future; everywhere I turn now - in every magazine and website are stories of gold.  This does not change my long term view here - but financial instruments are all the same to me... when they go up, I want to lock in profits and try to buy back cheaper.

2)  On that note - we've been more exposed to silver than gold which was the correct play 6+ weeks ago, but gold has actually been better in the past month.  As silver hits a new high for the year yesterday, I am going to employ a similar strategy to gold and take off 90% of our remaining 1% position.  We took multiple rounds of profits in our ProShares Ultra Silver (AGQ) so this will obviously be the last round, until we can buy some back lower.   I had originally planned to take another round of profits at $66 but once more tried to remain a bit more patient than usual and it's worked out.  The ETF is about 20% in the past 1.5 weeks. Again in no way, shape, or form am I saying gold or silver will selloff today, tomorrow, Friday, or next week - I have no idea.

3) The past month in trading, then re-buying BHP Billiton (BHP) and taking profits off those sales has been picture perfect.  I am going to press my luck and take off almost all the rest of my shares here (another 1%ish allocation); these were purchases in the $68s and $65s the last time the stock corrected.  I will place a limit buy order to replace these shares sold today (somewhere in mid $70s) down below $69 and see if we can continue the recent pattern.

4) We restarted a position in Potash (POT) last week on a breakout over the $106 level (our cost is $107ish); so far a "textbook" breakout.  However yesterday's action (reversal) was not super hot.  I am not going to outright sell today but I have placed a stop loss for half the 2% position at $112.  Overall strategy is to lock in a gain on any correction with half the position, and try to rebuy somewhere in the $105-$107 range if and when.  Then if (a) the stock breaks down, the losses we take would be offset by the gains we locked in or (b) the stock continues to surge after breaking $112 - we at least have half our position on.  Obviously if there is no pullback to $112 or below, it's a moot conversation and the beat goes on.

All names above are simply inverse US dollar trades, pure and simple.

5) Selling all but 1 share of Priceline.com (PCLN) - the stock is approaching 100% gain since our original purchase.  This is one of 2 stocks we never reacquired a large stake after taking profits in the summer. It's not a huge part of the portfolio but let's "lock it in".

6)  Since I've added Ctrip.com (CTRP) and Potash (POT) in the past week, I'd like to keep the # of positions relatively flat so we have an obvious stock to kick out.  I'll be closing E-House Holdings (EJ) - the stock is just not acting well; I'll revisit this at a later date... it makes no sense to me with how impressive its earnings were. Only a 0.2% type of position was remaining after a stop loss hit last week.

7) I placed a full stop loss (i.e. the whole position will be exited) for yesterday's purchase of EnerNOC (ENOC) in the $23.80s so our maximum loss will be 4%. The "red bars" continue on this one.

Long all names mentioned in fund; long Potash in personal account

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