Tuesday, December 22, 2009

Bookkeeping: Selling Half of Atheros Communications (ATHR) on Parabolic Move

There is absolutely nothing wrong with the chart of Atheros Communication (ATHR) other than it is now going parabolic.  This has turned into a momentum traders dream, but the farther it departs from any support, the larger the potential for a relatively sharp correction.  But knowing when is impossible.

When I noted the relative strength in the name last week [Dec 15, 2009: Atheros Communications - Best Performer of Late], I mentioned the way to play was simply to place a stop loss under the 10 day moving average, since it was making new highs for the year.  A good reader had mentioned that $34s area was where the stock rallied to in summer 2008 before Lehman / Fannie / Freddie / AIG.  Therefore as we are a whisker away from $34 I am going to sell half our position in Atheros, with a game plan of buying over $35 if and when the stock can get there. 

Short term chart... with 10 day moving average (green line) shown

Long term chart

My belief is the hardest thing to do is to let your winners run; certainly in my case it is and talking to many others, they have the same issue.  So in this case, many days I wanted to lock in profits but decided to let it all ride... I've been satisifed with the ability to remain patient.   From here, it's only a 3% difference between selling near $34, and rebuying on a break over $35 which I am willing to give up on half the position to lock profits safely under the mattress.  One would think the stock would rest a bit at 2008 highs, but that depends if we are about to melt up, Greenspan Bernanke style. 1999? 2009? It feels identical at this point - someone remind me to get long equities big time in 2019 under Federal Reserve Chief Geithner's hand.

We've taken half our position off just under $34... pending the movement in the coming days we'll assess from there.  At this rate, we could be right back in the position this afternoon, on a break over $35.00.

Long Atheros Communications in fund; no personal position

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