Wednesday, January 20, 2010

Bookkeeping: Closing Sourcefire (FIRE), Adding to Rackspace Hosting (RAX)

Just as watching which stocks are acting poorly on strong days for the market, we can often learn something observing which stocks are acting well in a bad tape.  Today is one of those rare days where the names in green stand out like a sore thumb.

Our stop loss on Sourcefire (FIRE) triggered last Friday, locking in a 8% loss with 80% of our position.  I was unsure if I was being head faked out and we'd see this stock jump right back up once all the stop losses were collected....

... but thus far it looks like the near term trend is still down.  I wrote last Friday:

Bulls will want to see FIRE hold the $24.25 area on a closing basis today; it has been acting horribly the entire week. Any close below $23.00 and we're most likely exiting stage right.

Of course if the market continues its move over S&P 1150 and on to 1200 the story for FIRE can change in a moment, but I can only go with what I see today.  In fact, with the recent weakness, the stock looks better as a near term short, rather than long.  With that said I am following my own marching orders - while the stock is not below $23, I don't like the direction things are heading and am punting the other 20% of the position.  We will close the entire stake; the last 20% is closer to a 10% loss... so in whole, a very unsatisfying experience in this name.

I am going to roll that 0.6% exposure plus another 0.4% to add 1% to Rackspace Holding (RAX) which is asking "selloff? what selloff?"  The stock barely budged this morning and in the 11 AM hour began a nice rally even as the general market puked. 

I don't know why, nor particulary care - I am respecting the price action and I like relative strength.  This will take Rackspace to about a 2.5% allocation. There is *very* obvious resistance at recent highs of $23.50 (mid December 09, early January 10)... if the stock can break above that level on a closing basis, we'll want to be adding even more as that should signify a new leg up.  Hence we're layering in at moderate levels while we wait to see what RAX can do from here.  At this point the chart is very interesting and quite rare - both a "double top" and a "double bottom" in the past 2 months - I can't recall the last time I've seen such a thing.

Ironically I began both these positions on the same day.

EDIT 12:45 PM - looks like there was an upgrade today which is helping I assume. Terremark Worldwide (TMRK) is also green today, might of been a sector upgrade.

08:04 EDT RAX Rackspace initiated with a Strong Buy at Raymond James.  Target $28.

Long Rackspace Hosting in fund; no personal position

Disclaimer: The opinions listed on this blog are for educational purpose only. You should do your own research before making any decisions.
This blog, its affiliates, partners or authors are not responsible or liable for any misstatements and/or losses you might sustain from the content provided.

Copyright @2012