Friday, January 22, 2010

Bookkeeping: Stopped Out of 60% of Atheros Communications (ATHR)

It's quite interesting how a market that is only a few % points away from 16 month highs is causing so much damage in individual stocks.  Atheros Communications (ATHR) actually is holding up much better than a lot of other stocks we either own or I have on various watch lists.  However, I did not want to give away all our profits on this one so I had a quite tight stop just under $34.00 which I noticed today hit yesterday - part of the avalanche of orders from Thursday.  This reduced our stake by 60%.  Unfortunately, we are in a spot here similar to much of the past 2.5 years where almost everything moves together en masse; our student body trading situation is back.  Hence very little is being spared although some stocks seem quite exhausted to the downside after taking traumatic damage in just 3 days.

Atheros is far better off than most of the other charts I am looking at, so if the S&P 500 can regain support by the end of the day, it might be able to bounce... but right now the charts are taking a back seat to the overall market so their usefulness is degraded.

There are some dead cat bounces happening as we speak, especially in the blind sided "weak dollar" plays but if 1995-2007 rules are in play, these oversold bounces should simply lead to excellent shorting opportunities.  If 2009 rules are in play, the oversold bounces turn directly into V shaped recoveries.  I don't know what the 2010 playbook is yet so we're more observors than anything right now; what happened repeatedly in 2009 should not occur but once in a blue moon, but almost every month we saw rocket shots after any sharp selloff.  One of my favorite short term traders just wrote this which agrees 100% with my sentiment:

With the breakdown we've had over the last few days, you really have to be watching for a failed bounce that sets up shorts. Typically, the folks who are caught with too much inventory will be looking to cut back into a bounce, and that leads to another pullback. The problem is that last year it just didn't happen that way. Once we started to bounce, we just went straight back up without a pause. There were very few failed bounces, and that just killed the shorts.

Leading many to question who is behind the curtain causing historical trends to be blown out of the water all year...

Last factor to consider, it's almost become expected for a mass of buying on the first day of every week - the last 3-4 months are full of Monday happiness.  [Nov 20, 2009: What the Heck is Going on With Mondays Lately? Always Up] Will people position for that in Pavlov fashion?  Either way I am not going to get excited by any mechanical bounce in the S&P 500 unless we are back over S&P 1130 (first 1115 needs to hold, then 1130)... there might be some quick in/out action for traders with shorter time frames however.  (I'm doing some with the indexes myself)  Lots of new things to assess this weekend, but the most important question is are we back to traditional times where any oversold bounce from here should invite shorting as a real correction beckons... or are we still in 2009 times when the next neck snapping attack of the bears lies right around the corner?.

Long Atheros Communications 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