Thursday, March 4, 2010

Bookkeeping: Adding More Individual Shorts

It's times like these with the Russell 2000 up 15 of the past 17 sessions, and all intraday pullbacks lasting at most half an hour before buyers rush in when it feels like the market is incapable of going down.  Perhaps the powers that be will make it so, I don't know.  Even Goldman Sachs (GS) is now ramping up, over resistance which clearly means Paul Volcker and his rules have been shot through the heart by the lobbyists.

With that said, rather than betting against the index which in this era is a fool's game since 7 out of 10 morning's the market is marked up 0.3% to 0.4% (meaning you lose immediately) I will begin to focus more on individual names.  Index shorts can only work on heavy volume days since light volume in this era means the market goes up or sideways...

I am going add a few positions today purely for technical reasons... first up will be American Superconductor (AMSC) which is a stock we actually have held on the long side a few times including as recently as 2 weeks ago. I was fortunate to sell out of the position as it was stuck below the 200 day moving average, and not partaking in the party - just before it fell off a cliff.  It has now rebounded back to some early resistance which lets us in at a decent risk/reward entry point.    I will short with a 3% allocation around $30.50.  If the stock gets over $32.00 we'll cover, which would be a 5% loss.  I'd like to target something near $28 to the downside which would be an 8% gain.

Next, a 2% short allocation into Athenahealth (ATHN) which is suffering from some potential 'accounting issues' - the lawyers have pounded so perhaps the bad news is already in the stock.  But again for technical reasons ... the stock plunged a few days ago and has now rallied back to just under the 200 day moving average.  With an entry near $38.75, we can give ourselves some leeway and stop loss around $40ish which would be a 3% loss.  If the stock jumps back over the 200 day moving average - so be it, it will signify the stock has its advocates back.  Otherwise, it might suffer a bit under a cloud of uncertainty.

I'm looking for some other candidates as we speak.... here is one I wish I caught about 75 minutes ago.

Short AMSC, ATHN in fund; no personal position

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