Thursday, April 15, 2010

Bookkeeping: Restarting Rackspace Hosting (RAX)

Rackspace Hosting (RAX) has completely sat out this 2 month rally, certainly causing exasperation for its shareholders.   As I wrote yesterday, I'd rather find names which are nearer to support levels and are not extended to add exposure to, rather than chase stocks that are up 50%+ in a month or two and nowhere near any support (albeit that strategy is working great for those who follow it).   The only reasoning for that is when the market sells off (don't laugh), some of these names so removed from any meaningful support have the potential for waterfall types of drops.

With a 2 month base built, and a jump over its mid Feb to mid April range today, on huge volume (RAX already has done an entire day's worth of volume in the first 90 minutes) I am going to restart a position in the company.

I can't find any specific news driving this move - it might just be technical in nature (i.e. "it's your turn").

Of course the concern is with 93% of stocks now over the 50 day moving average, we are at the stage of the rally where even the laggards are now breaking out.  Maybe we will have the first market in history where 100% of stocks are over the 50 day moving average.

Other than throwing my broken record caveat out there.... can't say much more.  Eventually we are going to be faced with some wicked reversals but at this stage you just have to accept that to continue to play the game. 

I created a 2.6% position around $21.10 while I try to figure out what is causing this move.  If the stock fails to hold $20.50 the basis of the trade weakens considerably.

[Jul 29, 2009: Colocation Stocks and Industry Overview]

Long Rackspace Hosting in fund; no personal position


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