Tuesday, August 17, 2010

Bookkeeping: Adding Some Short Exposure to Replace Gentiva Health Services (GTIV)

In trying to adapt to the new world order where HFT + EFT = GLEE (high frequency trading + dominance of EFTs = happiness for us all*) I want to try to avoid the bipolar action when I can.  Especially on the short side since my shorts are far more technically oriented, whereas my longs are combinations of good fundamentals + good charts.  By avoiding hedge fund favorites, I will hopefully not get swept up by a "risk on" day, and the stock can trade on its own merits to some degree.


What is a risk on day?  Today for example when EVERY single stock on the long side of the portfolio is up.  Long before it was called risk on, I called it "student body left" trading, and it's now the de facto standard in a thin market, dominated by professionals (as retail has fled to bond mutual funds)... and most of these professionals now are made of silicon.

So as I peruse charts for shorts, I try to avoid "energy" or "materials" or "China" or anything I know will either be demolished or worshiped based on what HAL9000 has decided is going to be the theme of the day.  I still want liquid names (decent sized market cap, decent amount of shares traded each day) so in the real world they can be shorted easily.  Today's candidate is Henry Schein (HSIC) which is a nice quiet company in the healthcare field.  The specifics are immaterial as this is a technical short.... the stock has had trouble clearing the 50 day moving average for a few months.  In the past few weeks the 50 day has crossed below the 200 day so we now have 2 resistance areas.  I am going to use the intraday high of last week as my stop loss area, so $55.25 or so.  I will short roughly a 2% exposure in the $54.40s.  Downside risk is 1.5%... it's not going to be a 'fast money' mover so unless the market goes into tail spin $53 seems to be the current area of support.... it does have a gap to fill in the $52s.

Gentiva Health Services (GTIV) is headed out the door for a 3% loss which is the maximum I will take on the name.  It still has not broken out over the highs of the month, so this is a precautionary adjustment.  I'll consider this a 1:1 switch between GTIV & HSIC.

I threw on some TNA short as we run into the mountain of resistance on the exponential moving averages, but only a small (2%) amount since simple moving averages seem to be working better of late.  I will cover this on a break over S&P 1100; so I'm "at risk" about 4 S&P points.  Over 1100 I might instead turn tail and go long the same instrument.

Short Henry Schein, Direxion Small Cap 3x ETF in fund; no personal position


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