Wednesday, September 15, 2010

Bookkeeping: Covering Intuitive Surgical (ISRG) Short

This rally has now become annoying.  Many of the laggards which are lost in sea are now rallying as speculators look for things that have not already run up 25-30% in 3 weeks.  Those are the names I am preferring to short but with absolutely no quit in the broader market, there is no relief.  Further, from historical precedent usually once these names begin to rally you are on the last legs... but only after short sellers who use stop losses are wiped out of their positions and give up in disgust.

This is the case with Intuitive Surgical (ISRG).  It has done nothing during this "V" shaped move until yesterday.  Today it is following up and breaking over the 20 day which was providing an excellent ceiling the past 2 weeks.  Now do you take the pain assuming the market will go down and this move is just the computers shaking out all the bears?  Or do you duck and cover?  Being risk averse I'd rather take small losses and then kick the cat (not literally) when the stock reverses down during the next selloff.

There will be a next selloff right?  Bueller?

I've covered for a 4% loss and not happy about it.   The fact that the laggards are now rallying is being displayed in the % of stocks over their 50 day moving average... it is back to an extreme level.  Showcasing once everyone has given up the ghost trying to short, we'll be ready to fall.   And no one will profit since they will be nursing wounds from all their stop losses hitting.  Which is how the cruel Mother Market likes it best.

That said it can get worse from here for bears as this reading was over 90 for four weeks in March 10 - April 10 before the bottom fell out of the market.  And over 90 almost all of August September 2009.

No position


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