THIS IS THE KIND OF STOCK YOU WANT TO BE LONG IN A BULL MARKET
I see traders and investors pointing out stocks on a daily basis that they see as buys for one reason or another. Unfortunately, when you look at a snapshot of the company, in the form of a chart, it looks like a distant cousin of the Addams Family. Scary, pale, without much character and a blank look on its face. That is what I see in many of the names that investors tend to become obsessed with. The obsession is mostly due to one valuation metric or another, a key product or a recommendation. These considerations all seem to trump whether the company looks aesthetically pleasing in terms of price action. It has been my experience that the best investment opportunities come when beauty is offered along with brains. In other words, fundamentals and technicals come together to create a symphony of profit potential. Valuation is damned if the price doesn't line up beautifully to confirm your fundamental homework. The new product that seems so promising is garbage if the price doesn't want to cooperate. An analyst upgrade or a recommendation by your favorite market pundit is a fart in the wind if the stock can't look itself in the mirror due to the horror of its price action. Tonight I discovered a prime example of the type of company that deserves serious consideration within a bull market. The risk is clear. The trend is even more clear. And the strength is crystal. It is a company that deserves to be on the watchlist of short-term traders as the price action and patterns are extremely clean. It is also a company that deserves to be on the watchlist of longer-term investors as these types of trends have some very real potential over the long run. In other words, they don't dissipate overnight. The company is ALLT. It is an Israeli telecom company that does business in Africa, Asia and the Middle East. All the parts of the world that are growing at a breakneck pace, in other words. A nice tight float of 22 million shares. A roughly $600 million market cap. Short interest of less than 2% of the float so you know that the volume we are seeing is not simply demand meeting supply in the form of short sellers invading. I haven't studied the company fundamentally beyond the above mentioned. And I don't need to. Here is the chart: click chart to...
CURRENT PORTFOLIO POSITIONS
The current portfolio looks like this into the close on Friday: Long PRGS http://www.zenpenny.com/?p=3394 Long SPRT http://www.zenpenny.com/?p=3451 Long PTGI http://www.zenpenny.com/?p=3412 Long GSIG http://www.zenpenny.com/?p=3412 Long EDZ (this is an inverse ETF so it is a short position effectively) http://www.zenpenny.com/?p=3700 In doing my research this weekend, I must say, that it is a confusing picture at this point to say the absolute least. This type of muddled picture is typical of a market that is pausing in search of its next bonanza. Whether that bonanza will be for the bulls or bears is the purpose of this investigative mission. I'll be posting my weekly chart review later today in order to clarify my confusion.....if that makes any...
LESSONS IN BEHAVIORAL FINANCE AND PORTFOLIO CONSTRUCTION UTILIZING PIMPOLOGY 101
2012 has surely been a much different experience for most investors than last year. 2011 draws up two distinct images when I look back on the first half of the year and the second half. Looking back on 2011, the first half of the year was essentially a guy trying to get out of bed after engorging himself with a dozen greasy donuts and a bean burrito. It just wasn't happening. Every attempt to get up was met with resistance. The second half of 2011 was a midget doing the rain dance on a stage lined with dynamite. From one day to the next, you didn't know if the market would end up falling through the floor or flying through the roof. In the meanwhile, it bounced everywhere in between. 2012 thus far has been much different. After being bullish from late-September 2011 into December, I became bearish towards the end of the year and acted on it through a good deal of short exposure. This was based primarily on some very reliable sentiment measures that were blinking off the charts with bullishness. Here's the thing with sentiment indicators that a lot of actors in the markets miss: They don't work during bull markets. That's the bottom line. When a market shifts into full on bull mode they expand the range of what you and I deem as being "normal". You aren't smart enough to know where that range will normalize. That is really all there is to it. Listen, they work great during mild bull phases or for attempting to find bottoms during standard pullbacks. They even work fairly well in bear markets that don't get out of control a la 2008. Runaway bull markets turn them into trash. Remember when everyone was going nuts over the AAII (I think it was) numbers coming in at the most bullish in X number of years during the first half of January? Where did that get those who believed the markets were saturated with bulls? Your job is to be able to decipher when a market is moving into that type of bull market that will turn formerly beloved sentiment indicators into flaming turds being thrown out of the window of a Cadillac El Dorado. I quickly realized during the second week of January that I had been played. I covered all my shorts on January 10th. Several days after I put out my first post regarding a long equity position in many months. This was followed by more posts relating to small cap companies that looked attractive on both a fundamental and technical basis. As a result of my...
TRADE UPDATE – EDZ
It has been a couple months since I last had a trade in an ETF. I'm going to be touching on the culmination of events thus far in 2012 that have led me to this point. It will be a good refresher for myself and hopefully of benefit to readers. That's the next post. For the time being, I did initiate a short position via leveraged inverse ETF in EDZ. Emerging markets have been relative underperformers recently. There is weakness in the commodity markets and Dollar strength both of which are contributing to the obvious pressure being applied to emerging markets. I will be going over the technical details in the weekly chart review tomorrow. Here is the tweet sent out before the close yesterday: It is simply a hedge versus long exposure. I am holding onto all long positions. In addition, I will be tuning up the frequency of short-term trades over the coming weeks and months as I have a nice cushion of gains so far in 2012 from which to launch an offensive...
A RANGEBOUND MARKET DESERVES A STUDY OF WHICH LEVELS TO SELL AND WHERE TO PLACE THE BUYS
When we look back through each chapter of the market of 2012, marked by every passing week, we will remember last week as the warning signal of the sideways range that was to come and this week as the confirmation that we are now in it. It's a necessary component of every bull market to be able to absorb gains, while recalibrating the buyers and sellers in preparation for the next phase. The modus operandi over the next couple of months will be very short-term in nature. It will involve buying weakness and selling strength within the perceived range, if you are so inclined. My preference is to rotate assets into more aggressive names within the portfolio on weakness and take profits, where they are available, on strength. I am not in index ETF, short-term trading mode here. The range simply isn't wide enough and the potential for volatility still remains small. Here are some illustrations for your perusal: click chart to...
NO LONGER HAPPY WITH BEING IN THE MISSIONARY POSITION, THE MARKET FLIPS
Now everyone can rest their heads well tonight. We got a pullback. The market is no longer satisfied with being in the missionary position and is looking to broaden its horizons. Aficiondos of wild markets unite...your time has arrived. Those of you who have been keeping up with my thoughts should have, at the very minimum, been mentally prepared for this. Hopefully there are those who managed to profit from or avoid this all together. The signs were all there and they were abundantly clear for anyone who chose to listen. From the manner in which the volume kicked up on the reversal last week. To the breakdown in commodities, namely the precious metals. To the generational trajectory that was hit on the dot in the Nasdaq. What now? We certainly could have a bit more downside left. Not much, however. Perhaps 150-200 more points on the Dow and roughly 50 on the Nasdaq Composite seems about right from today's closing levels. I took the opportunity today to rotate from portfolio positions that have been underperforming into the outperformers over the past couple months. GSIG, while being fundamentally sound and possessing substantial upside from here, just hasn't been putting in the performance of some of the other names. It's up about 2% since I mentioned it on January 18th. Not even close to the double digit percentage gains in some of the other companies in the portfolio. I trimmed a bit from GSIG today and added to SPRT. Since gapping up after reporting earnings on February 9th, SPRT got as high as 3.80. It has now pulled back to 3.15 and seems to be in a good position to increase exposure. I'm not considering any new positions at this point. Have a good mix within the portfolio of companies that have significant opportunity due to restructuring/cost efficiency/partnership efforts. No reason to tinker too much with something that seems to be functioning optimally at this juncture of the uptrend. I have a lot going on this week. I will be diving into some deeper market analysis over the...
A CRACK IN ANOTHER PILLAR SUPPORTING THE MARKET BECOMES OBVIOUS
Over the past week I have been mentioning some of the important pillars of the current bull market that have suffered cracks. These cracks are by no means fatal. They are just indications that some reinforcing of the foundation needs to take place before we can attempt to move higher. I discussed one of the cracked pillars - the small caps (IWM) - last night. I've also discussed the Dow Transports, which caught a little more downside pressure in today's market action. Now we can add the SOX to that growing list of important market components that are creating a shaky foundation from which this rally will likely falter and grow into a muddled mess of sorts over the next couple of months. Here is a look at the SOX on a monthly and daily basis. I wanted to zoom out to give an idea of the important level that it is sparring with currently: click chart to enlarge The information that the SOX is relaying to us simply gives further confirmation of the choppy and disorganized nature of the market that is to come. The easy money was made in January and February. It will become more difficult from here. The edge, however, continues to be with the bulls. And that is exactly why I remain with little cash reserves and long a variety of small-cap names. Bottomline: I'm willing to ride out this chop in exchange for being invested in the bigger...
5 CHARTS THAT WILL CONVINCE YOUR KIDS TO CLEAN THEIR ROOM AND YOUR INLAWS TO VISIT ONLY ONCE PER YEAR
click chart to enlarge
THE LANDSCAPE SUPPORTING THE MARKET SHIFTED THIS PAST WEEK. NOW WHAT?
The easiest way to spot a shift in the market is to look at the landscape that supports it and watch that landscape for changes. The more you try to make sense of the shift according to various fundamental paradigms and traditionalist thinking, the more you will draw blanks. You have to completely tune that shit out of your mind and look at all the various factors as a single functioning entity. When one or two components of that entity begin veering off in odd directions, you can bet that the entity will become agitated, even if it doesn't respond to the changes right away. And that is what we had this week, the entity that is the market witnessed numerous components within its structure begin veering off in directions that have shifted the landscape for the first time in 2012. Our job as investors is to attempt to determine what overall effect this shift will have on the entity and whether there is an opportunity to profit or at a very minimum, avoid loss, as a result. I outlined some of the shifts I was witnessing on Wednesday. As the week came to a close, I saw further signs that a shift has taken place that will likely result in change of character for the markets over the next few months. Suddenly, the Euro has weakened dramatically. Of course, the US Dollar has reversed course and is sitting right up against a major technical level on the US Dollar Index. The uptrend in both gold and silver has been broken. The reaction to the break on Thursday and Friday were not promising. The commodity sector looks increasingly weak as a result of the aforementioned facts. The Dow Transports look ready to breakdown. The Russell 2000 has already broken down. And generational trajectory points of enormous stature and importance are converging across major market averages. None of these facts changed into Friday's close. It translates into a market that is going to begin becoming a lot more deceptive than it has been since January. It translates into increased volatility and opportunity for gains from both sides of the coin instead of simply being long. It translates into a sideways range developing into April and May. What it means for you as an investor is that you may not want to be chasing the hottest growth names at this particular juncture. You don't want to be putting large amounts of cash to work in equities currently unless they are of the conservative variety. Hold onto whatever cash you have for better opportunities in the months ahead. I also wouldn't be...