PORTFOLIO UPDATE: EVERYDAY I’M SHUFFLING
During the trading day, I tweeted the following: One nice winner. One nice loser. In the end, a wash really. SPRT has too much beta in its pants to hold onto during uncertain market times. It has become a nice trading stock. I initiated it, for a second time, at 2.60 on June 16th. Earlier this year I rode it up from the 2.60 range into the 3 range for a profit. I may pursue it again if it moves back down around 2.50-2.60. Have to see which way the cookie crumbles. As for GSIG, it has become my arch-nemesis. I love the company because I did so well on it between 2010 and 2011. That love, however, may be clouding my judgement. The price pattern just keeps on getting more convoluted. I can't make sense of it anymore. I have to move on. Probably the last time I reach for that dish for quite sometime to come. The stock has simply churned me all year. The primary reason for these sells is because I am making room for my newest holding that I have been accumulating since Monday. I will release a full research report on it later this week. This research report has been one of the most difficult I have ever undertaken. There are so many facets to the situation here that I sometimes feel that I am over my head in researching it. However, the upside possibility is so great while the risk is so well defined that it is just simply too good to pass up. You will understand once I present the facts. I am trying to understand it the best I can and want to be able to communicate the opportunity to you the best I can, as well. Takes time...and I'm a one man team. As of the close today I am holding shares of the new holding (to be released), ATNY, AUTH and SPNS. The untouchable posse has lost a few but remains as ruthless as...
AMONG THE CASUALTIES OF THE MARKET: SENTIMENT
There are times sentiment studies can be the most valuable tool one can have in their arsenal. There are also times to dump it in a toilet filled with old cigarette butts and clipped toenails. What separates the professional from the amateur is knowing when to use what. There are times to pull out your AK-47 during a battle and there are other times when it is better to use a hunting knife. WHEN matters. I haven't talked about sentiment for awhile because it is useless in a market that is caught in the mid-range of its bullish life cycle. It only becomes useful at extremes of one sort or another. Those extremes may involve highly oversold conditions, based on panic driven selling. Highly overbought conditions, based on pure greed. A break of an important generational trajectory point. A break of round number or important support level. We are now entering a moment in time when I am watching sentiment again. I'll tell you why: Something curious is happening during this recent selling that I just started paying attention to today. There seems to be a general lack of fear that has developed. While the Russell 2000, as one example, is sitting at one month lows, a short-term measure of the put/call ratio I track is sitting at near 3 month lows (see chart below). I am starting to pay attention now because of the following bearish technical events that have taken place over the past several trading days: 1. Dow failed the important generational trajectory for a third time on Friday. Death comes in 3s and 4s for bull markets. I said in the weekend review to "remain vigilant." 2. The Russell broke down and away from its generational trajectory as of the close today. 3. The VIX experienced a powerful breakout above its trajectory off the 2008 highs today. In the meantime, the chart below shows sentiment is actually becoming more bullish as these important trajectory points are broken: click chart to...
THE COLD HARD TRUTH
If I was all about generating hits to my website, I could easily publish trading setups, volumes of poorly based research reports, and chart analysis that simply doesn't matter. I would be publishing all of these useless tools just to create volume. I know from experience that those who frequent financial blogs love volume. They want the trading setups. They want new stock ideas. They want constant analysis. It matches very well with the attention deficit disorder type mentality that has developed in the trading world over the past several years. Unfortunately, traders and investors seem to think that jumping from idea to idea is the most efficient creating capital gains. They learn over time that this is far from the truth. The problem is I don't care about hits. My goal here is not to have advertising revenue. I don't want to be the most popular guy, I want to be the most effective guy. I want to be the one that changes the way you look at small-cap investing and technical analysis. That is why I go out of my way to provide analysis that you won't find elsewhere. Analysis that opens your mind to possibilities. The purpose of this experiment in communication and information is to demonstrate what I've learned through 18 years of experience. And perhaps to shorten your learning curve by a bit. While on the subject of length of experience, allow me to drop some hard, cold truth on those of you who haven't been doing this for very long. This game that we play is not to be learned overnight. I have come to realize, at the ripe old age of 37, that it takes a minimum of a 10-15 years just to BEGIN to get it right. The foundation that is built after 10-15 years of constant trial and error will allow you to be great in your 20th year and beyond. That is if you make the correct adjustments, modifications and possess the proper mindset. You don't really begin to learn about yourself in relation to trading/investing until after the ten year mark. Before that point, most are jumping around from strategy to strategy. Most are too short-term in focus. There isn't any substance or originality that allows the methodology to give a defined, necessary edge. Most importantly, even if it does, there isn't enough emotional and technical experience to even recognize an edge if it drops right on your lap, gift wrapped with a card saying "YOUR EDGE." You don't know yourself well enough to know where your edge lies. It takes time. It takes a lot of time. In...
A SPECIAL MID-WEEK LOOK AT 3 INDICES THAT ARE CREATING CLARITY GOING FORWARD
I typically like to hold off on publishing technical assessments until the end of the week report. However, we are at a point in time and price here that it warrants special attention. These are the three indices that are driving market action here. Two of them (Dow and SOX) are sitting above technical levels of the utmost importance. The other (CRB) is providing fuel for the markets to move up further. Here's a look: click chart to...
THOUGHTS ON MEDIOCRITY IN EARNINGS, PORTFOLIO PERFORMANCE AND HOW TRACKING INSIDER BUYING CAN BE USELESS
We're getting our first look at what earnings season July 2012 is going to look like. It can be summed up as mediocrity, even disappointment, splashed with glimmers of sunshine and speckled with periods of darkness. Just like the market, there is little consistency. Most importantly, that lack of consistency is not at all a surprise. It was seen from a million miles away for months now by even the most optimistic market participants. In my June Month End Summary delivered on June 30th, I wrote: "There is a very strong perception of July earnings coming in weaker than expected rendering any rally from this point useless once the second week of July roles around and companies begin announcing the horror of the previous quarter. I don’t think the negativity with relation to earnings is as cut and dry as it seems. We either rally right through a negative earnings period based on a factored in, looking ahead type mentality OR earnings and forward projections will be nowhere near as bad as most are expecting." I continue to look for that "factored in" rally to take place. Although now I am also entertaining the possibility of a sideways market right through earnings, basically remaining in the 12,300-12,900 range for the Dow. The lack of participation, generally speaking, has been pronounced. Even more so than summers of recent memory. A wait and see approach seems to taking place among those who have the power to influence market movement. The rest of what is occurring is simply running through various technical levels to see who says "uncle" first. A game I am not interested in playing. I can't complain. I am up about 1% for the month and roughly 25% for the year mid-way through July. I'm sitting at 75% invested of capital, with a 25% cash position that I am eager to put to work once my intermediate term trend indicator turns. As of tonight, both my long-term and short-term trend indicators remain positive. I need all three to give me the buy signal before I fully commit to the market. On another note, one of the research pieces I track closely is insider buying as it relates to small-cap companies. I am seeing a severe drought in insider buying over the past few weeks, the likes of which is rarely seen. The volumes are basically nonexistent. There is a school of thought that exists on Wall Street that considers insiders "smart money" and considers an absence of buying, similar to what we are experiencing currently, an ominous sign for the months ahead. I have a problem with that school of...
PORTFOLIO UPDATE: MORE AUTH
During the trading day, I tweeted the following: This is in addition to the buy I made on AUTH Thursday and Friday between the prices of 4.45-4.55, announced on Twitter during trading hours. There was a news event attached to the move today. Samsung will be using AUTH security products in its new Android phones and tablets. One step closer, I presume, to the big fish - Apple. If you haven't already done so, please read over my research report on AUTH from May 8th that outlines the bullish scenario for this company going forward. I expect that with their next earnings report, in August I believe, the company will report numbers that will more than justify a stock price double current levels. A close over 5.25 sets up a quick move over 6 and beyond. I'll update the chart when that price event takes...
5 CHARTS THAT TYPIFY SUMMER TRADING AND WHAT THEY MEAN GOING FORWARD
click chart to enlarge
PORTFOLIO UPDATE: AUTH IS A DOUBLE DIGIT STOCK IN SINGLE DIGIT CLOTHING
During the trading day Friday, I tweeted the following: AUTH was originally initiated on May 8th, 2012 at 3.65 with a research report titled: "AUTH Represents A Substantial Opportunity In The Wireless Sector." Subsequently, on June 5th, I took a 37% profit for portfolios at 4.95 - 5. The stock got as high as 5.10 before moving back close to 4 and rebounding above 4.50 recently. Those of you who have been observing my behavior as a trader/investor regularly know that I am a proponent of allowing profits to run. A great majority of traders/investors in today's environment cannot differentiate between digesting large amounts of diverse communication and sitting tight in a stock. That may have been a confusing way to put it. Let's try this: What it comes down to, at its essence, is that the vast information flow should not turn into a vast trading flow. You have to be able to digest the second by second bursts of information and remain confident in your position. There must be a discipline at work that allows you separate yourself from the Pavlovian instinct to simply cut and run just because a profit exists. Great years all come down to a few good trades or investments. All the rest is managing risk. Ok. Now that my rant is finished, I will get back to AUTH. I would have normally allowed a 37% profit after one month to run. However, in the case of AUTH, there were signs that the price movement to 5 was climactic in nature. This became even more evident when rumors of the new IPhone using AUTH software began making the rounds. IPhone rumors for small cap companies are like Bigfoot. You get several sightings every year from guys with names like Billy-Bob and Kletus, with the occasional photograph of what is obviously a man with a gorilla mask, most often blanketed by a tree. But not once has Billy-Bob or Kletus called a news conference to showoff their catch. Now that the dust has settled, it seems that AUTH is proving itself once again by looking technically stellar in the midst of a difficult market. click chart to...
PORTFOLIO POSITION REVIEW: ONE BY ONE
It has been awhile since I put together one of these. Now is the time since I'm beginning to get the feeling that it may be time to begin shifting things around a bit. I also feel that we are very close to a point in time where I will either be moving into an even heavier cash position (at 50% right now) or I'll be moving into a 100% invested position. Either way, the second half of my year will likely depend on decisions made over the next several weeks. No pressure at all. None. Here are my thoughts on current positions: GSIG - Absolute frustration here. The only consolation is that I bought into the company when it was in bankruptcy during late 2010 at $2 and change, eventually riding it up to above 10 before selling in early 2011. Perhaps it is my reluctance to let it go because of that profit that has kept me around. But when I look at the fundamentals here, I can't argue with it as an investment. It has all the attributes I like: Great management, low float, restructured, undiscovered and under-appreciated. From a value perspective it is trading at less than 10 times forward earnings and continues to generate cash on a quarter by quarter basis. Additionally, the company has taken the fiscally conservative approach of reducing debt at every opportunity they get. While this doesn't allow them to leverage up and go for the gusto so to speak, it is a prudent move given the history of the company. The price action just stinks, however. It has been caught in this extraterrestrial sideways range for about a year and a half. It will eventually be a $20 stock. I just am not sure if I have the patience to stick with it when there seem to be more expedient opportunities out there. ATNY - The past few days have been difficult here. Earnings were released and obviously have been given a thumbs down by the market. The major issue with the earnings release is that the restructuring taking place with one of their divisions seems to be taking longer than expected and is proving to be more costly, as well. Not a good combination for a levered company sitting on only $18 million cash. The good news is that the restructuring costs do not effect their cash position. Additionally, it seems that the market is bothered by the negative spending cycle taking place in the defense sector generally. There is a budget crisis that effects defense spending, leaving huge amounts of uncertainty for investors to weigh. There is also...