AN ALTERNATIVE VIEW OF SYNC
SYNC is a mind-fuck. At least for me it has turned into one. What I mean by that is the stock has the potential to interrupt my mental equilibrium if I reinvest, regardless of how bullish I feel. When I begin changing my mind, jumping around or becoming squirrely about a stock I know it is time to walk away. More harm than good can occur if I continue hanging around. What I can still do, however, is dissect the price action so at least some of you who aren't afflicted with my handicaps can prosper. I have no position here as of Tuesday. Nevertheless, here is my assessment of price action alone. I feel the stock has settled enough to be able to weigh it out rationally. Here goes: click chart to...
LIVING IN A LAND OF NO OPPORTUNITY
In my mid-30s now, I have developed (or perhaps regressed?) to a point where all sense of uncertainty with respect to what I will be doing from one hour to the next has been removed. Yes, I live a very regimented life. With the exception of an occasional vacation or getaway, I can tell you what I will be doing at any given point two Sunday's from now. My time has been segmented into small windows that I devote to different things in my life that matter to me the most. Every single day a couple hours after the market closes, like clockwork, I perform my daily routine of looking through current positions and attempting to locate new candidates. I have a number of scans and filters that I use. I also look through about 80 different charts day in and day out. With the exception of when I took a three year break from the markets after closing my hedge fund in 2006, I have been doing this, without exception, since 1994. From 1995-2006 I would look through approximately 400-500 charts per day without missing a single day. I took that number down substantially when reentering the markets due to modifications in my methodology and focus. I decided to get more micro rather than being macro. Just because I am not mentioning my research doesn't mean that it is not being performed. It is one of those things where I feel like if I miss a single day, there is potential to miss the next SYNC or PTGI or SPRT or AUTH. Any number of the opportunities that have come along this year, leading to substantial profits for myself and hopefully some of you as well. And it literally comes down to a single day. If I don't follow my discipline in research then that filter that triggered SYNC back in March, as an example, won't trigger it the next day or even the next month. That opportunity is then missed. There goes a 100% gainer and a good percentage of my gains so far in 2012. There simply isn't any opportunity out there. I mean it is bone dry. Fairly typical for the summer trading months. Nevertheless, it is frustrating. Even my current positions, with the exception of SPRT, aren't performing well enough to consider adding to winners as I like to do. As far as my trend indicators go, my short-term indicator is close to turning negative, while my intermediate term trend indicator is close to turning positive. Meaning that even my mechanical, quantitative models have no idea what to make of the past few days...
IS THERE AN EXIT DOOR OUT OF THE TWILIGHT ZONE?
When it rains it pours. My SYNC road map fell apart in flying colors resembling what you find in an outhouse today, forcing me into full scale liquidation mode unexpectedly. And now it seems that my price mirrors in the Dow and Russell are beginning to experience some cracking. I have suddenly found myself in another dimension of market analysis, where the sights and sounds are not what they seem. Welcome to the stock market Twilight Zone. In order to experience a quick exit from this Twilight Zone, I need to see a green close tomorrow across all major indices. I DO NOT want to see the Dow or Russell close below today's lows. Should we continue to weaken throughout this week, then I will need to reassess. This doesn't mean I will be bailing out of my positions. Barring an enormous down day, my trend indicators are still firmly positive. But enough technical damage is beginning to occur that it needs to reversed in order to preserve the short-term bullish structure of the market. When the short-term structure falls, then the intermediate term is not too far behind. And so on and so forth. It can get ugly quickly. Especially in these thin summer months, with earnings season upon us. And that is exactly why I have little tolerance with moves in the greater indices that are against my expectations. Minor damage can turn into major damage in a hurry given the time period we are in and the crosscurrents we face. If there is an exit door out of the Twilight Zone, I hope I find it this week. Otherwise, I am afraid that what was once a bullish pasture filled with wonderful flowers and fairies will turn into a raging river of molten lava occupied by bear-demons with reptilian tails and serrated teeth. I prefer flowers and fairies. Let's see if we can spot any...
PORTFOLIO UPDATE
During the trading day, I tweeted the following: SYNC was the largest position in the portfolio. Selling it brings me back down to a 50% cash position when I should be at 75% invested according to my mechanical system of allocation. This leaves me with a distinct dilemma: I need exposure, but am having great difficulty in finding the proper candidates. I don't want to force the issue either. My only choice here is to wait until the right opportunity comes along. It could be later this week or it could be in a month. At this point, I'm not sure. The current portfolio consists of ATNY, GSIG, SPRT, SPNS and roughly 50% cash. Still up for the month, despite giving back a bulk of the gains today with SYNC's...
SYNC: KICKED OUT OF THE CLUB TODAY FOR UNRULY BEHAVIOR
A profitable relationship with SYNC ended today. It was kicked to the curb during the first couple hours of trading. As most of you know, I initiated a position in SYNC on March 29th in the low-7 range. I added to the position on April 30th in the 8 range. It became the largest position in the portfolio as a result of appreciation, constituting roughly 25% of the portfolio before today's sell. I didn't have a clue, inkling or feeling that today would be the day I would sell SYNC. There are times I know I will be selling soon and times, like today, where I am forced to act by an event outside the realm of expectations. I had a target above 20 for SYNC either taking place this week or in the coming weeks. That was my expectation. The expectation or rather, my analysis, is never wrong. It is the market that is in error or out of sync (no pun intended). I'm not making an arrogant statement in saying that my analysis is never wrong if you read into it correctly. What it means when I say that my analysis is never wrong is that there is a correct mode of behavior for a stock or index and an incorrect one. My analysis lays out the correct path of behavior. When the behavior diverges from that path I realize that I am dealing with a stock or index that has become ill, so to speak. At that point, I sever my relationship with that stock or index. SYNC should have continued above 20 this week or in the coming weeks before pulling back. That would have been the normal course of behavior. Even if it didn't reach 20, a move to 18 or 19 let's say followed by consolidation or an orderly pullback. I would have been fine with that. It wasn't the fact that SYNC went below 15 or 14 that was bothersome today. It was the manner in which it did it and the volume that accompanied it. Again, so far outside the range of expectations that I cannot accurately assess its risk from this point on. Whenever I become fuzzy about my risk in a stock, regardless of how much I believe in the company, I can no longer have anything to do with that company. SYNC has been booted. Walked away with roughly a 100% gain in a little over 3 months for the portfolios. I'm happy about that. What I am not happy about is that given the circumstances surrounding the stock, I will likely not be allocating into the name...
4 LONG-TERM LOOKS AT THE MARKET UTILIZING 9 DAY CHARTS
Since the markets seem to be in a state of short-term consolidation, with little change from last week, I decided to take a look at a longer-term view of the markets. What follows are 9 day charts for noteworthy indices and stocks. click chart to enlarge
A PRICE MIRROR IN THE DOW THAT WILL LEAVE YOU MOPING IF YOU ARE BEARISH
I received a great reception to the price mirror in the Russell 2000 I posted some weeks ago. There is a price mirror also occurring in the Dow that should be pointed out. It is not as "tight" a price mirror as the Russell example because the price mirror in the Russell took place ON the trajectory point, whereas the Dow price mirror is taking place a little ways AWAY from the trajectory. Also, the Russell has been leading this bull run, therefore it is given precedence in analysis over the Dow. Price mirrors can only occur in or around important trajectory points. Otherwise, it becomes your run of the mill correlation study that is prone to dissolution at a moments notice. Here is the Dow price mirror: click chart to...
THE OUTLOOK ON SYNC FOLLOWING AN ACROBATIC, HIGH-FLYING WEEK
SYNC is and HAS BEEN an investment since March, when I first published this research report on the company when it was in the low 7s. It has grown into the largest portfolio position as a result of appreciation. In the March research report, I stated the following: SYNC is selling at 1.5 times revenues and 15 times projected 2012 earnings. If the projections are correct SYNC should be selling at a minimum of double the current market cap based on the the premium that should be assigned to a growth company in a hot sector that has created a niche for itself that is difficult to replicate. If the guidance is conservative, then the stock should be in the mid-20s by the end of the year. It seems as though my estimates may have been conservative, all things considered. I didn't know at that time that volume and interest in the stock would jump to such extraordinary levels. The onus is now on the company to justify this run by exceeding expectations and raising guidance when they report in a few weeks. Keep in mind, this was a company that was attempting to go public before 2012. It is also a company that was supposed to start trading publicly above $10 per share but saw its offering price lowered due to prevailing market conditions earlier this year. Point being that management obviously had an idea of what they considered to be fair value. At present value, the company is trading at a 50% premium to what management considered fair value at the beginning of this year, without all of the recent positive developments. Upside remains substantial. And here is an updated technical look at the company. As a side note, before getting to the chart, I am astounded by the number of individuals who find it so difficult to hold onto a profitable investment. I am also surprised at how many individuals honestly feel that they are adept enough to trade every swing in a stock. Both of these traits guarantee that you miss the bulk of the move in a stock like this. And all you need in order to have a good year is reasonable risk control and one or two of these names per year. Your trading and fear of a profit turning into a loss will kill you. click chart to...
FILL UP YOUR GAS TANKS, CRUDE OIL IS GOING TO 115
And eventually 140 within 6-12 months. Especially given the smash move up in the CRB recently, the global "inflate or die" trade is back on. click chart to enlarge
3 CHARTS TO HELP YOU WIN, WIN, WIN NO MATTER WHAT IN THE MONTH OF JULY
click chart to enlarge