Brandon your story of Kirby reminds me of the following... author unknown... People will forget what you say... People will even forget what you do... But People will never forget how you made them feel...
you sure changed you strong bias for Japan equities real fast. I think the BOJ raising rates is a tell-tale sign that their 16year recession in coming to an end and prices are rising(good) -> nurtured inflation is good to a degree. Did you really think Japan could have a full-scale economic recovery with rising asset prices and no rate rises?
I am going to approach it cautiously now. One of the hallmarks of my trading is that I can and do change my mind quickly. With regard to Japan I still have the core position and even added a bit to it on friday, but I am watching it close and have moved my stops WAY up. Brandon
There is a whole lotta nothin going on as far as the market goes for me. We continue to trade in a sideways manner, from lows to highs, and highs to lows and then back again. For me, this is untradeable. When I do try to aggressively trade it the only thing I accomplish is to lose money. A lot of people get very frustrated when they encounter a market that their system does not work well in. I do not. I realize that a methodology is a bit like a relationship with a person, there are high points and low points, you take the good with the bad. I am a breakout trader, so for me this type of market is the bad. The only appropriate action I can really take is to be on the sidelines with the majority of my funds, and trading light on the setups I do find. There are some pockets out there that are interesting. I think that this range is going to eventually resolve to the downside, so I am focused much more on finding shorts than longs at this point, though you still should be looking for strong stocks as well.
I have a list of several stocks that are looking nice. Some of them have setup and need to now pull back, others are in the process of building a base. bdh pwei dbrn ewj ewo pru slb cbrl isis holx mar hd shld io irix ericy pcar txcc kndl xray dna cfc wfc sti ldg rad met pru mt yum nda lscc akam dcel do aro glbl xly On the short side there are fewer stocks, but the market has rewarded play on both sides. cnp bbby dell goog ryl apol
AKAM is a interesting one. Growing at an accellerating rate and they have huge margins. This stock could turn into a rocket.
Chuggah Chuggah CHOOO CHOOOO!!! and keep the train moving! What the hell am I talking about? I'm talking about moving on. As you may recall at the start of the year I was extremely bullish on True Relgion Apparel, a maker of high end (ie Overpriced) denim goods that it sells at its own stores and through high end retailers. The company's products are very powerful and the retailers I have talked to said they can not get enough of True Religions products in their stores. This has led to powerful growth in TRLG's earnings and sales as well as some nice appriciation on the stock itself. So, at the beginning of the year I was very hot on this stock and we bought a good number of shares. I thought it had the potential to go up 100% or more over the course of the year, however the price action is suggesting otherwise. In the end, price is king, everything else is secondary at best. Lets look at another stock that I liked a lot, IBM. This is one that I was very hot on shorting due to a nice chart and what I feel is some aggressive accounting which is likely to come back to bite them in the butt. I talked about IBM a number of times and was really looking forward to having a setup so I could put a position on in the beamer, which I antticipated making a lot of money on. In both of these cases I had invested a lot of time and energy into stocks that I really liked, in both cases nothing came of that investment. This can be very disapointing, but it's just part of the game. The longer you trade, the more times its going to happen to you - and each time you must do the same thing. Shrug your shoulders and keep moving. You do not buy stocks with the words "through sickness and health, good times and bad, till death do us part", instead it is a relationship of convenience, nothing more. No stock is worth taking home to mom, and 99% of them are not suitable for life long relationships. They will eventually break your heart unless you are willing to move on quickly if needed. Moving onto the market. What can I say? I must say that this has been a difficult year thus far. We have been in a rather wide range and the market is holding it pretty well. Unfortunatly for me, I am a breakout trader, so this type of action does not mesh well with what I do. Fortunatly I have taken advantage of the opportunities the market has given me and taken action quickly when things have not worked out. The year started off with a lot of promise, I was up 10% in the two and a half weeks of the year. Since then though the market has gotten rather choppy and difficult to trade, thus I have not been as aggressive. If I had continued to be aggressive and trade as though the world was great and there was nothing to worry about in the world I'd have likely given back all of my gains and worked my way into a loss, but I have not. I have been very bored pretty often, but I am currently up 18% on my client accounts for the quarter during a period when most of my fellow traders and money managers are down or flat. I have only had four days so far this year that I lost money. Why am I bringing this all up? Well cos I like to break my arm patting myself on the back of course! Well actually that and because I want you to know there are still money making opportunities out there, nice ones too. Since I am managing other peoples money I can not tollerate the drawdowns, but there have still been great trades out there that have produced gains. No matter how bad the market is, there are always pockets out there that you can trade. More on the market then! We continue to be in a range with the S&P500 and the Nasdaq Composite and Nasdaq100. However, the Dow has broken out now to new 5 year highs, while the Russell 2000 (small caps) and the S&P400 (Midcaps) are at new all time highs. Ordinarily this would have me dancing naked in the streets- however right now I just cant get myself real excited about the market. It still feels very rangy to me, but setups are starting to work. There for awhile nothing was working long or short. Now I am finding that things are working on both sides of the market, this is good. My list is my most important indicator. What do I mean by this? Well each night I scan and on the left side of my sheet of paper I write down the stocks that have technical setups to go long, and on the right side shorts. When the market is healthy there are a lot of stocks on the left side of the page and there is a lot of follow up with them. I want to just briefly though draw your attention to a storm cloud on the horizan. That storm cloud is JAPAN. Since the end of World War 2 Japan has been in a giant easing cycle on interest rates, so much so that real rates have been negative in Japan for some time. That means that you essentially are paid to borrow money from Japanese banks. The low rate party though is about to end. We are now in a world wide interest rate tightening cycle, and for the first time in modern economic history the Bank of Japan is being caught up in it too, if you look at a chart of their short term vs long term rates, they are actually on a collision course to invert! Our own bond rates are also rising and are uncomfortably close to breaking a multi year downtrend and going above 5%. If we go above 5% on rates in the US rates will go to 7.5% to 8.5% eventually, there is no doubt about it in my mind. There is also no doubt in my mind that once Japanese rates start to rise it is going to hurt, and there is a chance (Id put the odds at 20%) of it triggering a global crisis such as we saw in 1987 with the crash and then again in 1998 with the Asian Currencies, Russian and Emerging Markets Bonds and that whole bit. This could be AT LEAST that bad. And the big problem is that right now every one is leaning in one direction, and that direction is LONG. Not only are they all long, they have good reason to be long. I think global equities are very much like Oil stocks were right after Hurricane Katrina, which is scary to me. What do I mean by this? After Hurricane Katrina nearly everyone got very bullish on Oil stocks and bought them, and there were many good reason to do it. When oil stocks finally came down it was like the rug got pulled out from underneath of people and the major oil related indexes crashed 10% to 15% in two or three days. Some of the weaker individual names lost 30% to 50% in under one week. This is the kind of risk we currently are exposed too with equities. Right now I don't think there is is a lot of action to take around this because its not something that is currently unfolding, and it might not ever. However, its something to keep a close eye on because if it comes to pass its going to unleash a Hurricane Katrina on the global equities market. The only thing I see currently related to this is the TLT, which I am currently short and will be looking to add additional short exposure to if it breaks down further.
continue Now lets look at some individual names. For the most part I tend to be a trend following guy. I trade breakouts in the direction of a trend in strong or weak stocks, but there are always places to deviate from this. I occassionally buy bottoms when a stock breaks out of a nice and long low level base. A good relatively recent example of this setup is ARBA. You can see the very long base it was making near the lows at the end of last year. On December 9th it broke out sharply and has not looked back since. This type of bottoming pattern very often leads to some of my best trades, and certainly ARBA, which I still own, has been kind to me. Two stocks I want to watch right now as potential bottoms off these low level bases are LSCC and SATC. Both of these stocks are dirt cheap semi conductor stocks that have been losing money, however both have broken out sharply on heavy volume and have been making quick progress in trimming their losses, which Wall Street is obviously taking note of. Each of them is a little extended right now, so I will not be buying at these levels but I will be watching for a pullback and looking to put on a position then. Silver and Gold stocks are also very strong at this point, silver in fact just made a new 22 year high. The clear leaders there are SSRI and PAAS, both of which are showing great relative strength, but also need to rest a tad before I buy them. Eagle Materials (EXP.B) has a nice gap and go that its building, my main worry with this is that its broken out on light volume. JBL broke out Thursday on heavy volume after earnings, on friday it traded on lighter volume in the top of fridays range, resting and giving us a potential setup. Sears Holdings (SHLD) is another stock that built a nice low level base, has a big gap that is holding and looks higher. Kerzner International, a member of the recently strong gaming group had a thrust 5 days ago and has since rested and looks as though it could go higiher. Other stocks in the gaming sector that I think will offer opportunities later (they need to form new setups) include SHFL, STN, WYNN, and GPIC. I find myself being compelled to buy GM, but I couldnt tell you why. Usually what that means is that I will buy a little bit and will end up wishing I had bought a lot. JDSU seems to have come back to life and over the last few days it has pulled back nicelyy on lighter volume. It now looks poised to resume its march higher. SBUX looks nice, pretty soon each new house will come with its own built in Starbux store. MCHP is another strong uptrending stock that has pulled back on the weekly chart to support. All the names above should give you a pretty good list of names to watch. On the short side the Internet stocks as a group continue to look like the south end of a north bound mule, pretty bad! I had thought the homebuilders would top out and tumble, but they again had the last laugh. Finally Internet Security leader Check Point had a huge move down following a gap on friday. This action brings it to the botom of a rnage which looks unlikely to hold. I will be looking for shorting opportunities in that stock. Hopefully the half a book I just wrote above will give you a few ideas you can use. If you would like me to look at your portfolio and see if I could help you please email at BrandonLFredrickson@gmail.com Brandon