Joined Jul 30, 2008
2,107 Blog Posts

Nice Relief Rally, Open Up Some Shorts Now

You have a few minutes left to open up some shorts today.  I’ll talk more about today’s rally later (simply put, semis spearheaded this rally), and I’ll start with the stocks to short first:

–  Gold stocks:  GG, EGO, NEM  … all hovering near highs, but have a tough roof to break out here.  Stocks rallying in US and Europe usually means gold will reverse.  Use a “step-in” approach to accumulate your short position (ie, short on up days at 1/4 positions 4x).  Damn, EGO is just so overpriced.  Anyway.

–  Stocks that did not breakout today that should have:  SFLY, PCLN, AAPL    …aim for 3% retrace then cover.  NFLX also can be shorted tomorrow on a downgrade.

Stocks to get long (with stops set to today’s low): 
LULU (low:  42.74)
ISRG (low:  324.92)
MELI (low: 58.49)

Okay, I’m buying into this priority-matrix method of doing things on the iPad, but whoever authored it totally copied my idea!  So anyway, I think it’s time to reintroduce you all to Matrix-Trading.  No, not Keanu Reeves slow motion dodging bullets kind of trading, but another intutive way to trade stocks using a simple matrix.  To be continued… (because the market is about to close).

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Mad Money in Solar Stocks


No swing trades today.  Just a quick day trade on some energy plays like HK and YGE.  It was a little hard to get long on a daytrade because most stocks already started way up.  I have to get used to this buy high sell higher style in this back and forth market. 

Stocks closest to 52-lows did particularly well, showing that this a panic-buying rally.  Check out YGE and STP in the solar industry.  I like shorting this industry on the swing side, and getting long on the daytrade.  We here at iBC just love to daytrade solars.  Anyway, you’ll notice both YGE and STP were up about 10% after flirting with their 52-lows.  SPWRA did even better closing up 13%.   If you’ve been tracking the industry, you would have noted there was a lot of negative news on the supply side of solars overseas, which probably contributed to the sectors decline over the past few weeks.  Really, this sector was begging for a bear market rally.  Nevertheless, in a sunny state like Hawaii, solar (ie, Photovaltaic) is a hot industry.  

Anyway, let’s get a little excited now that this sector is brought back to life.  My list is small but potent for trading on the long and short.  TSL is the best of the breed on the fundamental side.

When energy stocks rise,

1.  long TSL (swing)
2.  long STP  (swing)
3.  long YGE (day)
4.  short SPWRA (swing)

When energy stocks retreat,

1.  short YGE (day)
2.  long TSL (swing)
3.  short STP (swing)
4.  long SPWRA (swing)

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IBD 100 Top 10 – A Good Place to Measure the Market

I like IBD because it cuts my screening time in half.  I also like to cross some of the IBD 100 stocks with The PPT engine to see look for hiddeng gems.  For those of you who use The PPT, you’ll notice many stocks that get high scores (ie, hybrid >3.5), usually end up on the IBD.  Set your screens to low-cap, something like 500 – 750M and you can usually spot a hot stock before it hits the IBD 100.  Win.

Anyway, every now and then I like to check out action on the IBD 100 list to see which sectors are booming.  For market direction, we can look at the top 10 (or 5) and monitor their price action to predict where the market is heading.  In other words, these leadership stocks lead the market.  So here’s your top 10 from the IBD 100.  Also, you may notice, two of them were stocks I shorted often in the past, which shows that not even I can get it right all the time.  Humbling.  Anyway, here they are…

1.  [[BIDU]]  …Law of large #s.

2.  [[lulu]]  … I used to short this bad girl.  Apparently, women are into the whole Zoomba aerobics (Zamba? Zimbo? Zeemboob?) and other stuff.  I thought Yoga was a fad, but women are becoming more and more self-concious.  Oh well, good for you LULU.

3.  [[nflx]]  … I praised this stock heavily when I saw BlockBuster videos begin to close down stores all over the place.  But then it looked like it got too ahead of itself.  But then NFLX does the amazing thing by allowing members to stream content from their Play Stations, Wiis, and iPads.  That’s great management and you got to love NFLX for challenging itself.

4.  [[cmg]]  … We have one in Waikiki, and the place is packed… with a bunch of tourist.  The hell?  One time the place was run down by a bunch of Canadians watching a hockey game.  Still a very cool place to chill.  Does it belong so high on the list?  Nope.  It should drop a few places soon.

5.  [[Deck]]  … never been to one.  I still have a difficult time finding a correlation between the clothing stores doing great in a bad economy?  I think a stock like ROST would have a better case.

6.  [[meli]]  … another stock I heavily shorted in the past.  But good thing I stepped away.  The Spanish eBay.  Man, aren’t there like a billion people in Mexico? 

7.  [[aapl]]  …iPhones, iPads.  True leadership company and stock.

8.  [[med]]  … there’s a lot of fat people with fat wallets.  Hello Dan Marino.

9.  [[dpz]]  … don’t know much about them, but earnings change from prior quarter up 500%?!  I got to look this up.

10.  [[dgit]]  … advertising on digital networks.

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When Market Weakens, Knowledge is Power

Today’s end of the day jump was a little deceiving.  Dow closed up a 100 points, but the Nasdaq stayed in the red, showing obvious signs that the market is weak and undecisive.  This was one of those weeks where the market was down enough that we would eventually get a up day.  The warning signs are there, so keep it real.  For example, gold hitting new records is not a sign of optimism (although I do think gold is ridiculously overpriced). 

This was only a breather for the selling, so be careful with buying into this rally and calling it the bottom.  Simply put, we still have a lot more down to go.  On the plus side for the longs, investor sentiment is getting to low levels.  There’s many reasons why, but let’s go ahead and say the pessimism is fed by the stall in the job market recovery.  Of the few people that find jobs, many of them are temporary.  I know a few union workers that have been out of a job for too long, and so they decided to just go and start their own business and undercut everyone else.  Either that, or others in society are looking to advance their education to make a career change or to add an extra level skill so they can be more competitive.  With a weakened economy, knowledge is power.  That means knowing what’s wrong with the market, and knowing what steps to take to survive it.  That applies to the stock market as well.

Education Stocks Showing Relative Strength:

STRA … volume is up.

EDU  … attempting to form a base at 88-90.

High risk/ High return education stocks:  [[DL]] , [[REVU]]   … look to get long if EDU can extend rally.

Other plays:

Foreign solar stocks are worth shorting on supply problems:  SPWRA (heading to single digits), STP, YGE

PEET – nice short play for conservative players.  Easy stop loss set to 40.

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Right on Target… Stock Market Gets Voted Off the Island

Tuesday was the bullseye.
Friday was the shot.

I pointed out earlier that we would have a pretty nice decline today, based on Tuesday’s warning signals, and the fact that selling potential is strongest heading into the weekend.   Market showed very little signs of strength when it got blown around on all the world news.  With many countries hurt financially (can you believe it, not sectors, but countries), the U.S. market has become increasingly sensitive to World events.  That’s why I knew that any rally the rest of the week would be erased.  And so, here we are again, under the water at <10k.   Clearly, investors are getting nervous.  It’s important to start gathering short positions, and avoid buying dips right now unless you are trying out a new small position.  But if it doesn’t go right immediately, then get out.  We’re not in panic zone yet, but we’ve had far too many distribution days in such a short period for us to view the market as a bargain.  Remember, too many distribution days signals a major market reversal.

My plan is to avoid shorting energy until the end of the month.  Also, I’m pulling the plug on some stocks here:  SIRO, PCLN (now a short >180), RVBD (now back at our rally point set in February); meanwhile, I’m still liking HITK, and DRQ looks like a good oversold bargain (I nailed this on the short side back in March, flipping to the long side for bounce).   Currently, I’m looking at shorting JOSB head on, but a part of me is reluctant.

So yeah, while the overall market is hard to get a hold on, it’s much simpler to master a few stocks.  I’ve cut my list of tradeable stocks to about 15, and am focusing more on entry, exit, and stop points.  Seems to be working good in this undpredictable tape.

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The iPad… a Lesson in Good Marketing

Those were some staggering sales numbers, even for a giant company like Apple.  I mean, let’s face it, Apple is an original all-American company that knows how to produce quality, but in a way, struggled to market itself.  Nevertheless,  Apple keeps showing the world who is boss when it comes to revolutionary hardware.  And demand surely backs them up…

2 million iPads in 2 months!  That’s a minimum $1 billion gross ($500 for the 16gb).  Very well timed release and nice pricing to give the iPad a significant market penetration.   A very nice lesson in how a good company that makes good products can become great…

Timing –  Apple created the iTouch which was almost like a preview of the iPad.  It greatly reduced the learning curve, stirred the curiousity of those that enjoyed their iTouch, and got rid of a lot of unknowns.  People who see the iPad as a giant iTouch need to start viewing that as a positive.  It was as if Jobs wet your feet with the iTouch, and the rest of the world plunged into the iPad.  Don’t forget, by the time the iPad was released, the iPod/iTouch products gave the thrid-party community enough time to create apps, and to develop their skills in the app development.  So now, by the time the iPad was offered, their sales pitch included “a wide array and fast growing app store.”  For many of you who bought an iPad, that was probably one of your tipping points.  Come on now, Netflix on that beautiful screen!  Ftw!

Pricing-  It’s hard to do comparative market analysis on the iPad, since there is little to compare it too.  I mean, HP has their own touch screen products that they were trying to develop, but they didn’t pony up enough to catch the consumers attention.  But what I can compare the iTouch too, and I know this is ridiculous a little, but it kind of provides an opportunity cost to NetBooks.  There was a wave of NetBook buying, and they are priced between $300-$400… but the battery life, screen size, and speed of these NetBooks could never make the portability of the product that appealing.  I mean, I already have a small laptop and it owns all those trendy NetBooks.  Other products though that the iPad could probably provide an opportunity cost is to digital book readers, like Amazon’s Kindle.  That piece of junk is priced so high, that it really did a favor for the iPad being priced starting at $500. 

Product –  And finally, the biggest reason why the iPad sold so fast in these past 2 months?  It basically sold itself.  Apple already has this reputation of concentrating on maximizing quality on one product.  They really specialize and spend all their money on developing ONE great item.  Versus, say Microsoft, which created the Zune… “just because.”  Yes, just because Microsoft wanted a piece of a hot market (personal digital media).  While Apple just creates one product, which creates the rules and sets the bar. 

So there you have it, 2 million people have this beautiful piece of hardware on their laps, half of the time wondering what in the world they’re going to do with it, but all of the time having fun with it.

I tip my hat to you Jobs.  FINALLY, you’ve figured out how to sell something, or maybe this was your evil plan all this time?    By the way, I just got my iPad in the mail yesterday. Yee ha!  I’ll be writing my review on it this weekend. 

Apple’s Stock action…


this blog post was in response to:  http://www.pcworld.com/article/197758/ipad_sales_show_little_sign_of_slowing.html

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