Markets Like White Elephants

As we sprint higher into the closing bell, we are getting ever so close to that significant 1220 level on the $SPX. I have highlighted that area ad nauseum because it represents the entrance gate to the zone of resistance from the failed rally in the summer of 2008.  There also seems to be a new air of optimism on the financial news networks, as well as in the non financial media and main street about the economy and the market. So, I would probably start to slowly begin the process of reducing longs.

As for my trading, I sold completely out of my $KLIC today on the 20% move higher, purely on selling discipline.  $CLNE and $DPZ are doing well, while $CSIQ is lagging, although still above its 20 day moving average.

A big reason why I said you needed to have some extra cash on hand during earnings season is to take advantage of what happened after the bell today.  $INTC and $KLIC, both semiconductor related companies, were up huge after hours. I expect other semis to run tomorrow. My favorite play off that pin action is $SMOD. In addition, this news could propel the broad market to that all-important 1220 level tomorrow.  We may very well need a huge up day before we turn around and get that much anticipated pullback.

Below, please find my top setups for tomorrow. Feel free to pick and choose whichever ones best suit your style.  Even the best of setups can fail, so I urge you to use stop losses in order to minimize downside risk.

After the bell today one of my top holdings, $KLIC, is ripping up over 16% because the firm came out early and guided way up on increased demand and visibility in the semiconductor industry.  The reason why I bought $KLIC a few days ago was because the chart looked ready to make another move higher after consolidating from the most recent run up. Below you will find an updated chart that does NOT include today’s after hours action.

You might think that I am posting this news flash to pound my chest, alpha-male style.  Well, possibly.  However, a more IMPORTANT reason for posting this is to illustrate how unpredictable earnings season can be. This company was not even scheduled to issue earnings until May 6!!! Yet, here they are after the bell causing a massive re-pricing in the stock. So, despite the fact that I won, and won big this time, do you see why I have been so persistent in telling you to have some extra cash on hand? I could easily see some downside surprises with other stocks that I own. Having extra cash on hand would help to cushion the blow if that happened. Earnings season, in particular, is a time for respecting risk and not recklessly disregarding it. You are dealing with both expectations and cold, hard numbers. Trading in anticipation of how those two will collide, instead of trading based on price and volume during the other times of the year, offers you a generally unfavorable risk/reward profile as an individual trader with no inside information.  Of course you can still hold positions, just be a little more careful than usual, and a little more street smart…

As for the broad market, you might as well see my previous market wrap ups from the past few days.  It appears that we remain in the vacuum up to 1220, drifting and “slap-chopping” the bears higher. I think you should be mostly long right now, and I favor being in cash in lieu of being short as the danger of a blow off top is too menacing.  At some point, we will need to come back down and test the 20 and/or 50 day moving average, in addition to possibly needing a retest of the 1150 breakout zone.

TOP PICKS: $DPZ, $KLIC, $CLNE, $CSIQ

The market is continuing its daily cocktail consisting of two-thirds drifting up, and one-third chopping and flopping around like a goldfish taken out of its tank by an ADHD riddled seven year old boy.  You degenerate gambling types hate me for saying it by now, but it is correct gambling/trading strategy to have more cash than usual on hand during earnings season because of all of the additional forces affecting stock prices.  Thus, I am taking profits more quickly these days.  Since I made a quick 12% in the past few days, I decided to sell the rest of my $AIG stake. I could easily revisit the position in the coming days, mind you.

I also initiated a position in cardboard cuisine, a.k.a. $DPZ.  Although I would sooner eat airplane food for the rest of my life before ordering a pizza from Domino’s, the chart looks great.  Lord have mercy on all of you stoners, college kids, and idiots who have no taste for good food…

As for my other positions, I am pleased with the action in $CLNE, $CSIQ, and am looking to add to $KLIC as it pulls back to retest its original breakout level.

Here we go again! If you had read my previous lists of setups, you would be swimming in weekend steak, cigar and scotch money right now.  $AIG is up 7-8%, $KLIC is up 4-5%, and many others are in the green like $NUS, $IPG, $AOL, and $VLTR.  All of this in the face of a sluggish, albeit slightly higher market.

And yet, despite my success I have no intention of becoming a complacent loser. I am peeling off my $AIG position 10% at at time, each time I see the stock tick above $40.50.  I will not be a candied pig with an apple sticking out of my mouth, being devoured by “burlap buttress” occupants.

Moreover, I sold out of my $PSYS position. Yes, the stock still has a high flag, but it is acting like dead money for now, as it is probably waiting for some type of private equity buyout or more developments from the new healthcare law. Either way, I’d rather have my money in more momentum based names.  I still like the play, and I could reenter at a later date.

Also, I bought a starter position in $CSIQ.  I like the chart, as I posted last night in setups, and think it is a good long swing setup.  However, as I have said before, I still have a higher than usual cash position on my books due to the fact that it will officially be earnings season after the closing bell today.

Finally, a very gentlemanly reader of my posts–Stevo–commented last night that he believes many more people read my posts than comment on them.  So, please, feel free to leave whatever opinions/comments/insults/funny jokes/horrific admissions you have in the comments section.