Oink Oink

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Since my entry into $NANO at $13.65, the stock has exploded. I supposed I could adhere to a broad rule to let all winners run, but the stock is up roughly 11% today alone. Thus, I will not be a pig in Mr. Wu’s pen in Deadwood, Dakota Territory. I sold out of $NANO.

All trades are timestamped inside The PPT.

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TOTAL PORTFOLIO:

EQUITIES: 62%

• LONG: 54% ($ATPG $CRZO $CSTR $GNK $HMIN $PAY $TIE)
• SHORT: 8% ($QID)

CASH: 38%

I bought a full position in $CRZO, based on the chart below. The stock was one of my top setups last Sunday evening, and I believe it is as close to an ideal setup as there is. Regardless of this particular outcome, understand that I will take this setup every day of the week, so long as the broad market is acting reasonably well.

All trades are timestamped inside The PPT.

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TOTAL PORTFOLIO:

EQUITIES: 66%

• LONG: 58% ($ATPG $CRZO $CSTR $GNK $HMIN $NANO $PAY $TIE)
• SHORT: 8% ($QID)

CASH: 34%

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I made two trades, thus far today:

• I sold out of $VMW.
• I sold 1/2 of $HMIN.

All trades are timestamped in The PPT.

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TOTAL PORTFOLIO:

EQUITIES: 58%

• LONG: 50% ($ATPG $CSTR $GNK $HMIN $NANO $PAY $TIE)
• SHORT: 8% ($QID)

CASH: 42%

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MARKET WRAP UP 09/28/10

Throughout the month of September, aggressive bulls have been, by far, the type of traders who have been rewarded the best by Mr. Market. Thus, when we saw a sharp selloff this morning, including some flash crashy action in $AAPL, it should have come as no surprise to see the bulls come in to buy the dip. With the S&P 500 closing the session up 0.49% to 1147, those aggressive dip-buyers are going to need to be disappointed at least a few times before they throw in the towel if the market rolls over.

Despite the reversal higher today, the bulls still must contend with the serious resistance at 1150. Thus, the tension continues to build at this juncture. As I noted throughout the day, we printed several hanging man candlesticks across the leading indices, sectors and stocks. However, that fact alone is not reason enough to turn bearish. As sloppy as today was, we are still digesting the gains made during last Friday’s rally.

The temptation on a day like today is to overtrade. With all of the progress they have made over the past month, the bulls still have the short term initiative. Rather than extrapolate too much from today’s action, I elected to simply hold my positions and make no changes to my portfolio, until there is a market move with more staying power than that which we saw today.

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The market recovered nicely from the wicked dumping we saw this morning in $AAPL. Into the close, I still believe the daily candles that are on the verge of printing should be respected as possible indications of a correction. However, I made no changes to my portfolio today, as I believe situations like this are designed for traders to trap themselves by jumping to conclusions too soon. If, indeed, today’s assortment of hanging man candles are the beginning of bearish reversals, then that fact will become obvious in the next few days.

The bull case is that today marked a mere consolidation. To support this notion, take a look at the currency pair which is arguably the best gauge of risk appetite in the world: the Aussie Dollar versus the Japanese Yen. This looks to be a bullish setup, and if the Aussie breaks out I would expect all economically sensitive risk assets to flourish, namely equities and commodity related stocks.

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After this morning’s sharp thrust down, the dip buyers came to the rescue and we are now soundly in the green. Across the daily charts, I am seeing many “hanging man” candles that are in the midst of being printed. In Japanese candlestick terminology, a bearish hanging man candle does not differ in appearance from the bullish hammer. However, hanging man candles can appear at the end of an uptrend, indicating buying exhaustion, whereas hammers appear at the end of downtrends. Both of these candles require confirmation in order to declare a reversal of trend.

Those candles, combined with the troubling action in $AAPL that I discussed this morning, have me putting any new longs on hold. I want to be clear that I am not calling a top to this market, so much as I am taking a pause for at least this afternoon. I will let my current longs run, and still have my ultrashort $QQQQ hedge.

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