There Are No Lap Dances in Chessville

Tue Aug 24, 2010 12:09pm EST 7

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…mighty Rick’s has struck out.

I got stopped out of my 1/2 long position in $RICK earlier this morning, just south of $6.40. All kidding aside, I still like the risk/reward of that kind of setup. The stock had been in a steep downtrend and printed two hammers in a row. I bought with the intention of selling out below the low of the most recent hammer, and I did just that. For all of the times that I buy and get stopped out in this type of trade, they are more than made up for when the stock follows through on the hammer to the upside and rips.

So, all things considered, on to the next one.

UPDATE: I took profits and sold out of the rest of $ISLN.

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TOTAL PORTFOLIO:

EQUITIES: 56%

LONG: 50% ($APKT $KOG $LVS $MELI $HMIN $RDWR $CMI)
SHORT: 6% ($ANV)

CASH: 44%

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Bad to the Last Drop of Summer

Mon Aug 23, 2010 6:33pm EST 7

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MARKET WRAP UP 08/23/10

With the beginning of the end of summer trading commencing this week, the market stayed to its script of chopping up both bulls and bears. After several uninspiring attempts at a rally today, the S&P 500 sold off into the closing bell to finish down 0.40% to 1067. As has been the norm, volume was tepid and breadth was weak. The good news for the bulls is that we did not take out Friday’s lows of 1063. However, the bad news is that we closed on the lows of the day, and we are still dangerously probing multi-month support levels.

The updated and annotated daily chart of the S&P 500, seen below, should illustrate these points.

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The daily charts of the other key indices and sectors also continue to tell the story of the bulls tempting fate, in the form of dancing on significant support levels.

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With the market acting weak at key support zones, I have one eye on the exit doors with respect to the longs in my portfolio. The nature of this market has been to punish bulls who anticipated big upside breakouts, as well as bears who shorted at support, looking for a breakdown. The essence of a trading range is to reward traders who resist the urge to extrapolate that weak price action will beget more selling, and vice versa for rallies. In other words, fade the prevailing sentiment. Right now, sentiment is poor, and traders are frustrated and just about ready to give up on this market. It will be interesting to see if we find support here and stay within this tight trading range.

If we do not, the stampede towards the exits will be deafening.

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An Important Message Directed to Mr. Market

Mon Aug 23, 2010 3:38pm EST 3

Since late May, Mr. Market has truly been a royal pain in the ass to both bulls and bears.

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[youtube:http://www.youtube.com/watch?v=TwBa3XA3Sl4 450 300]r

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Before You Wreck Yourself

Mon Aug 23, 2010 2:03pm EST 16

You better check yo self.

I am down on my $CMI position since its purchase. So, how am I supposed to react to it? Do I say, “Oh wow, man. I’m losing money here, man. I’m a total loser, maaaaaaan. Let me smoke some nugs and munch out on Funions and Bugles.”

Answer: No. I do not say that.

$CMI is still a top tier company that makes great, hi-tech engines. Rather than getting all frustrated and emotional about being down on the position, an analysis of the daily chart tells me how I can best define my risk from here. As you can see below, I am willing to admit I am wrong and sell out of the name if the stock falls and holds below $75. If that happens, then the prior breakout earlier this summer can be deemed premature, at a minimum.

Of course, if the prior resistance turns into support now, the stock could easily be setting up for a run to new highs. Thus, having a clear line in the sand is important for not only mitigating your downside risk, but also helps to keep open the possibility of capitalizing on a reversal back to the upside.

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