FOLLOWING A ROUGH QUARTER, I’M ASKING MYSELF THESE 6 QUESTIONS
I just sent members our monthly performance numbers for the investment names within the portfolio. To put it bluntly, March sucked for us. It capped off a somewhat frustrating quarter where we became all too familiar with the dynamics of a sideways trading range. 3 out of 4 of the names within our portfolio are mired in a sideways range. All of the 3 closed the month at the bottom of their respective sideways range. This creates an odor in the performance numbers that is only remedied through a steady diet of positive gains in the weeks and months ahead. I think it's important when suffering through down months - and especially down quarters - to examine one's thesis and judge whether it continues to hold valid. If you invest based on fundamentals, you must look at the individual stocks within the portfolio and ask some questions. Here are the questions I am asking myself tonight: 1. Do the fundamentals that drew me into the stocks I invested in still hold true? 2. Does the catalyst that caused me to take a position in the stock still have validity? 3. Have the names within the portfolio become more correlated to the general markets than in the months or quarters prior? 4. Have the investments in the portfolio become popular amongst investors, causing the potential for unnecessary volatility in the investment? 5. Are technical warning signs beginning to pop up? 6. Are there macro-economic developments beginning to take shape that may interfere with the potential for the investment? If I can give a confident no answer to a majority of these questions, then I'll keep the portfolio allocated as is. It's important that you, as an investor or trader, constantly reexamine your thesis or system of trading. It should become an especially urgent matter during drawdowns. You must constantly look at yourself and be willing to admit that I could be wrong here. You must then be willing to make the necessary adjustments to right the ship. Be pro-active in all facets of your investment or trading life. Don't become complacent or think you have any single component of your investment or trading methodology down. It is during times of cocksure arrogance that the market will devour nuts and leave you in a state of complete and utter impotence. Keep it alive and stay...
A STOCK GETTING READY FOR LIFT-OFF
Two names here. I'm long both names. PSTR I have a good sized long-term position. VOG I have a small sized trading position. click on chart below to enlarge
THE SINGLE BEST INDICATOR OF BULLISH SENTIMENT
The sentiment geeks are always switching between different indicators of bullish and bearish sentiment in an effort to gauge whether the market is close to a top or a bottom. If it's not the AAII survey, it's Market Vane or Investor's Intelligence. Maybe it's the COT numbers that tickle the fancy of some traders? The VIX is a fan favorite, as well. The list goes on and on. I have traded with and attempted to profit from every single one of these indicators over nearly two decades of speculation in the financial markets. The single best indicator of bullish sentiment time and time again has been individual stocks themselves. I described how to use individual stocks to gauge market sentiment in my "Phase 4" article published in February. With all the squabbling amongst the bulls and the bears about whether we are about to make new highs in the market averages or plunge to multi-month lows over the next few weeks, I thought now would be a good time to measure what "Phase 4 investors" are up to. Let's take a look at 3 companies and 1 ETF: (click on the charts below to enlarge) CIEN and PXQ are giving us early signals that speculative money is coming back into the market. FNSR and JDSU moving up substantially over then next few days will be the final bell sounding on this short-term bull cycle, within what I believe will be a sideways trading range for the next few months. You want sentiment indicators? I just gave you four of the best. Keep your eye on...
DON’T PULL IN YOUR BULL HORNS QUITE YET
On the morning of March 23rd, I posted a blog update citing the reasons why I was short-term bullish. The chart below cites the reasons why I remain bullish and believe that the upside target for the QQQ could be above 58. click on chart below to enlarge
MY 6 GOLDEN RULES FOR TRADING
The short-term trading portion of our portfolio has been somewhat active lately. More active than taking on anything in our long-term portfolio, for sure. I think it's a good time to go over some short-term trading rules that use to keep me out of trouble. Next time you wonder why I pass on certain trades and take others, it will more than likely be rooted in one of these rules. In no particular order of importance...THE RULES: 1. Avoid the first half hour of trading. Trades in the first half hour of trading are few and far between. There are a ton of quant robot traders out there who make a living off of the first half hour alone due to the fact that it is filled with so many fakeouts, whipsaws and generally shitty trading conditions. I keep my distance from the first half hour for this reason. 2. Volume is everything. There are many solid patterns that I will pass on when the volume isn't there. The more volume you have behind a move, the more chance it has of turning into something solid. Truth be told, volume and the ability to understand price patterns is all you need to read the charts successfully. Most everything else is wasted pixels. 3. Gaps make things tough. If I'm looking to go long or short a stock and it gaps over my price trigger, I will generally back off. Sometimes the stock will keep running and I will be kicking myself for days. However, most of the time it ends up working out. Case in point: FTK today. I released FTK as a play on "The Gun" last night. It gapped way over my price trigger this morning and closed the day at its lows, far below the opening gap. For every one gap that ends up running 20%, there will be nine others that do what FTK did today. 4. Avoid crowds. If a lot of traders are looking at the same trade I am, I become skeptical right away. One of the golden rules of investing is that you have to go where others do not tread. If you have a lot of company on a trade, odds are you are going to lose money. Why? It makes the price movement sloppy. It makes a mess of normally neat, tidy patterns. It goes against the very essence of the market, which is best summed up as: I want to kill you. If you have a ton of sheep running along side you, it makes you a very easy target for a blood-thirsty market. 5. Physical stops are...
TRADE UPDATE – N
Sold N @ 28.97 - 29 Break even trade. Hasn't moved as I expected over the past few days. Original trade here: http://www.zenpenny.com/?p=1237
TRADE UPDATE – VOG
Bought VOG @ 4.50 - 4.55. Reviewed on "The Gun" last night. http://www.zenpenny.com/?p=1292
THE GUN: 3 NEW LONG OPPORTUNITIES THAT DESERVE YOUR ATTENTION
click on the charts below to enlarge
ENERGY CONFERENCE THIS WEEK IS A CATALYST
The Howard Weil Energy Conference will going on this week in New Orleans. It started today and continues through Thursday. Lots of micro-cap, small-cap and mid-cap energy companies will be presenting. Easy to figure that the general consensus will be one of excitement and bullish future expectations. Whether these expectations are fulfilled is yet to be seen. However, the influence it should have on stocks in the micro-cap to mid-cap energy space should be bullish. I will be publishing 3 new stocks for "The Gun" segment later tonight. 2 of them will be direct beneficiaries of this conference, I believe. And, per the usual, they are setting up for a fantastic risk/reward trades. Thought I would make all of you aware of this so that you can benefit from this catalyst through your own research and trading. Good...