Thursday, March 12, 2009

Profits in the bear rally for a retail trader

The current market is a range bound one and its likely to remain so for some time. Its essentially a bear market in which we sometimes get bounces off some extreme lows before hitting some form of resistance and start a downward spiral again towards a support or create new low , once the support/new low is reached RINSE AND REPEAT.

So in essence its a trading market, best visited with hedges, and NOT an investment market. Anyone who tells you blue chips/solid names are cheap so BUY BUY BUY, please let them know that they'll be cheaper next week (JNJ anyone).

I have a very small, well tiny actually, trading account with Tradeking. Usually it is a day trading account and I seldom hold more than 4 positions at a time (not by rule more by forced compulsion else the fees start eating into my profits). Well by friday I was 60-65% cash, while holding on to my old favourite name china fire, cfsg. I follow this stock with diligence and it has with great consistency traded in the 6.2-7.3 range in the bear market. So I got in at 6.2ish a week earlier (I like to trade in and out of this name) and by tuesday I was out at 6.9ish. GAH!! By wednesday the bear rally had set in and its now at 7.7!! So thats a 10% profit instead of 25%ish one. sigh :(

Not to worry I did manage to get into AXYS technology on wednesday in the 35s. AXYS is a favourite motley fool name, a stellar company but the stock has been decimated over the past 3 months (80ish in nov around 25 going into this week).

Anyway AXYS put themselves up for sale on wednesday with a target price of $60 and voila I am up 10%+ on the position. I didnt sell it today, which might backfire as tomorrow is friday and could be a sell-off day as S&P is hovering round its big resistance at 741. I have a sell order at $45 and will be happy to get out at that price (notice the beautiful 25 to 40 jump in 2 days after the "buy us" announcement)

Tomorrow is a big day, if we can hold on to the gains of the past 2 days then we CAN/MAY make a run towards 800 on the S&P, thats where our major resistance lies if we can go north from here.

On the watchlist, waiting for pullbacks:

1. MOS below 39, another stellar run company in the agro/fertilizer sector that has been brutalized (used to be cheap,screaming buy at $100 5 months ago).
2. JRCC, another commodity name,a coal company, below $10, ideally below $9. (used to be a screaming buy at $40 5 months ago).
3. Short LasVegas, I mean the LV casino names (Las Vegas and their casinos/hotels/resorts along with Trump in Atlantic city have been wiped out really by the economic downturn) like Las Vegas Sands,MGM grand, Wynn resorts, when we inch closer to the 800 resistance or break 741 as we start moving down again.

In the meantime continue watching Cramer vs Stewart while drinking Kool-Aid.

Disclaimer: Long AXYS in trading account

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