My Whole Lot of Bark, Not Much Bite

So Hurricane Gustav really didn't do much damage, even the helicopter inspection out on the gulf showed that the rigs were ok. There might be some distribution disruption but I really don't foresee a major effect on oil prices. Although, I do have to say that I think oil prices dropped too much too quickly and it makes me a little uncomfortable. I took off some of my positions today in ENER, LUFK, KOL, GMXR, HK, ARD, FWLT, and PTEN. I covered my CEO position short too quickly. It was my largest short position and I've been losing a crap load on it... stupid Chinse ADR. I think I only end up making 60 cents on this. I just don't really like how it'll gap up or down 5 points depending how it did in Asia. There were a lot of other stuff that I didn't get in or I wished I took more shares but really, I think I did the right thing in not risking too much capital on one idea.

I think it was Morgan that came out with the downgrade on DF today. I almost had to laugh when I read the news since that's what I've been hoping for since last week after SAFM and SFD's earnings. Let's see if we can get a few more of the herd to join.

I'm really a little surprised on what kind of prices some of these home builders are trading at. Is the housing market already rebounding? I bought some TMA at 40 cents. Normally I don't like to pick bottom on these low dollar stocks but honestly even if TMA goes bankrupt it's a good risk reward. I'm sure there are still a lot of questions that need to be answered. CNBC won't stop talking about how XHB is the best performing sector lately... makes me want to short it just to spite them.

Gold and Silver is breaking down... hopefully I can still find some mining companies to short.

Three more hurricanes forming in the Atlantic. We'll have to see how much impact they have.

My Confusion, Pt. 2

Boy, was I wrong about MW missing earnings. There is never a sure bet when it comes to these earning plays. Well... there's never a sure bet when it comes to trading, period. Sure was glad I didn't play it though.

You know, here's what I'm talking about the confusion... you got a tropical-storm-soon-to-be-hurricane coming. It's not like Katrina, but at least it's the first major big one since Katrina. You would think USO and UNG would go up, but they don't. It gapped up this morning and just losing ground all day. Whatever. This means that the downtrend still holds. You don't trade the news; you trade the reaction. My short order for the coal ETF KOL got triggered and I think I should've taken some profit in the middle of the day when it started bouncing.

I'm going to list the things that didn't quite make sense to me, with what I guess was the reason in the parentheses.

SHLD misses by 12 cents but bounced hard right around 85 (GDP data that came out today)

ENER beats by 8 cents but falls after the open (Oil going down)

Potential big ass hurricane coming but crude and natural gas goes down (Dollar strengthening?)

Oh whatever... what do I know. Nobody knows anything out there. If someone tells me exactly what the market is going to do tomorrow or for any timeline I'd call him a fucking liar in his face.

FNM and FRE is touching that down trend line... I'm tired of playing these two stocks, seriously I wish the government would just come out and we're going to save it or say "let it burn!" It reminds me of a song by Usher

I was looking at the projected path for Gustav, honestly I was more interested to see if our home opening game would be ruined, but it looks like we won't know the full effect of the damage until probably Sunday or Monday. Either way, makes for a VERY interesting open on Tuesday when we come back from Labor Day, especially when we got ISM data coming out at 10 am EST as well.

My Perfect Storm?

Some of my oil/energy short orders got triggered with the fear of a hurricane and it can be pretty easy to push prices around in this low volume. I think this hurricane is a little different the previous two (or was it three?) we had this season. The previous ones were quickly dismissed as no threat to the rigs out on the gulf, but judging by the projected path of this one it might actually do some damage. I've changed my limit orders to just flags now. I don't want to end up with so many positions again that I can't think clearly. If the hurricane turns out to be a whole lot of nothing I think this little spike could get you some nice entries with a reasonable stop.

I'm still up on my ENER short position from 79.95... this coming storm, oil inventories on Wednesday and I think ENER reports earnings on Thursday make me want to take profits. I'm down on GMXR and I might give it only another point b/c I take a loss. I wanted to short SPWR when it was around 97 but with the recent report about LDK and STP's good earnings and contracts I wanted to sit out and observe more. I personally want to think the solar story is over for now. A lot of these contracts were in the past, it's more important about the future projection. We'll see what SOLF says on Wednesday.

MW reports after the close on Wednesday. I might play it if I was up a lot for the day. I'm short biased against Men's Wearhouse. I think it's crap.

SAFM and SFD reported today, I think one beat earnings and the other missed; can't remember which at the moment, but both cited challenging environment, particularly the cost. I put on my DF short and it's working so far; hopefully some analyst come out and downgrade the entire industry. HRL wasn't really moving and TSN I got in kind of late for only a slight profit. PPC started dying and I really should've gotten in with earlier and with more size. I knew about the two earnings today, I simply forgot about PPC was in that group so it too me some time to believe in the move. I think that was my best trade for the day.

Russia (RSX) gapped down and finished lower again, although I'm starting to hear CNBC talk about Russia more now. It could be that they don't have anything else to cover. I mean... c'mon, they did some story on Guitar Hero today that I think they even forgot to say the stock implication. It was more about this "new" guitar they have out. It could also be an indicator that it's bottomed, as we all know often analysts downgrade the bottom and upgrade the top. Sell the frenzy and buy the panic I guess.

My Slow Week?

This is the week before Labor Day, typically really slow and I think volume in most stocks and ETFs today was about 60% to almost half of their average volume. I haven't dialed down my trading shares and I really ought to this week.

I was a bit surprised at how many important numbers and earnings, especially retailers, are coming out this week. Well, I say they're important I mean they're at least interesting to me. Too bad we might not get any reaction from them at all, maybe a hiccup and that's it. Maybe this will set up for a crazy start in September after Labor Day like what happened back on MLK Day.

I'll be watching the earnings for SAFM and SFD, they sell chicken and pork, respectively. DF I think would also be in play (DF sells milk products) other than the obvious HRL and TSN. DF and SFD have shown relative strength after having multiple downgrades. We'll see if maybe they go right back down to where they bounced.

Speaking of DF... I'm really surprised what a beating WBD has taken along with the Russian ETF RSX. I can't tell how much of the down slide is related to what's going on in Georgia. I want to say the down slide started long before Georgia and that only made it worse. I'll be watching and waiting for sign of rebound in both of them.

Oh, before I get back on track again... I just realized lately that there's an ETF for heating oil, except that the volume is really too low for my liking. It might be a good idea to find a good entry right now before winter comes.

Anyway, among the retailers reporting this week, AEO, BIG, CHS, JCG, TLB, SHLD, TIF, TWB, ZLC, WSM and DDS. I haven't been able to borrow shares of ZLC so I think I'll probably just play BIG and SHLD. On top of that, we have consumer confidence and FOMC minutes coming out on Tuesday, durable goods orders along with the regular crude inventories on Wednesday, GDP on Thursday, and Chicago PMI and Michigan Sentiment on Friday. Let's please get some consistency going and form some kind of trend, but I wouldn't be surprised we end up down 200 pts one day in reaction to one number and up another 150 the next day b/c the number is not as bad as anticipated.

Nevertheless, let's get ready for some FOOTBALL! USC @ Virginia, Alabama @ Clemson, Illinois @ Missouri, and who knows, maybe Appalachian State will repeat their upset last year over Michigan at LSU this week (LSU doesn't exactly have their QB issue settled, so I wouldn't be too surprised)

My Confusion

No major trend going that I got in early enough. I've been trying to stretch out my trading timeline and start to think more like a fund manager, but before I'm confident enough to risk real capital I've been using a trading simulation application to test my result.

Although I can't say that I thorough enjoy Andrew Horowitz's The Disciplined Investor podcast (I think he can be very condescending), which I do listen on a somewhat regular basis during my commute to work, I do like his methodology. He uses a Quanta-Funda-Techna method, which is looks at the quantitative first, then the fundamental (EPS, etc), and then the technical (charts), to screen for stocks. I personally use a similar style except I don't have a fancy term for it. In essence I look first at the big picture first, from there I identify the industries that are in play and whether it's strong or weak, from there I find the leaders and laggers of those industries. After I have narrow it down to at least a manageable list of stocks, I look less at its P/E ratio and what not, but I tend to value the IBD data more. P/E ratio... well, people make arguments for buying stocks w/ low ratios thinking it's undervalued or shorting high ratios b/c it's overvalued. Personally... I think it's a load of bull crap if you think like that. I tend to believe that stocks trades w/ a high P/E ratio for a reason. I use it more for a screening tool, but I wouldn't formulate my opinion over a stock over that simple ratio. One additional note though is that I would almost never buy a stock w/ a P/E ratio more than two times its growth rate.


I don't believe that us traders should "predict" the market. What we should do is observe what's happening in our environment for changes and catalysts, find potential trades from that and wait for confirmation. I've come to the realization that the market doesn't care what I think. I might think short or long a stock when the tape is telling me the opposite and the market slaps me w/ a big F-U!


Although I usually don't spot the up trend early enough and I don't like to chase them, what goes up usually comes back down. I guess I have to thank my experience w/ JSDA. It's possibly the easiest pattern to recognize. These growth stocks shoot up after a few blow out quarters and then the analysts start praising the companies, but once the earnings slow down and you start seeing the lower low and lower high pattern... get in and short. There are tons of examples, CROX went from 75 to 4. CEA: 120 back down to 20. ZNH: 90 to 16.


Lately I've been just floating out shares on this trading simulation platform and getting whacked left and right. My entries are usually terrible and honestly nothing is trending very well... at least the ones that I got into. But I've cleaned out everything in my fake portfolio and starting over. Recently the craze about oil gave you some good chance shorting oil and oil/energy related stocks on the way down. Two days ago the pop in XTO, DVN, APA, CLR and CNQ gave you a good short entry with a reasonable stop... except for some reason I thought it was going to break out and longed it to "hedge" against my other oil and energy short positions. Really don't understand what I was thinking. I guess I thought these stocks were beat up way too much.

JRCC at 45 looks like a pretty good short to me, although the chart is not as clean as I'd like. PCX is also not as clear, but I'll definitely short it when it breaks 50. CWEI has a cleaner lower high and lower low pattern, although this stock is kind of illiquid and the spread is bigger. I'm looking to get in around 88, 89 on the next spike. SPWR above 80 is a clear break out; although now I'm looking to get short close to this 100 level. LUFK still looks like it's in an up trend, I'm waiting for it to break down. ENER at 80 also looks like a good short. I'm also looking to short some metal and heavy construction stocks... MEA is this only one that I know off the top of my mind would be a good one, but we'll see what happens w/ X and CLF.

It sounds like I'm a bear and I'd have to say I'm slightly short biased b/c stocks tend to move down faster than they move up, but you need to be able to go both ways, too. When oil starts to break the trend, you could find stuff that would benefit from this... namely, the airline stocks that have been beaten up so much. I've sort of missed the train going long on them so I'm going to wait to see if I can get a good entry.