Tuesday, October 31, 2006

SMSI saga continued

What happened?
This is the right question and we will never know real answer.
Since I, after seeng my 5 consecutive stops to fire and after adding at 17.3 witnessing that last one to go at a loss, let say instead of making 3x amount I made 1x, and if I'm not going to be able to convince myself that SMSI worth "an earnings shot" I probably lost 5x of expected profits. Yeah, yeah, yeah - I'm "counting turkeys".

The only way for me to make any sense of what and why happened is to look at the chart.

Today's SMSI chart does NOT look good..
Wait a minute - it looked good until, OK - be patient

Day started for SMSI as we all hoped for and for the market ( I'll use Russel 2000 as benchmark ) as well, on a positive note.

It did not last long for R2K and by 9:50 it was in the negative territory... SMSI followed due to profit taking and put a bottom at 9:49 at $18.1 and immediately run up again. And that was a beginning of the end of SMSI in the bad market. Everybody set stop loss orders at $18.10 - just in case... I would...

$18.1 held up until 12:05PM when it was penetrated with just 6700 shares. And that started first avalanche and if you'll look at R2K chart by that time it was in free fall as well. Then up until 3PM SMSI behaved quite well in the very bad for small cap market.
From 12:25 till 3:05 it never went below 17.2, at about 3PM it looked like it stabilized at 17.3 area - so I guess, going into the close and tomorrow's earning a lot of trader set a stop at -.10 which is 17.2.

At about 3:10PM R2K started to slide again and pulled SMSI with it, just a bit - but if everybody set the stop where I would ( and sorry to say - did ) penetration of 17.2 on volume of 7300 shares caused the second slide down to 16.35 which immediately triggered a lot of buying on very nice volume and for the last 40 minutes price did not change much.

Bad market and a lot of cautious (momentum?) traders who bought SMSI yesterday and nervousness before earnings caused this fall.

Is that what really happened? We will know tomorrow and after earnings we'll have a final dot. Will I buy tomorrow? From my perspective nothing changed since Thursday when I posted SMSI as a short squeeze play except for couple of slams, first was caused by IBD "chart of the day" and short covering and the second one by bad market and stop loss orders, price wize from Friday's close to today's ( Tuesday ) close SMSI ADDED .12c and sitting above current support of about $17.

Hey - this stock has beta of 4.26 - there is a heat in the kitchen!

Tomorrow we WILL know.

P.S. Second short squeeze play candidate IIG is up today 4.77% and 4.4% since Friday when I opened position and it made another 52WK on more then double the volume ( Thanks God IBD did not jinx it :)

Monday, October 30, 2006

Quick Update

We all had very good day today, we all excited and ... tired. So, I just went over previously posted ideas and posting those which are at good buy points. As always - if you have interest in any particular position - ask questions.


short: FMCN AEOS

And.. congratulations to those of you who stayed with RNAI - nice pay off!

Sunday, October 29, 2006

The "reasoning" behind SMSI long

On Wednesday night of October 25th ( I run my screens daily ) SMSI has come up on one of my basic screens showing stocks within 10% of 52WH, having small float = 20M, substantial short interest of 33% and with institutional holdings slightly above my "comfort level" of 40% - SMSI has 55%. So far so good.

When I look at ANY stock I use multiple time frames to analyze price action, let start from 3 years weekly part.

Stock is in its "base 4" phase ( this is when most stocks which did not go below prior base fail its advance) - there is not much to like here, this is a time when retail investors jump into the stock and then find themselves holding a bag for a long time.
If you look at weekly chart for last 3 years, base 1 ended on 5/2 2003, base 2 ended on 8/6 2004, base 3 ended on 5/3 2006 ( not exact dates, but you get the point ).

Now it is in base 4, June 2006 to October 2006 which is not classically shaped, has rough edges, big ups and downs, sharp button of the base, strong run up last few weeks, not really comforting to me, this one to keep an eye on at all times.

On week of 10/13 2006 SMSI hit 52WH on strong volume, week of 10/20 another 52WH on above average volume, not to worry about red week - it was only down .85% - to me even without using technical indicators it says "accumulation".

Now daily chart for the last month
first latest 52WH was set on 10/10/06 on high volume, another 52WH on 10/11/06, there was no follow through which is explained by substantial advance from the buttom of the base in short time, still on 10/11 SMSI gave up only 4.3% out of prior day's advance of 8.54%. Another 52WH on 10/16 on no volume, this caused weak hands to get out next few days with "shake off" on 10/19 down to 25MA line, but still, closed above 6/5 - 7/26 resistance level of $15.5.

Now, lets look at 10/19 - 10/25. SMSI has formed small ascending triangle on very low volume, which is great in this case since it shows that not too many traders were getting out, apex formed on 10/25 - night I posted it as long pick ( along with IIG ).

If I would be a big fan of candle patters I'd be scared by "Dark Cloud cover Bearish" formed on 10/27, but - I'm not a big fan of such things, here is why -I think in order to use many of candlestick patters you have to be an expert, perfectionist, hey - MARKET IS NOT PERFECT. I respect "hammers","engulfing" and .. that's about it.

Average volume dropped to about 800K during last 10 consolidation on the top days, relative strength is quite good - above 60 most of the days.

Now - last 2 days, strong closes with a lot of buying into the close. You might oppose me and say: "On Friday there was a huge dump of over 100K right into the close" - NOT. Don't be confused by last 2 red candles on 5 minutes chart. First brought SMSI down .12% on volume of about 25K, and the second and last moved stock down another .12% on volume of 95K - can you call it "selling into the close"? I cannot, because if it was just selling stock would plummet on that volume, what it was? Will we ever know?

As almost always the case with stocks I trade SMSI has quite healthy for grows stock fundamentals.

And last, but not least, Investors Business Daily (after looking at my blog?) posted "chart of the day" on Saturday Oct 28th night which you can see for free till Monday evening here

Earnings due Wednesday Nov 1st after the market close
- it is ALWAYS a gamble, good luck to all of us ( If earnings play makes you feel uncomfortable - you'll have 3 days to close your position - if you have one )

Battle for "blog survival"

Fellow bloggers have noticed that for many months it's been a real pain to publish posts on blogger, constant errors, timeout, thanks God - no lost posts due to "save first publish next" way of how blogger works.

I've been reluctant to switching to blogger beta, but today I took a dive, kept my fingers crossed and switched to beta. So far so good, no lost content, publishing is a breeze, navigation - will get use to it, and what I discovered that due to me been technically challenged I had "unmoderated comments" which I "approved" now and they appeared on corresponding pages.

One of the "lost in space" comments expresssed a wish to know more "reasoning" behind how I select particular stocks. Explaining why I think stock "ABC" will go up or down for every stock I post is a very time consuming task, but I'll be happy to answer questions for the picks you, readers of this blog, will be more interested in, as I said, don't just blindly use info on this blog, before you make a move - you do need to understand my "reasoning" - so ask questions if any of my stock picks seems to be attractive to you.

I will do one more post late tonight and I'll try to narrate what caused me to select latest candidates - IIG and SMSI on Thursday Oct 26th 2006.

Sunday morning update

Sunday Oct 29th morning update:
Was reading IBD, was glad to see that one of 2 stocks I selected on Thursday, October 26, 2006 as "short squeeze play" SMSI was highlighted in Investors Business Daily as breakout play under "chart of the day" column. Stock has huge short interest, earnings due Monday, could be interesting.

Thursday, October 26, 2006

"The nature of the beast"

When coolER heads watch in disbelief runaway market that is when we know, that it is time to stop listening for the voice of reason and just join runaway bull market. Crowd is always wrong, crowd is always strong, join the crowd, but watch for a safe exit at any time - you don't want to join patient bagholders caring the bag since Spring 2000.

(ticker / reasonable buy price )
TOPT 6.2 ELGX 4 GEHL 29.1 MEND 13.5 KFI 19.3 TXRH 13.8 ELON 8.8 FALC 7.81 NUAN 9.9 ICOC 7.75 COLY 12.2 ID 14.05 RGC 20.05 SMSI 17.03 MNKD 19.45 LMIA(?) 20 CCO 21.5 SFUN 18.8


Short squeeze play

Since market is about to open on positive side again let see if IIG and SMSI will fill the bill on the long side

Tuesday, October 24, 2006

Throwing darts...

still when we do that in a good market we want to collect more then just an average return


and some short ideas (it's good to have few of those in case of correction and just to hedge an account): SLR CPS DLB ATYT FRK

Monday, October 23, 2006

Just one stock

FLDR long

Friday, October 20, 2006

Arguments for continuation of uptrend

Here is where market is now - top of earnings season with a lot more companies to report.
So what one might ask.
Here how earnings work when companies are at their best. Those companies that have something good to report lining up first anxious to add shareholders value, those who don't have anything substantially better the expected to report don't care where in line they are. Now hear this - for performance evaluation based on currently used metrics if company moves release of bad earning further up, prior quoter earning are going to be used in brokeage houses performance evaluation systems, portfolio managers will get better bonuses, company will not upset the Street - this is of most of company management concerns, they can upset shareholder ( old news ), but they better be nice with the Street.
So, guess what kind of earning releases we are going to witness next week?

Next, upcoming elections="uncertainties" and Street HATES it - another reason for "down" vote

Then with earnings and election behind us, FEDs meeting on Nov 23rd ( If I'm correct )
With core PPI stinking on inflation front as much as it did - will they raise? Do you want to bet? I don't - so not too many others, especially sitting at the profit in stocks - another "down" reason.

Oh-ho, "economy booming" headlines by leading financial publications and TV stations? "Lets keep noise down before elections"

Now, what argument I had for market continuing to go up?


Thursday, October 19, 2006

Very short post

Right to the point - I've been talking too much lately :)


short: (time to start hunting :)

Check earnings dates - play it safe

Tuesday, October 17, 2006

People I know...Stocks I trade...

[This post relates to BULL market strategies ONLY]

Well, not really, since trading is not about who we know, but about who we are,
so the title of this post starts and stops that useless for us subject.

Sinsecato ( one of the Trade Guild blog TagBoard's gifted crowd) asked me what I am looking for in the stocks I trade.
Hmm.. sounds almost like: "Stocks I know..."

Credits don't go to me, I just adopted and practicing what proved to be safe/profitable way for me to trade.
Those of you familiar with W. O'Neal founder of IBD will know where my preferences came from, at least partially

First off I look for the stocks not "everybody" knows about. Why?
Keep in mind that I'm not talking about day trading, the subject is short to intermediate term trades.

On a day like today, down day in case you did not notice, most "crowd favorites" getting hit hard, first it starts, as CNBC and other Yahoos call it, orderly "profit taking" which quite fast turns into disorderly, so to say "panicky" act of "cutting losses" by people who found out about this stock after millions of other traders and never made a dime on it, so the process escalates very fast ( I'd love to be short that stock ).
I hate to be "last in first out" type of a guy, so I try to stay away from crowd favorites, "First In First Out" is the way I wish it worked for me with many happy returns.

Let say I found 50 candidates, charts look good, volume, indicator, overall market and such ( Mostly using different scans, less often - articles I'm reading)

1. Float
should be below 30 millions, if it is 200 m - shares are very diluted, stock split many time, there is no crack, pardon me - no grows. Of course, some like to "trade" GE. It takes A LOT of money to move the price of such stock.
Example? SIRI - everybody loved it, now what? Everybody loves it so much to sit on the dead money for months, years? Not really, still millions of "investors" have it in 401Ks 'cause "their broker [friend | boss | dog] told them so". Good luck to them too.

2. Institutional holdings
I like to see from 5% to no more then 40%.
The reason - with too large of % if anything happens they will dump fast, at once, and ask questions later. Not really flattering if my middle name would be "bagholder" ( Some use word "investor" - investing IS good, but not when you are holding the bag)

3. Short interest
very helpful for price moves, especially if "days to cover" > 5-7 TZOO - yeah, you remember
Plus it tells you that stock already has ennemies - it takes some price moves, flatliner sitting in the same price range for years normally don't have too much of short interest.

4. History
I like to see if not great earnings grows story, than at least decent, I've been caught in overhyped stocks before, thank you - I'll pass this time around. Of course, there are some emerging sectors where there is no history of earnings - exceptions make the rule. BTW, IBD is really helpful to do a quick spot check on earnings history.

5. Volume
at least 80K over 30 days average volume, I'm not afraid of thinly traded stocks (Use money management always), as a matter of fact - I'd rather be in 300K volume than in 4Mils. Like they say: "There never is enough volume when you need to sell fast"

To conclude I'll use similarity between trading and gambling. ( I play BlackJack when I need to replenish my funds depleted by trading )
The way to win is to take chances when opportunity present itself and find it way before the crowd, cream is gooood, mmm...
The way to not to lose is to minimize chances for losses and not to look for opportunity where there is no such.


P.S. Allusions used in this post have nothing to do with some Trade Guild blog TagBoard's members with good SOH, well, you know who...

Afternoon update

That was a very good title for the last post: "Patience is a virtue", hope everybody waited for PPI and IP to come out, if you did - not too many got hammered. Speaking of hammered - from yesterday's list mostly only True Religion got down 5% - if market improves - that is a buy, still.
Most others picks from yesterday 9- UP!!!, 9 loss UNDER 1%, so 18 out of 20 - that is a safe trading, I'd say. Somehow when I bought and sold GAP yeaserday - my six sence did me a favor ( not too big - but a drop on GAP today )

UPDATED AFTER MARKET CLOSE: This is very good illustration that charts might tell you more then earnings, analysts' ratings and so on - I was raving about how smart I'm for closing GAP yesterday, because I saw earnings shortfall in the morning, then it dropped to $25.5 - now I'm back home IT IS UP 5%! So the buttom line is: "Trust your feelings, but go with your TAs!"

I will post at about 10-10:30PM EST tonight

Monday, October 16, 2006

Patience is a virtue

Today's list was one of the most time consuming for the last 6 months and in spite of preaching on a subject of patience I gave up - too many run away overextended stocks, but this is what you get in run away bull market, so I decided to start from most heavily shorted, closest to 52wh issues, warning - now MORE then ever you want to make sure that you will be at the profit at the DAY ONE, don't say: "there is going to be tomorrow", so watch for reasonable entry points ( most of them are really "unreasonable" any way you slice it )

WAIT for PPI to come out, don't trade premarket, let PPI to sink in.

I did not have time to check earnings dates - PLEASE do so!
Unless company is fundamentally solid - don't do earning play, it requires KNOWLEDGE of the company, LOOK EARNINGS UP, PLEASE!

EARNINGS CALENDAR for your convenience

Most stocks on this list are thinly traded - use limit order, don't chase!
All long:
1. these are stocks with the high short interest
TRLG ( if volume will be strong from the very morning )
IIG(if it'll start moving closer to 16)
MNKD (careful with this one)
AIQ ( my past favorite since Sep 6th - made a bundle )
FALC(SMSI for alt play)
SGK ( today was 5x volume with only 0.3% drop - why? something is cooking? otherwise - this is a laggard)

"just longs" :)
2. REDF ( is Cramer curse over? not my favorite, but someone might like it :) ) CHDX(?)
SGEN ( slightly further from the base, but as I said - beggers cannot be choosy, is it bull market so far)
KEYN(unusual volume last 2 days, fundamentally is not the best one, careful) URGI ( close to 52wk, strong volume last few days )

Saturday, October 14, 2006

For today's post

Please, visit
Trade Guild blog post as of October 14th " And now for something completely different..."

Thursday, October 12, 2006

Rotation, rotation, rotation...

Nice green day on the market, mostly anyone who knows popular stocks could make money today - that troubles me some.
Would you care to ask - why? OK, today is 12th - so what you ask, tomorrow is 13th - you think I'm nuts and cannot get to the point because there is no point - wrong you are. Tomorrow is a big 401K inflow day, but at the same time it is Friday, it has been quite good week so far, so I think what was happening today is that money managers started to rotate money out of few well performing sectors, such as health care providers (which is starting to get hammered lately and I see some nasty MACD divergence on XLV ), Big Pharma and "too good to be true" overachieving other stocks and put money into well known names "safer names", not necessary just tech names - just well known names and they used some of cash reserves they had in portfolios, so what I'm saying - whatever had to happen tomorrow - happened today, purchases meant to be made tomorrow were made today. If it holds water, then we are going to see a pop in the morning and then choice of stagnant trading throughout the day or selloff after noon. Don't forget Wall Street mentality - it is still October.

As game plan for tomorrow - biotech has pulled down some, tomorrow it'll most likely go down so more in the morning at least- I'd use it to add/open positions in biotech cos recomended on this blog and on Trade Guild blog for the last 2 weeks.

If you hold "fancy" retail stocks - I'd start to ease up on those, take at least partual profit

I think next substantial move will be in nanotech stocks, some were up lately, take a look at PXN I'd say it is C&H

Gold/commodities stocks criping higher - I would not be a buyer yet, but I think this might change somewhere from 1 day to 1 week - be alert.

Here is a bad(for consumer) / good (for invested in oil) news - I think it is about to reverse and go up, so keep an eye on OIH and USO ETFs and oil related stocks - a lot of oversold goodies there - just throw a dart.

No new lists today stick with the winner from last 2 weeks ( remember that if I'm not in particular stock - I rarely monitor it for longer then 1-2 weeks )

Wednesday, October 11, 2006

YAHOO MB "short noise" is down...is it?

It is this scary time of the year and none scared? No selloffs? No panic?
I cannot find any decently looking short setups ( Surprise-surprise-NOT - I am a bad short after all)

Today was not a "distribution day" - just a reality check? but somehow it did not feel quite right, sudden spikes in volume, ups, downs, searching for direction? Looking for excuse to sell? Idea of not so great economy is gradually sinking into excited traders' minds? High flyer SYX down 30% AH?

We'll stay in check, for now I thought I'll just post new long watch list, but first few short candidates


and last, but not least RNAI ( which I bought ) - courtesy of CHELOBES from Trade Guild's TagBoard

Monday, October 02, 2006

Fall in New England

It is upon us - the most gorgeous ( and in my humble opinion - the only ) season in New England. Took my laptop to the deck pointing to the untouched woods, meditated for few minutes? hours? Well suffice to say that very nice Dominican Davidoff cigar ended its existence while I was "meditating" - so, I guess I was there for a good hour... OK enough already, lets start October on a profitable note


note: GS starting to look like a potential short

Sunday, October 01, 2006

Long overdue article A.K.A. "My trading style"

[this article applicable to bull/stagnant market - bear market calls for entirely different approach]

The idea behind this blog was not so much to gain popularity ( I did not expect to discover that somehow, without me advertising this blog people started to visit this blog, ask questions, criticize, use ideas), but to have an organized "journal" of "when, what, why" kind of.

But, like they say: "If you build it, they will come".

Now it is a really good time to explain my trading style in greater details.

First and foremost "Set of Trading Rules" is a cornerstone for disciplined trader ( especially the one who wants to be making money, not just trading for adrenaline rush).

Here is how I use my own ideas:
When I make a selection, mostly night before ( I don't do day trading, I do all research after the market close), sometimes - once a week, I'm not necessary rushing in the very next day and buy/short out of prior night's selection - I BEGIN TO WATCH candidates listed - I do not expect my picks to skyrocket or fall right away, as a matter of fact - I try to STAY away from stocks someone might expect to skyrocket during the short period of time, I dim that kind of trading hazardous for people who are not watching screen 24/7 - and I DON'T sit in front of monitor all the day long ( may be once or twice bi-weekly).

Sometimes, if I am in the mood to watch market open and I see that currently listed ideas begin strong intraday move in direction expected (or not) - I MIGHT jump in, but then I feel "obligated" to continue to watch such "surprise" move very closely and if I get 5-10% in 1 day - I mostly will CLOSE that position and look for pullback to re-enter. That was the case with LEA, profiled on the morning of Sep 21st, I shorted it in the morning, covered next morning, since there was no continuation of the move and I tend to think when there is no such that prior day's move was an overreaction/temporary/reversal prone move.

UPDATED on October 28th
Speaking of LEA and mentionned above "overreaction/temporary/reversal prone move" it proved to be just the case - LEA reversed and added 70% in 4 weeks. This is a very good illustration that not only you have to be flexible, but you have to always monitor ALL stocks you follow on a daily basis in order to capitalize on reversals, which in many cases are "fast and furious". I broke this rule - and only made 10% on downside and missed ROCKET move UP of 70% in 4 weeks.

Next, "how long I wait for expected move for "candidate" trades.
Mostly somewhere from 1 to 2 weeks at most ( If not much changed in "Why I selected those stocks" ). If move continues ( even at a slow pace ) in the direction expected and I have position I continue to monitor the stock to ensure that the "reason" is still there, if I think the "reason" begin to change or no longer there - I close position EVEN if direction does not change - I know that I will never get out at exact "turning point" and I'd rather keep $5 and watch "un-made profits" go to $10 then been able to make $5 and forced to get out of position with a loss of $3, you getting the point.

"Stay with the winners" - I think the only way it is possible is when entire sector for stock I have position in continues to move in direction of my trade, when sector changes its pace - even if my position continues to go into profitable direction - I watch for an exit - if entire sector weak - almost no stocks will be able to continue insulated move contrarian to the sector direction.

Now it is time to talk about "8% loss rule" - it is a must to obey, but... as traders gaining experience, sometimes it pays to go with "the gut feeling" and distinguish between 8% drop which WILL continue and "shake off" and following reversal into direction expected. How can one tell? There is almost no way to say when it is and when it is not. Very sad... Well, in my experience, most of the stock poised for substantial move attract a lot of institutional buying - and "they" LOVE to get it at cheaper price - this is their extra margin - who would mind? This is why I, myself wait until I see such "shake off".

Trailing stops - I hate those - specialists on the floor - LOVE them, so I don't use trailing stops in most cases.

That is it for today - might be continued.