Sunday, November 19, 2006

Tax related activities ( answering Tagboard questions )

1. Tax related
First and foremost the good news: Institution are mostly done with tax and fiscal year end related selling, since institutions take "30 days wash sale rule" in more serious and organized way than individual investors.
The bad news: if you stuck holding underperforming, beaten down stock - do not expect it to sky rocket all in a sudden, I'd say 4 out of 5 such stocks will stay where they are for a while.

Don't be lured by market action next week, don't get excited when laggards and losers will go up - watch the volume! It will mostly be attributed to retail trading and, what is way worse, to institutional traders ( who have not left for long "weekend" ) marking up "laggards and losers" to finish exiting loosing positions or just make a "quick buck".
It is possible that the week after Thanksgiving market will see some institutional tax related sell activity, but not on the large scale, then two last trading days of November will be good for longs - tuts will be buying back stocks with good potential.
In December, especially last few trading days, retail will wake up and "cut a brunch they are sitting on" - will dump most of losers at once, good and bad and by doing so will totally miss and opportunity to capitalize on January effect ( if any ).

2. FORD - stay away, dead money, the only way I would trade this stock is if it'll breakout above $6 with good follow up day and I'd sell it right under $8 - what is so special about FORD anyways? ( In FORD case I totally ignore most of technical indicators, stock has such a small float that it can be really deceiving )

3. MRVL - I think it is in the process of establishing bottom at $17-18 area, Friday's low range was "safe" price for opening 1/2 of longer term position ( 2 to 4 months ). MRVL does not give clear signal yet, but volume close to $17+ looks interesting, it is not as high as I'd like to see, but close.
Why am I taking about MRVL which totally is "NOT THE STOCK I TRADE" - huge float, splits and so on? A lot of institutional investors will (?) be buying back into MRVL in January 2007, they can fill big orders on that type of stock, we'll see.
It is quite possible that MRVL will undergo another shake off during the last week of November - I'd use it to open or add to position - as long as it will not go far below $17.75 on close.

4. NXG - oh my... It is in the descending triangle (DT) from May, but to my surprise I've seen quite a few DTs breaking to the upside, if gold&silver will crowl higher - I would use it as a sell chance, not a buy opp.

5. CAAS - unless it is going to be able to consolidate at current level ( which I doubt even with this short interest ) I would not play Russian Roulette. Then again - the week before Thanksgiving is notoriously famous for quick money made in stocks like CAAS, me, personally - - I'd stay away and never feel sorry "that I could make easy double and did not". The most CAAS can do IMHO is to get to about $12 which does not worth the risk.

6. ZOLT - this IS high risk idea, I did state in the original post "no rush to run out and borrow $$$ to buy - UNLESS these are going to start moving on the upside - as of now they both are better shorts than longs", I hope ZOLT was not bought based on this post. It is still a "better short". My perception of becoming long on this stock is based on the same observation that some hated and fallen stock in descending triangles all in a sudden break on the upside with ferocious force.
Despite last 2 down days I do like volume - close to lowest volume for the last 6 months. What I think is going to happen on Monday - market will collapse on the open an huge volume and then reverse by 11 AM, if this is what will happen and ZOLT will follow on the upside - I'd buy 1/2 position in ZOLT ( but will keep my fingers crossed )