Wednesday, February 23, 2011

You Gotta To Know When to Hold Them

BAGAKOAA 23 Feb 2011 You Gotta To Know When to Hold Them

Kenneth Donald Rogers got single of the year in 1979 for the great song “The Gambler”. The tune is a “requiem” for traders who have not timed their trades well and let’s face it that would be all of us. Today we enjoyed the company of several of our comrades as we passed out management bonuses but still found the time in the early hours of the morning to take some profits from some apparently weakening positions. Here are some of the highlights of the main portfolio. Please pay attention as there are some recent stocks we have pimped here that we are now exiting.

We sold out of the TUFF (that small miner in AZ) penny stock we have been bragging about after a 12% loss. It moved quickly down about 20 cents a share. Don’t know why and don’t care. It went through my 8% rule so adios. RULES ARE GOOD.

We got out of HOC as it to dropped 7% after having it one week. HOC Holly Corporation, together with its subsidiaries, operates as a petroleum refiner in the United States. The company process sour crude oils into light petroleum products, including gasoline, diesel fuel, jet fuel, fuel oils, specialty lubricant products, gas oil/intermediates, carbon black oil, and liquid petroleum gas (LPG) and other products at its three refineries located in Artesia and Lovington, New Mexico; Woods Cross, Utah; and Tulsa, Oklahoma. This will remain on the watch list and we will look for a better entry point.

Are you sitting down? Here is a shocker. We have dumped all of our nat gas positions. We have waited about 7 months to break even on those positions and the time is now. We bought into this market about 3 years too early. While Nat Gas could creep up as oil breaks and stays above 100 a barrel, we feel there are better plays because of the high priced oil. (Think rail roads and shorting airlines.) Specifically we got rid of all of our PNG PAA Natural Gas Storage, L.P. operates as a master limited partnership formed by Plains All American Pipeline, L.P. (PAA) to own, operate, and grow the natural gas storage business that PAA owns.

We closed out our position on IBM after watching a 14% gain slide away to 7% gain. We watched the volume and direction on this one and it was time to pull the plug. Great stock, but we need better entry point. We will watch the chart closely.

Similarly we watched a 20% gain on FANUY, the Chinese robotic firm slip to an 11% gain and wanted to take some profit.

We were also informed of a 2 for 1 split for NATI National Instruments Corporation manufactures and supplies measurement and automation products. It provides application software and modular hardware that combine with industry-standard computers, networks, and third party devices to create measurement, automation, and embedded systems.

We took a few of the portfolios out of KO today as it too was drifting down on heavy volume. Depending up which portfolio, we were looking at 4-12% gains.

Then we added some more of the January 2012 $40.00 call options for the VXX.

BTW if you had listened to the blog and shorted ROVI Monday Night and Shorted GMCR, you would be up 14 % percent and 8 % respectively.

We expected existing home sales number to be down and we were wrong. They were up BUT (Behold the Underlying Truth) the prices were way down which also weighed on the market.

So what is next in the middle east?

That is anyone’s guess but here is what you should be watching for. Look for signs that Kuwait and Saudi are experiencing social unrest. That could easily push oil to 120-140 a barrel. Now as the disclaimer says, we are not a financial advisor so we can not recommend what you should do. Here is what we are doing. We are taking profits on any stocks that do not stand to gain form social unrest in various parts of the world. We are keeping any stocks or ETFs that will benefit from higher oil and commodity prices. (DBA JJG come to mind) Any monies in a balanced account (Bonds and equities) we are moving to bonds, cash and commodity funds. We are also looking at how to buy and hold Gold and Silver. GLD and SLV come to mind. A 401 k might deserve the same scrutiny until we can see if this is “the correction” and we see how big it is.

What’s up at Wally World?

Have you heard the news that same store sales at Walmart are down. That is right and it is a tell of the overall economy. The terminator of profit for TGT, BBY, CSCO is loosing a little market share as American’s are feeling a little better about the economy. Look for improving numbers from the likes of Target and Costco. Walmart will be hard pressed to drop prices enough to keep more confident consumers in their stores as their costs are increasing. If you see significant price slashing out of Walmart with same store sales eroding, you can expect earnings to diminish and institutional monies will start spending on other retailers.

Another day Another Newsletter

One of my buddies shared with me a back issue of The Chartist by Dan Sullivan.

This is an 8 page document that comes out about every 2-3 weeks and what is cool, unlike most news letters or blogs, this is real money. Dan Sullivan actually reports on his portfolio. Now Cramer does the same thing with his charity portfolio, but this is real bucks (about 1 million to be exact.) The news letter runs about 300 bucks a year and you not only get the news letter, but all of Sullivan changes to the portfolio as they happened that day. After reviewing this issue, a recent one here are my observations.

Sullivan calls his approach buy high sell higher versus the age old BLASH (Buy Low and Sell High). He seems to gravitate towards high earning equities that are being driven by decent volume (implying institutional buying) and if there are corrections, take profit quickly and narrow your losses quickly. His newsletter is also chart heavy and you can see his is a cup and handle type of guy and well as a double bottom kind a guy (Ok if you’re not into charting I know you just went to some place lewd, crude, and socially un- acceptable, but I swear those are charting terms.)

If any of that sounds familiar, it is because many of his observations could be pulled right out of O’Neil’s “Making Money In the Stock Market”. Despite all the similar banter when you compare his Chartist Cash Account to the IBD 50 there is only a 22% correlation. So we can’t say he is grabbing his picks from the list, but they have many of the same attributes.

I mention the newsletter as it is succinct and has all the elements we like for not only looking for a Pick Of The Day, but also it explains some of the rational behind the picks.

The Golden Rule Is Talking To You

The Trend Is Your Friend when you own stocks. The trend is your lover when you own or sell options. What is the trend saying after two down days. To quote IDB, we are in an “uptrend under pressure”. My suggestion would be to put any buying ideas on hold for a couple of days. (unless we are talking defensive plays like commodities the VIX etc.) You will be tempted to try and catch the falling knife as prices are adjusting down. You will think lowering your average cost is a good thing (and in certain situations that is true-this is not one of those times) as even we have mentioned doing here in the blog.

If we are right and the situation in the middle east was the catalyst needed to trigger the overdue correction, you will look like a genius sitting their with all your cash and taxes due to the tax man. If we are wrong, how wrong could we be? Will this rally last forever? Will there be an unlimited upside? What might you miss another 3-5% on the upside? Be happy with the almost double since March of 2009. Think about taking some profit and do some reading to prepare for the next rally. Take those profits and consider getting the IBD in print or on line or the sexy iPad APP for IBD. We liquidated about a third of our account today. The rest are either bonds, defensive stocks, some stocks we are keeping to work some options strategies, or just some really sickly call options that are worthless but may perk as their expiration comes up. We are happy to sit on cash until we can find some comfortable defensive plays.

Salve Lucrum


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