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To
OTC Journal Members:
As posted in today's BLOG,
I closed my SPY trade within an hour of the open at $134.29
for a net gain of $2230 in two trading days. The market then continued
to "melt up", and I ended up leaving another $2k on the table- such
is life.
Today, bad news on financials (UBS),
and bad news in the economy became good news for stocks. Guess what that
means? Shorts, seeing bad news is no longer pushing down stocks, had to
cover. Remember my March 22nd edition entitled the "Firestorm
MeltUp"? That's what I was talking about. LEH did a big convertible
preferred offering, and it was oversubscribed. The market now believes
this signals demand for financials.
One great day does not make for a
turn around in microcaps. The only stock that look "perky" today in little
corner of the microcap world was PhotoChannel Networks (OTC BB: PNWIF).
I would love to see that one get over $4 and stay there- that would
bring the possibility of a NASDAQ listing clearly into focus. The stock
closed today at $3.75 offer- closing in on the promised land.
However, SPKL continued to
struggle a bit as predicted- just hanging on to $.80- EFSF got
no love despite announcing its direct marketing campaign has officially
commenced. It was all quiet on the Western Front for the rest of them.
Micros won't start behaving great after one good day. It will take some
convincing to bring back investors.
The BLOG is your opportunity
to ask questions and offer comments. I will make an effort to answer every
legitimate question. If I don't know the answer, I will contact the management
and get the answer. Alternatively, if you have questions you don't want
publicly displayed, you can always email me directly at editor@otcjournal.com.
If you submit a comment or question, it will not appear on the site until
I have responded.
To use the BLOG, simply go
to the home page at www.otcjournal.com
- the BLOG scrolls down from the upper right hand corner. The most
current journal entries appear on the right hand side of you screen. Check
back frequently for updates particularly when stocks are moving to overbought
or oversold levels in volatile markets.
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RIMM: To Short,
or Not To Short- Very Tough Call |
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If you've been watching my short
term trading ideas, and are starting to be tempted, you could be the perfect
reverse barometer. I'm now 5 for 5- Time Warner, QQQQs, Long GS, Short
LEH, and long SPY- everyone of them was put in front of you, and everyone
made money.
I'm guessing you're tempted to act,
but saying to yourself he's do for a losing trade. So true. Nevertheless,
I wade into this week's Big Idea- which is the riskiest of the bunch.
As I pointed out in the weekend edition,
whenever you see a stock trade up dramatically out in front of a highly
publicized earnings release, it usually drops once the numbers come out-
good or bad.
Tomorrow, post close, one of the
4 horseman of the last bull market (AAPL, RIMM, EBAY, AMZN) will
come out with year end earnings for their fiscal year from the end of February.
Research
In Motion (NASDAQ: RIMM), manufacturer of the Blackberry, is
the culprit.
The stock has been tearing up the
charts of late, so I believe it is probably a good short- even if RIMM
delivers killer numbers. Here's the quandary:
The gap you are looking at happened
at the last earnings release. RIMM closed at $105 and reopened at
$122 on December 20th. If you were short, you got killed, but only for
about one week.
So, why am I contemplating a short
position with the stock's recent history of killing shorts on earnings?
That's a two part answer- first, the stock had traded sideways for 3 weeks
into the last earnings release and it was a true surprise to the market.
For this earnings release, the stock has been trading up in advance of
the event- up from $100 to nearly $120 in the last nine trading
days.
Secondly, if you look at the chart,
you will note the move to $122 was very short lived. The stock only
traded up above the clouds for about 4 trading days before falling apart
and pulling back below $100.
RIMM has been very vocal for
the last two weeks about the robust condition of Blackberry sales.
They are selling product to China and India, and the market loves it.
There are three possible scenarios
for tomorrow's post close earnings. 1.- they fall short of estimates ($.70
for Q4). The stock will get clobbered at the get go. 2.- They hit the estimate,
and the stock will pull back, or 3. They blow away even the whisper number,
at which point the stock will trade much higher.
How many times have you seen companies
deliver good earnings and watch the stock get killed? It happens time and
time again, because the numbers are already priced into the stock, and
everyone is trying to exit their position at the same time to lock in their
profits- it's called a "Crowded Traded".
I now own 10 April 120 Puts
(RUL.PD) at $9- an absurd premium, but it's the price of poker.
I don't like shorting individual stocks. I'm probably early. I love owning
the puts in the $118 to $120 range.
I am prepared for a gap higher if
the earnings are off the charts. I'll buy more of these puts. It's a very
risky trade, but I like it for my money. Participate if you want with the
understanding that it's very risky.
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