2007 February « The Novice Bear

Picture this

27 02 2007

Looks like the higher highs on lower volume couldn’t last all that long.

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Categories : Uncategorized

Bad time for a conference

27 02 2007

So I’m at a conference and can’t give the market my full attention. Too bad because I missed a doozie.

I already posted the fact that my SIMO position was stopped out today, which was a real downer. It sure sucks to have a 12% gain turn into a loss just because my broker couldn’t process my order fast enough.

On the plus side, I reopened a sizeable QID position again. I did this just after the open. Although the QID was already up 3.5% I didn’t want to miss a possible crash. Long story short, I easily made up for my earlier SIMO loss when the Nasdaq continued to go down.

I’m going to look to add more of the ProSHares Ultrashort on any bounce.

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Categories : QID, SIMO

OUCH!

27 02 2007

The panic this morning triggered my stop loss on SIMO at 19.87. The problem is that it wasn’t filled until 19.13.

Of course SIMO is now trading back at 21. That sucks!

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Categories : SIMO

Flotek Industries (FTK) Price and Volume Warning!

24 02 2007

Don’t get me wrong because I love Flotek. The company is great and should have bright future but the chart is flashing some warning signs. Most importantly, FTK is making some new recent highs on dramatically lighter volume. I have posted a candlevolume chart to help illustrate this point. What is clear is that institutional investors are not interested in buying FTK at these levels. There have been some relatively high volume selling days in the early days of January and February.

One should keep a close eye on FTK, especially with earnings coming up soon. If you are interested in buying, you should wait for a pullback.

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Categories : FTK

Growing readership

22 02 2007

Not much to say except to show how much my audience has grown since I started. I’m gunning for Barry Ritholtz type numbers. Check out “The Big Picture” stats below.

Looks like I still have room to grow.

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Categories : Uncategorized

The market is strong, but…

21 02 2007

My QID trade was finally stopped out today.While it was up over 8% at one point, I only took a 2% loss. I was gunning for a big drop in the NDX and it just didn’t happen. No big deal.

Now that I’m back to a 60% long and 40% cash position I’m sure that the market will crack soon. What is particularly troubling is that I saw that Jim Jubak had a very bullish article today. Considering his record at market timing, it might be the perfect time to reestablish my bearish stance.

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Categories : QID

My CanSlim screen

20 02 2007

I’m going to start posting the results of my own version of Bill O’Neil’s CanSlim stock selection screen. This has been a great way to spot stocks before they show up on the IBD 100. Some of these companies are thinly traded and should be treated very carefully. Always cut loses short and don’t mess with cheap stocks or those that trade on the pink sheets. Click here for the screen.

I’ll start with an example that has frustrated me ever since it exploded. Almost Family (AFAM) has showed up on my screen for months. This company interested me mainly because I liked the story. It provides in-home nursing care for the elderly. Most of the old folks that I know hate the thought of a nursing home and considering the ageing baby-boomers, AFAM seemed like a great stock to keep an eye on. I watched AFAM flatline for the months of August and September and began to wonder if it would ever break.

Well break it did, but to the downside in early October. I found no news on the company and eventually stopped watching, figuring that something was not right. As it turns out, nothing was wrong, it was just experiencing a classic shakeout. In early November, AFAM exploded to the upside on huge volume. If I was still watching, I would have been tempted to jump in. I’m not sure if I would have bought, but since I wasn’t even watching the chart, I will never know.

“It’s like lotto, you’ve got to be in it to win.”

The message is simple. If you find a good story and a good chart, keep it on that watchlist. Don’t get lazy.

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Categories : AFAM, CANSLIM

Interesting Paper

16 02 2007

I was reading some papers the other day and came across a very interesting paper regarding the 1987 stock market crash. What was particularly interesting was that this paper appeared in Physical Review Letters, which is probably the top physics journal in the world. (I have one paper published in it and have another being reviewed.)

I’ll try to summarize the basic points of the paper. Usually stock prices move in small increments that can be modelled by a Gaussian distribution (bell-curve), with large price moves being less probable than small ones (The Black-Scholes model). The authors analyzed a 2-month period surrounding the market crash of 87 and found that there were large fluctuations that were equally probable on many different time-scales in the weeks preceding the crash. Basically it was a breakdown of the Black-Scholes model and made a crash much more probable.

Interestingly, this behavior is quite similar to the behavior of electron spin in a phase transition of a ferromagnetic metal, or in the behavior of heart muscles between heartbeats.

The authors think that their method could help analysts asses risk.

A very interesting paper, indeed. The link is here, but you need to access it through a local library or university.

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Categories : Uncategorized

Electronic Data Systems (EDS)- The perfect cup with handle

15 02 2007

I know that I’ve been bitching about this market’s not stop move up, but I have actually been finding some pretty good trades. I hope I don’t give back all of my gains trying to anticipate the downturn.

I picked up some shares of EDS yesterday (2-14-07) while the stock was still within 5% of the 28.03 buy point. Check out the chart. It is probably the best looking cup-with-handle pattern that I’ve ever seen. It is textbook!

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Categories : Uncategorized

Bye bye mr. bear

15 02 2007

My QID is just $1 away from my stop loss point.

Here is my prediction. A pop in the market in the very near future, thus triggering my stops, followed by the beginning of the 20% market correction that every Tom, Dick and Harry is calling for. (Remember QID goes up when the QQQQ go down)

Here is a comforting post on Decisionpoint.com for you bears out there.

On the plus side, SIMO had a nice day today.

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Categories : SIMO

Just give up bears!

14 02 2007

This market will never correct until the bears finally give up. We have had record short interest on the NYSE for months now. Hopefully today did something to help cull the heard a bit. My problem is that I would like to play the long side more, but I can’t find any stocks that breakout and continue up. Everything seems to just whipsaw back and forth.

I would like to see a pullback for the overall health of the market. The more we climb this “wall of worry” the more severe the correction will be. I don’t want to see a mini-bubble followed by a mini-bear market.

My chart of the day is the S&P 500. How long can this divergence between price and volume continue? It sure seems weird.

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Categories : Uncategorized

QID trade

14 02 2007

I added to my QID position on the big spike this morning. I also sold out my WFR position. I buy it again on a more substantial pullback.

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Categories : QID, WFR

Chicago Snow

13 02 2007

Ok, its not that bad but its the worst since I’ve lived here.

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Categories : Uncategorized

My CorVel Corp. (CRVL) call

8 02 2007

Before I get started I would like to apologize for the following self-congradulatory post. I don’t have a large readership so I have to pat myself on the back every once and a while.

Perhaps some of you remember my conversation with TradingGoddess regarding CRVL after I posted my concern over many of the leaders taking a nose-dive. She wondered what my “crystal ball” had to say about CorVel’s future. Here is what I said:

The strength shown by the market last week probably means that you are ok for now, but with CRVL almost 100% above the 200 dma I would probably be one of the profit takers. Also, just before the large decline, CRVL was making new highs on much weaker volume. This is always a big warning sign. The bounce on Friday
was also pretty weak and on much lower volume than the ealier decline. (Jan 15, 2007)

TradingGoddess responded with a chart that showed increasing RSI and MACD, to which I replied:

Using RSI and MACD for market leaders can be very dangerous. They usually work best with stocks that are in consolidation patterns. My sell rules are based on William O’Neil’s methods, which work very well with high-flying growth stocks (like CRVL).Look for CRVL to retest the highs and if there is a failure, then get the hell out of there fast. With only a 7.8 million float, it is easy to push around. (Jan 15, 2007)

Here is the chart as of today. I hope she got out when the highs were tested on much lighter volume.

What is interesting is that CRVL came out with earnings today and they doubled their earnings compared to earnings a year ago. This just goes to show that fundamentals mean absolutely nothing with growth stocks. It has been shown time and time again that growth stocks usually top when their fundamentals look the best.

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Categories : Uncategorized