Wednesday, June 11, 2008

Kung Fu Bears!

Bulls, especially the tech bulls, gave bears plenty of black eyes since Mid-March, and along way, they started to mistaken the black-eyed bears as the fun-loving, bamboo-eating, trash-talking comic relief pandas, and they paid dearly for that mistake in the last four sessions. With today's drop, NASDAQ (and QQQQ) and Russell2000 finally joined DOW and SP500, breaking both MA50 and May lows. All major indices are oversold on the 60 min charts, but are still 1-2 day away from oversold on the daily charts.

It is quite obvious that at this stage, the easy/fast money from the short side has been largely made for most short-time-frame (3-5 days) swing plays, and like many of you, I would actively bottom fish. However, keep the following in mind when conducting such risky fishing business:

1. The overall market has now resumed its primary down trend that started Oct'07. Be very careful whenever trading against the primary trend, especially when it is going the same direction in every time frame.

2. Bottom fishing here is only for the technical rebound, so try to initiate as close to the possible bottoms as possible (deep oversold+key support), honor your stops, and don't be greedy when taking profits.

3. Watch the momentum and candle formation, especially on the daily chart. Currently, these two indicators strong favor more downside in the near-term.

4. Keep eyes on Leh and WM, if they keep dropping like a rock, the market won't go higher in a hurry as the fear of something terrible persists.

5. Speaking of fear, even the major indices went down a notch today, VIX did break
the earlier high. As I said before, no fear, no bottom.

Position update


I exited my AAPL July 185 calls early this morning when it broke the opening low around 183.5. I need to be a bit more patient with AAPL under the current market conditions. As a restless wabbit, I exhibited extraordinary patience today by sitting tight on cash, resisting urges to go long on stocks such as AAPL, MA, PCLN, DRYS, and GS. I feel that I might get better entry prices in next 1-2 sessions.

As for tomorrow, I might start some fishing if the market gaps down at the open, I will refrain from chasing the long side if it gaps up at the early going.

A special note:

When answering question #4 in my survey: "If a significantly increased readership will drive me to maintain the current pace at the blog, are you willing to help out on this by means such as recommending it to your friends or/and post your recommendation on other venues such as Yahoo stock discussion boards?", about 80% of the participants said yes, and I do appreciate that. May I ask those folks to follow through their words in next couple of weeks whenever you think a post is worth recommending. I will see if there is any noticeable increase in the readership.

Thanks in advance.

13 comments:

fortune8 said...

Posted some charts and links to charts on my site - mostly short SOHU, TWM, SMN, etc..

fortune8 said...

Just a few days ago, I wrote about Kung Fu Panda. Now FlyingWabbit writes about Kung Fu Bears, as in Panda Bear. Get it? He is an honest trader with no hype.

http://fade-me.disqus.com/4821/?643391#comment-643391

Doug said...

Feel it would be lot safer to "bottom fish" with a MCD, IBM, or DD than a DRYS, AAPL, MA or GS

flyingwabbit said...

fortune8:
thanks for the mention on your blog!
As for SOHU, I still cannot believe that I got in near 91, only to exit early near 86! Anyway, I am actually eying it for a long play if it spikes towards MA50, with a stop just below 70....

flyingwabbit said...

doug:
I agree with your assessment, however, when they do rebound, the ones on my list would likely be more profitable, in other words, no pain no gain....

fortune8 said...

short FSLR 268 stopped out 270 short 269 no stops and figers crossed.

flyingwabbit said...

fortune8:
I am still waiting for fslr to approach 272/275 before taking a put position.
Bought AAPL July 185 puts when it broke the opening low around 180.5, and exited when it spiked down near 176.5. I might be too hasty again...

flyingwabbit said...

AAPL is leaving more sour taste in my mouth as I once again *@*^$ it up, capturing only 30% of the move.
Bought GS July 170 put, but exited early again.
Drys is approaching my ez around 70, also watching EXM around 36.

fortune8 said...

Pulling a wabbit trick and taking 5 pts profit for FSLR.

Anyone know why shippers are getting killed?

RazoR said...

money management...lost 500 on aapl today but washed it because the 160 puts I had were +1.00
Remember the drys 70 puts (.60) I bought after earnings? Sold those puppy's for 2.80...unreal, finally bought more drys at 71.70
V puts got blown up, but will wait, not a bad day!

pcaguy said...

Day rates took the biggest one day loss ever today. Go to yahoo finance and it is the lead story for DRYS.
Boy did I screw up big on DRYS.
Bot July 85 calls for $2.56 average today. DRYS reports earnings on June 30 but in the past earnings have not affected the stock price.
I continue to make huge overnight profits on my puts trades and call trades other than DRYS. But the DRYS loss more than kills it.
DRYS reported $15.97 in earnings for the last 4 quarters. That makes the P/E 4.46 at today's close of $71.33. Further based on the Baltic Dry Index DRYS will report at least $5 earnings on June 30th. It makes no difference, of course. The Jersey Boys will gap DRYS down every morning until they can buy all the shares at zero.
So far I intend to hold on into July.
Chartists, am I supposed to bail ?
PCA GUY

flyingwabbit said...

fortune8:
FSLR hit my entry level around 172 while I was on my way to work, just another frustrating thing today. Glad that you bit the bullet and got the kill.

Razor:
I do remember you took an hedge on DRYS with the 70 puts while it was still trading around 100 a couple of weeks ago, just amazing foresight!

pcaguy:
I was worried about many of your calls play, very relieved to know that your puts trades carried you through this.

As for DRYS/EXM:
once again I remained extremely patient (well, maybe greedy this time) today, and hope to get in at lower entries:
Drys--ez=64-68, stop just below 64, IT=84, r/r=4:16 or better
EXM--ez=30-34, stop just below 30, IT=40, r/r=4:6 or better.

RazoR said...

you have balls Pca! Its very oversold and they might take her to 65, it will shake violently up and down for a while, I like it right here and will hold...I don't think their earnings are coming, it came out a few weeks ago fyi...also that article leads to the fact that china ect will not be needing as much ore for a while, so it could be dead money for a month, they always have us guessing huh!