What an amazing second day of watching the pros at Ma'alea. A day of surfing and watching great surfers surf the best waves on the south shore of Maui in 5 years was simply incredible. I watched so many boards break and surfers get barreled that I will remember these past two days for a very long time.
No market commentary, OF COURSE! I will say that I see a lot more charts breaking down and stocks are starting to set up good shorting patterns.
New Swing Longs: ENY CNVR DEZ DEX AEP JCDA
Longs Outperforming Market: ABLE GEOI LYTS BVN OXPS LF WIRE CHB PMU PFWD HAWK ILOG
New Swing Shorts: RMK WFC GDT CAL RFMD ADBL DISH TNH
Shorts Outperforming Market: CNTF ANF MW
Aloha from the beautiful South Shore of Maui where the past two days have been epic, inspirational, beautiful, and mind blowing.
Please visit: www.surfline.com to check out the action. If I had any knowledge what-so-ever about how to set a link to this site I would.
7 comments:
I see you've been short CNTF, which has been a decent call over the past few weeks. I'm curious about what you look at when determining when its time to cover a profitable short position. Do you tighten up your stops? Or do you have a preset downside target in mind? With that stock down nearly 30% in less than two weeks, how much more downside do you think is left here? Thanks!
Great question.
I have covered all but 20% of my remaining position. Two days ago half of original position was covered.
You do want to keep tight stops on shorts. Covering your shorts depends where you are after your initial position. If after two weeks your short has gone nowhere, 1/2 is covered due to time factor. If it closes above the high of the day the short was taken, cover. If you are already in the money with your short, I then move my stops lower. If the stock swoons like 15% in the first week, I will cover a very small portion on weak rallies but usually I will hold on until there is a big intraday or daily reversal on large volume.
Most targets for shorts are 20-25% for stocks with good fundamentals. Stocks with no earnings and weak sales growth that breakdown and show a profit imediately after the short position can be held for as long as the downtrend persist.
If you have any more questions let me know.
Thanks for your comments. I am long CNTF (and getting longer as of today). I sense that the low set back on 8/18 on high volume caused the stock to hit the radar screens of technical traders and hedge funds. When the stock rose on tepid volume in the latter half of August, it was ripe to be shorted from 16 on down.
I wonder if any of those traders know that CNTF has over $3.00 in cash on its balance sheet with no debt? That it trades at 9x estimates for FY05 with a growth rate close to 100%?
Ah well.....that's what makes a market. I'm glad to pick up some cheapies in the low 10s, and I probably would not have had that opportunity without the shorting activity going on at present.
I assume you have some other trader friends who have seen the same things that you have and shorted CNTF?
No. I am the one that has been right but the trader friends I have have been saying the same thing you have been saying for a month.
This is why I buy strength and short weakness. I dont want to have my money tied up in a laggard or one that goes down because "I THINK" the fundamentals are good and wall street hasnt seen the "value" yet. Yeah right, I have seen this happen way too many times in the past.
I let them give me their money as some of them I know bought CNTF around IPO date. I let them think they are smart so I can make a living. :-)
BTW, This is not to say you are not correct in your analysis.
I am stating about some trader friends of mine.
Yup....you've been right and have made decent money on your short. If I can generalize on the interaction between fundamentals and technicals, there is always a push in one direction from "smart" money that is convinced that something has changed to alter the short term returns possible from any stock. That initial volume and price movement can attract attention from momentum traders who pick up on what appears to be a new trend, sometimes pushing stocks much higher (or lower) than would have been expected fundamentally. As long as the trend is in their favor, these traders can keep pushing, but at some point, the risk:reward tilts back in favor of a reversal of trend.
I like to find stocks that are fundamentally attractive and not heavily shorted.....CNTF meets many of my qualifications.
I have some guesses as to why CNTF has fallen so hard recently, but it appears to be overdone IMHO. Of course, I could be way off base and the stock could keep tumbling. Everyone who bought CNTF prior to today has suffered a loss, so they have to decide how much longer they want to hold on to that losing position. That may cap any upward retracement we see here, absent any new news.
The beauty of the market is that we can both be right and both make money. Have a great weekend; Hawaii sure looks beautiful today.
Absolutely correct.
Those individuals who are still holding to their loss have other issues (when to cut a loss) to deal with besides knowing the fundamentals as well as you do. You definitely understand the supply/demand side and short interest to the equation. Maybe if my friends had the ability to process this info like you they would not be holding losses. :-)
Hawaii is beautiful today but it is windy. The surf has come down too. The past two days, especially the 14th, was just breathtaking. One of the reasons I choose to live Hawaii.
Besides days like the 14th and my girlfriend being born and raised, the local government doesnt do a whole lot to want to keep me here.
Thank God for my girlfriend and surf. That keeps me here. Or else my address would be Las Vegas, NV.
At least my dollar is worth a dollar, in Nevada.
LOL. I am serious.
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