Saturday, November 26, 2011

Big Wave Trading Portfolio Update

It continues to be a rough 2011, minus the July to August downtrend, but it is possible another trend is in the process of developing. Following the rally off the October lows, it started to look possible that a new uptrend might take shape as some new CANSLIM quality stocks started to build right side of bases with some breaking out. On top of that, some very pretty green chart patterns began setting up in more speculative quality names (SIMO PKT) with the stocks coming off the lows producing some solid gains fast (PEIX BIOF). During this uptrend from the October lows two partial buy signals were produced with both failing immediately due to the signals coming very late in the uptrend during overbought conditions. While this was occurring, ex-generals of the previous uptrend from the 2008/2009 lows were not participating in the rally. These two major red flags prevented a full buy signal from being produced the whole rally saving Big Wave Trading investors money by keeping new long positions very small in relation to total account capital.

Since November 17th, things have changed. Bank stocks that looked to have been trying to hammer out a bottom have completely rolled over with stocks like BAC and GS hitting new lows, the new CANSLIM quality long setups (VMW TIBX SPRD RHT) have failed immediately, the speculative longs have reversed hard/crashed (LGND OPNT GMCR), the inverse ETFs have come under heavy accumulation, the 3x bull ETFs have come under heavy distribution, the ex-generals (AMZN AAPL PCLN CRM) have all created very bearish chart patterns (most have H&S tops), and the SP500 and Nasdaq have resolved themselves below the triangle pattern they were creating in November. All of this threw our market model into a 66%-75% sell signal on November 17th.

This signal has proven quite profitable in the very short term but it remains under a 66-75% signal and not a 100% sell signal due to the fact that volume on the NYSE on the distribution days continues to be below the average daily volume of the past 50 market sessions and we still have some current long positions that are holding above key support. If the market can rally on the short term and fail at recent resistance levels on higher volume, a full 100% sell signal will be triggered (despite above average volume or not on the NYSE). The nine long positions that remain in the margin account (4 in the IRA) are all on the cusp of triggering their final cut losses. If this happens, along with the NYSE failing at resistance (even if volume is lower than the day before), then the model will go 100% sell.

Currently, the Big Wave Trading margin account is 55%-60% short 10 stocks, 10-15% long 9 stocks, and 25-35% cash. The Big Wave Trading IRA account is 70% long 4 inverse ETFs, 6% long 4 stocks, and 24% cash.

Top Current Holdings – % Return – Date Of Purchase:

EDZ – 23% gain – 11/18/2011