Saturday, April 14, 2012

Big Wave Trading Portfolio Update And Top Current Holdings

“Don’t spend your time and energy chasing mediocre trades and investment opportunities. Only move when the odds are overwhelmingly in your favor.” -Brian Hunt

“The game of speculation is the most uniformly fascinating game in the world. But it is not a game for the stupid, the mentally lazy, the man of inferior emotional balance, nor for the get-rich-quick adventurer. They will die poor.” – Jesse Livermore

The Big Wave Trading Portfolio remains under a NEUTRAL condition but is near switching to a SELL signal. Had volume come in above average on Friday or had price dropped 2% on the SP, Russell, or Nasdaq, it would have switched. Our internal indicators that measure price, volume, and time on many different levels are all in confirmation of the short-term downtrends that are starting to appear on the indexes. At the same time, every single ETF is in full confirmation with their short-term downtrends and every single inverse index ETF is in full confirmation with their short-term uptrends. This action along with the constant non-stop poor action in individual stocks outside of the biotech and monster leading stocks (AAPL PCLN CMG SBUX) universe does not bode well for current bulls. Everything points to our model switching to SELL next week. However, there is one caveat that our model can not price in and has no way of knowing when or where it will come from. That is Ben Bernanke. As long as the government interferes with free markets price and volume is going to generate more false signals than we ever would have seen pre-2008. Since they can simply inject liquidity to a market that has no buyers, we have to respect that many high volume breakdowns are simply not going to work like they used to. If you are a big seller and you know the Fed is going to magically lift stocks higher why would you keep selling? You wouldn’t. You let them lift it higher then unload more and wash, rinse, repeat. The good news is, just like in July to August, you get a real break where sellers simply overwhelm whatever in the hell the Fed is doing. Looking at any long-term arithmetic daily, weekly, or monthly chart it is clear to see the big-cap monster leading stocks are going from extended to parabolic territory. Google finally announced a split. It staged a late-stage-base-failure breakdown on heavy volume. Now all we need is for Apple and Priceline to split and we can start to get a sense of what 2000 felt like before it ended. I will make it very very very clear that this is in no way like 1999. Trust me! However, the fact that so many CANSLIM high-quality stocks are acting so strange, volatile, and some with no rhyme or reason towards price and volume, can not overall be healthy for the market. If these leading stocks continue to hold up relatively well to the overall market, it is always possible that following a correction we could blast off higher. As of now, whether this is just a correction or the start of a new downtrend, it is pure speculation. All we need to know now is that stocks look extremely vulnerable here, the indexes carry a lot of distribution days in them, the internal momentum price, volume, and time indicators are all very bearish, recent longs failed, and new shorts are working. Those are the facts. It does not bode well, short-term, for the market. However, these facts do not matter in a world of quantitative easing. Anything can and will happen. In this stock market you are either patient and wait till all the ducks line up before you move or you must be very quick to change. If you are not quick to change in this market environment you will be dead.

Top Current Holdings – Percent Return – Date of Signal

SWHC – 74% – 1/3/12
AVD – 71% – 1/10/12
EPAM – 48% – 3/7/12
LNKD – 44% – 1/19/12
LQDT – 42% – 2/1/12
BVSN short – 34% – 3/19/12
PRXI short – 34% – 3/30/12
MNST – 28% – 1/17/12
ULTA – 28% – 1/13/12
DANG – 25% – 3/30/12

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