Sunday, March 31, 2013

Big Wave Trading Portfolio Update and Top Current Holdings

The Big Wave Trading Portfolio remains under a BUY signal re-triggered on 3/5/13 following the original signal on 1/2/13. There are currently zero conditions weighing on the model, despite the below average volume. Any assumptions and presumptions we have towards the current volume on the rally have been eliminated due to the QE and ZIRP policy being initiated by the Federal Reserve. We continue to go long signals as they arise and will not try to guess when the market will “top” or “pull back.” At this point the only signal that we are paying attention to is price. Price is the only thing that matters, as we have been saying all year long. Volume has not mattered on rallies in four years and there is no reason to believe it will matter any time soon. While it would be nice to see the market pullback for more than a couple of weeks on below average volume and then rally on higher volume it should not be expected. What seems most plausible given the situation that is occurring world wide is that we will end up in another asset bubble where higher valuation multiples are placed on stocks. Despite the lower earnings growth expectations investors are still paying higher prices for stocks believing that the Federal Reserve has eliminated the tail ends of the curve. As all experienced traders know this will eventually end badly. However, that is not happening yet and the only thing we can do is ride the trend until the end when it will bend. If another asset bubble is to occur we are in great position to profit handsomely and then will be in a better position to sell our winners as they break below key trailing moving averages on heavy volume. If the market can get parabolic that will allow us better entries on the short side (puts). For now, there is nothing to do but continue to follow price. As you can see below, following a very choppy 2011 and 2012, it is finally paying off like it normally has for us at Big Wave Trading. Someone asked recently that if the stocks below are our top holdings (top 50%) what are our our worst holdings. We currently have two. Both are automobile related equities and both are showing less than a 1% loss apiece. We do not hold losing positions at Big Wave Trading. Before any order is given to our brokers we know where we will exit if we are wrong. We religiously obey our final exits. We never let a loss run and are quick to leave if we are not proven correct immediately. As we go through equity/derivative drawdowns like we did in 2011 and 2012 we reduce the size of our positions and are quicker to cut losses. As our equity/derivative profit/loss line trends higher we will subsequently increase size and allow more “wiggle” room in our trades. The bottom line is that losses are never tolerated. They are always eliminated. No excuses. Have a great rest of your long holiday weekend everyone. Aloha from a very, yet again, windy and overcast Maui. Top Current Holdings – Percent Gain – Signal Date HIMX long – 127% gain – 12/19/13 CSU long – 113% gain – 9/4/12 EAC long – 98% – 12/17/12 POWR long – 96% – 12/11/12 CAMP long – 95% – 4/26/12 FLT long – 72% – 9/6/12 CPSS long – 70% – 1/31/13 HEES long – 70% – 9/4/12 ASTM short – 64% – 7/17/12 GNMK long – 48% – 11/16/12 AXLL long – 46% – 1/4/13 MNTX long – 43% – 1/17/13 WAGE long – 38% – 1/8/13 V long – 32% – 8/31/12 CHUY long – 30% – 1/10/13

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