Big Wave Trading Portfolio Update And Top Current Holdings

Big Wave Trading remained under a NEUTRAL condition all week, until Friday. The NEUTRAL condition changed around 1:15pm EST when the market blasted higher following an already strong uptrend throughout the day. The move on Friday was more than 2% on the Nasdaq and volume was higher than the day before and above average. That is exactly what we wanted to see to have confidence in any BUY signal. Sadly, there have been so many recent switches in the model that, under our current state of affairs in the market, we can not press like I would want to at this juncture. There was not a severe wash out, there was absolutely no fear in the VIX, and the II survey did not see bears ever take out bulls during the most recent pullback. We are at such low VIX levels that it is hard for us to see how any rally can create substantial gains from these levels. There will be stocks that overall do well compared to the market but these stocks will not be able to produce any meaningful gains with the volatility so low in the market. Still, there are plenty of stocks moving but sadly they are moving in one day. If you backtest leading stocks going back 130 years you will see plenty of breakouts where you have time to get in the following day or on a pullback. In 2012, that has been basically impossible as all high quality stocks seem to move 10-30% in one day zooming well beyond their pivot point making any new long position a pipe dream. The most extreme example is a non-CANSLIM thin stock. DWCH. That 30% move in one day is impossible to buy, unless you were on it intraday. Other more rational examples involve a stock I have tried to go long for weeks but every time it moves it moves 8%+. SSYS. I can not chase these one-day moves in a tape that is so unfriendly to trends. A reversal per QCOR or WWWW seems to be the pattern when you chase. Very few can do a MLNX. We are heavy cash but have been able to increase our long exposure the past week as we are in the black in 6 out of our 7 last long positions. All we need now are clean breakouts or perfect moves (price, huge volume, max-green BOP) to go 10-25% long a single position. More follow-through to today’s gains would be confirmation to look for additional pocket pivot point buy signals in CANSLIM stocks that have already broken out to new 52-week highs. We have a good possible uptrend setting up here. We will just need to see more follow-through and make sure we do not reverse this move next week. This is still a market held hostage by government interference and it will not change until we know they are going to get out of the way. The best indicator we saw today that this rally could have legs is that money came out of bonds across the board on Friday. Nobody knows if this is going to be a one day pattern or a trend change. If it is a trend change, that bodes well for equities. The future is unknown but for now it appears it could be a good week next week. Let’s see if we can get some follow-through and bust out of this trading range we are still in. Yes, we are still in a trading range. From May 4th to Friday, the Nasdaq has moved a whopping +0.06%. Aloha and have a wonderful/fun weekend! Top Current Holdings – Percent Gain – Date of Signal BVSN short – 82% – 3/19/12 AVD long – 65% – 1/10/12 PRXI short – 38% – 3/30/12 MAGS short – 36% – 4/18/12 CAMP long – 34% – 4/26/12 CLGX long – 32% – 6/19/12 ZLCS short – 25% – 6/19/12

Big Wave Trading Portfolio Update And Top Current Holdings

“Trading is a waiting game. You sit, you wait, and you make a lot of money all at once. Profits come in bunches. The trick when going sideways between home runs is not to lose too much in between.” -Michael Covel “I’ll keep reducing my trading size as long as I’m losing… My money management techniques are extremely conservative. I never risk anything approaching the total amount of money in my account, let alone my total funds.” -Randy McKay The Big Wave Trading Portfolio remains under an extremely weak BUY signal that was triggered on 7/18. The signal was so weak that not a single ETF or leveraged ETF position was initiated. Instead it was a signal that we could increase the size of our new long positions. However, that was not allowed to happen as the most recent long position did not move higher and thus an increase never occurred Thursday or Friday. Following Friday’s sell off on heavier volume, the extremely weak BUY signal is under severe pressure and a move below the 2904.24 level on the Nasdaq will switch it back to NEUTRAL. The Big Wave Trading portfolio did not have a good week, losing 1.5% bringing us to a -5.5% return YTD. Some may choose to hide from their losses. We would rather tell the truth and bring to light how seriously difficult this current market environment is compared to 1995-January 2011 markets where trendless periods were not nearly as long or complicated as what has occurred the past two years. This period of underperformance coincides directly to volume drying up on the indexes and contracting on the weekly and monthly time frames. Protecting capital continues to be the name of the game. Our returns can be compared with other trend following system traders here. One interesting note is how closely correlated the trading has been the past 100 days to the same 100 day period in 2011. If history is going to repeat itself in back-to-back years (something you almost never see) then we should expect the beginning of a severe sell off starting some time next week. I am not saying it will happen. It is merely an interesting historical talking point. The one trade that has been working is going short stocks that gap down in the morning following releasing earnings statements. Going short in the morning and then covering at the EOD has been a high reward/low risk methodology since earnings season started. With guidance not coming in too rosy, you would think, that this data combined with our macro data and action in the overall stock market would mean a market pullback is just around the corner. A lot of things are lining up. Sadly, reality is held hostage by the Federal Reserve and other world banks. Another round of printing can start at any moment. While it is unfortunate the system is not an open free market anymore, it is the environment we are in. We are going to just have to deal with it. When the market does crack on strong volume, I am sure trend followers are going to make a lot of money. I have a feeling the sell off, when it does start, is going to last longer than just a couple of days. But what do I know. The only thing we care about is price. If it is moving in our direction, it is wonderful. If it is not moving in our direction, it has to go. Big Wave Trading continues to cut losses extremely quick when we are wrong. We were giving new recent long positions more room to work, as they were producing gains, but Thursday’s negative divergence in advancers to decliners followed by Friday extremely poor action on heavier volume is our clue to go back to being extremely defensive with stocks showing us losses or not moving at all. Losses will simply not be tolerated. If it shows a loss, some of it has to go. No matter what. Aloha and have a great weekend everyone! Top Current Holdings – Percent Return – Date of Signal AVD long – 78% – 1/10/12 BVSN short – 78% – 3/19/12 MAGS short – 33% – 4/18/12 PRXI short – 33% – 3/30/12 CAMP long – 28% – 4/27/12 PHMD short – 28% – 5/11/12 ZLCS short – 25% – 6/19/12