Momentum Book Update
- Posted by Leigh Drogen
- on January 23rd, 2010
Oyyy, it was a tough week for long only strategies any way you cut it. The market trapped the chasers with three major distribution days and then puked for two straight. I made a calculated decision to lower my beta early in the week but didn’t significantly raise my cash level. I still see many great opportunities and don’t believe the market is ready to just roll over into oblivion. A good shake up is needed once in a while and gives us clues as to what issues will continue to trend and which need to be cast aside. Use this weekend to run through your names and see which trends are broken and which are showing good relative strength. The market will bounce next week, don’t be long the crap, stick to what is still working.
I cast aside $NTAP, $TSL, $HL, $CGA, and $RINO this week. Notice that three of those names are China plays. The Chinese market isn’t acting right and it’s better to step out of the way while that deleveraging plays out. The small cap Chinese market was overheated and too many people were making too much money, someone needed to be punched in the face. I took some pain by not taking profits while they were there.
$LZ was on fire until Thursday when it was obvious that it could not buck the market trend for any long, I took nice profits and reduced the position to 1/3 size. Winner of the week for sure.
I took some profits in $CREE, how could I not.
I bought the dip in materials this week by adding positions in $RGLD and $ANR. I’m not feeling too much pain and believe we are going to see a major bounce there. I also added to $RBY.
I started positions in $PEGA and $SBAC and added to $AAPL, $ARUN, $CPLA, and $RAX. I love the education sector here, it’s relatively uncorrelated to the market and institutions are making big bets on the government pouring money into retraining people through online schools. I’ve also been begging the market for a chance to step into $SBAC, a cellular tower company, I’ll add to it on any market strength, I want a big position if the market allows.
Business service stocks like $RHT got slaughtered this week as investors sold the excellent $IBM earnings. I still like it up here.
I’m loving the international banks here as investors flee US banks in fear of government regulation. My pick $IBN is still squeezing into the apex of a large triangle. A failure and I’m out, but I believe it breaks north and catches fire.
Next week is huge with $AMZN and $AAPL reporting, as well as the Apple tablet announcement. Look for support on the weekly charts after a puke like the one we had this week, step into solid trends, the market isn’t just going to fall apart and collapse.
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Leigh Drogen is the founder and chief investment officer of Surfview Capital, LLC, a New York based investment management firm employing an intermediate term long/short momentum strategy. More »
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