As you can see below, investors took materials and tech to the woodshed.  The trend in most, but not all momentum names is busted now, it will take some time for issues to base out and give goo low risk entries to the trend.  If we see a quick bounce back from the high momentum names, I feel it will be shorted into relentlessly.

Some stuff I sold out of this week: $NFLX, $AMZN, $AAPL, $IBN, $IAG, $MHS, $RHT, $RGLD, $CERN, $EGO, $CTSH, $ATHR, $LZ, $ANR.

The Netflix sale is really the only one that haunts me, not holding into earnings was a huge mistake and an emotional decision based on the overall market and my portfolio, not the fundamentals or technicals of the individual issue.  I fell victim to the emotion of just not wanting to be exposed to risk, when I should have traded the stock.  This should be a lesson to you all, not to be overwhelmed by the performance of your portfolio or the overall market when making a decision regarding an individual issue.

Some stuff that I still like.  The education names have held up very well, $DV even had a monster breakout this week.  I’m holding $CPLA and believe we could see a massive breakout on the weekly chart imminently.  $V still looks good and I’m happy to own this name until the weekly chart breaks or the government takes their candy away.  I don’t see either happening in the near future.  I’m looking to add to my $SBAC position on any strength.  The tower operators may not be the best businesses in the world, but hedgies are chasing them to the ends of the earth off the idea that $T and $VZ need to jack up their networks to deal with the onslaught of mobile devices requiring massive amounts of data transmission.

My cash position is now above 40% and will likely stay that way for the next few weeks.  Stocks need time to heal, and catching falling knives is not my game.  I’ll also be limiting the number of positions I have on, there are still some good trends out there, and new leadership, but I don’t believe I can spread myself out to 30 positions in this market while momentum names are getting picked off one by one and shot.

This is a long / short market now, trade accordingly.

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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$TSL and $CREE got smacked around pretty good today.  I bought more $TSL into the fear on Wednesday and then again Thursday, both great entries showing me positive P&L for the day, but adding to my losses as it is now trading below both levels.  I still like the trend, and this is the solar leader.  Profit taking is a normal, but I will be very quick to cut ties.  It closed exactly on the 50 day moving average today, anything below today’s lows and I’m gone with my nice profit.  The same goes for $CREE.

$AMZN and $PCLN continue to lag the market as no one is going to be buying these into earnings with the massive run up they saw after the last set.  Expectations are high, but I believe will be met and the stocks will once again be bought.

My materials and China exposure really hurt this week, I’m fine with the former, not so with the latter.  I believe gold is going higher, but needed a rest, I’ve been posting the chart with my expectation of the price action.  We need another month or so before gold $GC_F takes off again, and I’ll continue to build my position in materials.

$V looks great and should break out of its bull flag any day, I’m loaded up there.

I don’t think anyone has enough exposure to healthcare right now, which is why it’s still going higher.  I would like to have more, but still feel that we are going to see another leg to the tech rally, so I will keep the major part of my exposure there.

I sold out of $JCG and $GOOG this week as the trend in both is bending.  No need to be in $GOOG right now as it is a battle ground stock.

I also cut $GS today, it isn’t acting how I would like into earnings.

I added positions in $APPL and $EVR.  How can you not be long $AAPL into the iSlate announcement in two weeks, it’s a game changing product and the chart looks very healthy.  I think people come out of the wood work to buy this stock.  I’ve traded $EVR in the past and I’ve got a good feel for it, I love the weekly chart and think it’s ready to go again.

I also added a position in $ALGT this week.  40% of the float is short and the pattern looks great.  It’s not a high beta name so it gives me some refuge from the market if we do see a broader sell off.

Remember that this overview does not cover my complete activity or every position, just some stuff I’d like to highlight.

I still see so many names I want to own exhibiting great trends.  Bearish patterns like the one we are seeing in the indices currently have been broken by the bulls time after time during this rally, I believe that will continue to be the case.  Breakout and breakdowns have both failed, we are churning our way to 1200 $SPX, continue to buy the dips and lighten up on the rips whenever things feel too euphoric, I know I did a little to much this week and paid the price.

I’ve stayed away from the steel sector as I don’t believe we are going to see continued strength from them beyond this push.  I focus the portfolio on stocks that I believe will trend positively for the intermediate term, not just a week or two.  The real money is made by sitting, not trading.  I have not had exposure to coal, and I’m dissapointed about that.  I had a good opportunity to take a position in $MEE at the end of last week but balked, which was obviously a mistake.

My entry on $ARUN this week was perfect, already in the green by almost 5%.  I took off some exposure to $GS as it has traded straight up for a week now.  It was a heavy position, it is now a bit lighter.  $VRX finally woke up this week, patience really paid off there, I continue to like it going forward.  $TSL and $CREE continue to just move up, there’s no other way to describe it, these two stocks are unstoppable.  I have greater than a 55% gain in $TSL and have been peeling off bits along the way, which I guess has been a mistake because I haven’t found a place to reload the boat.  My two retail positions $JCG and $DECK are performing well.  I’m stalking $URBN which is giving a decent entry right here right now.

I will ruminate on the tech exposure this weekend, it may simply be too high.

Brocade Communications $BRCD has been the biggest loser, I had to dump the position with a 21% loss, which has turned out to be the right play as $BRCD has gone nowhere.  I still believe in the company, and think it will be bought out in 2010, but there’s no sense sitting in this name while so many stocks show better relative strength.  I was a little impatient in Patriot Coal $PCX, taking almost a 12% loss.  $PCX is now surging above a major resistance level and looks great.

I’ve kept my exposure to energy low, but names in the space are starting to look attractive.  As well, some REITs, yes real estate, you didn’t hear me wrong, are looking strong to the upside.  I obviously missed the boat on much of the run in healthcare, but will be sure to add there on a pullback.  I have exposure in $ESRX, $MHS, and $CERN, but would like more.

Here are the current portfolio positions, for sales I’ve made, visit the momentum tab of the trading book.

]]> http://www.leighdrogen.com/momentum-book-update/feed/ 0 http://www.leighdrogen.com/a-look-to-201/ http://www.leighdrogen.com/a-look-to-201/#comments Wed, 16 Dec 2009 23:07:32 +0000 Leigh Drogen http://leighdrogen.com/?p=1282 StockTwits has organized a new stream of tweets focused on the symbol $TWENTYTEN for the community to make predictions and share their views about the year to come.  I encourage you to participate by writing a blog post or simply tweeting your predictions or views.  Just tag your tweet with the symbol $TWENTYTEN.  Nothing in this post or on this site should ever be considered investment advice or an invitation to buy or sell any security.  Please feel free to leave comments or argue against my predictions, I love the banter.  I may add to this post as we approach the new year.

The Market

After two years of massive swings in each direction, the market settles down.  The trading range in the S&P 500 $SPX will not exceed 30%.  In 2008 investors dumped everything.  In 2009 investors bought everything.  In 2010 we get back to a more “rational” market as investors start making bets on companies instead of asset classes as a whole.  While the past two years have been marked by a high level of correlation amongst many assets and asset classes, in 2010 we will see this break down.  2010 will be the year of the stock picker.

Google $GOOG will buy Twitter $TWIT because they want to own the world and know “real time” is the next step in search.

The Google phone, also known as the Nexus, will be the first to take a real bite out of the $AAPL iPhone.  Google’s business strategy was insanely good.  Release your excellent operating system on a bunch of marginal hardware, get everyone else to pay for the advertising to introduce said operating system, Android, build an awesome piece of hardware yourself, launch it with a ton of buzz, own the hardware and the software and take a real bite out of the iPhone.

Facebook $FBOOK will go public, it’s too big to be bought at this point.

Palm $PALM will either trade under six dollars at some point, or be acquired, maybe both.

Financials as a whole $XLF will continue to lag, along with the homebuilders $XHB.  Healthcare $XLV will take the lead, outperforming the market as healthcare reform is finally out of the way, one way or the other, and investors are able to place bets knowing what the new rules are.  I’m especially a fan of the electronic medial records providers like Athena $ATHN and Cerner $CERN.

Retail investors will lose money trying to ride the gold miner $GDX train, getting whipsawed all over the place.  Smart fund managers like Paulson will make a killing in gold and gold miners.  Gold $GC_F will hit 1300 dollars.

Citibank $C will not trade over 7$.

Bank of America $BAC will spin off Merill Lynch $MER.

Economics

While the low end of the housing market will only fall another 5-7%, the upper end, above 1,000,000 will fall another 10%.

Commercial real estate will fall another 10%, but large well capitalized REITs will benefit from their ability to prey on distressed situations, setting themselves up for a positive year.

New York City residential real estate prices will continue to fall.  Phantom supply from recent construction that was turned rental will hit the market after developers default on their debt and banks take control, willing to sell at any price to liquidate inventory.

The official unemployment rate, which stands just north of 10%, will not dip below 8% by the end of 2010.

The Federal Reserve $FED will raise interest rates to no less than 2% by the end of 2010.

Politics and International Relations

Iran will announce that it has the capability to build a bomb, but won’t overtly say they’ve built one.  Neither Israel or anyone else will attempt a military strike on Iranian nuclear facilities.

No less than 5 senators or governors will be disgraced by some type of scandal.

Technology

Starting with AT&T $T, telecom providers will begin publicly restricting the bandwidth used by mobile internet devices as their networks literally choke on data.  I have the feeling that this is already happening in some form or another as they track massive network usage on my iPhone and degrade my service because of it. The war for net neutrality will become a headline topic as the telecom giants fight the edge developers for control over the future of the internet.  If you think that Verizon’s $VZ network is any better, just wait, they will choke on data as well.  The network providers will partition the network and charge an extra fee for your data to be priority.

Cloud computing will take over your computer experience like never before.  Soon, you will subscribe to programs in the cloud and access them over the internet instead of hosting them on your personal machine.  You may already be using Google docs, Pandora Radio, or Lala, the cloud based music service recently bought by Apple, but you haven’t seen anything yet.  The Google Chrome OS will usher in a new paradigm in how we interact with our computers.  Companies like Rackspace Hosting $RAX will continue to grow and are solid investments going forward.  Sales of netbooks by $HPQ will continue to grow as the computer requires less and less, everything is moving into the cloud.

I’m not a huge fan of location based services like fouresquare, I have no desire to tell people where I am at all times.  I don’t believe other’s will choose to make this information public in a massive way either.  But……location based marketing will take off in 2010 and a company will come to the forefront and rule the space.  You will download an application to your mobile internet device which will recognize you are walking into a certain store, let’s say Urban Outfitters $URBN, it will know your previous purchases and offer you discounts tailored to your history when you walk into the store.  It’s already starting with Google.  It will be huge, and you will love it, no more clipping coupons.

Mobile payments through services such as Square will be ubiquitous.  You will be able to pay for a t-shirt in the stadium parking lot by sliding your credit card through a little reader attached to an iPhone.  Once again, it will be awesome and you will love it.

Mobile video will be all the rage with USTREAM on your mobile phone.  You will broadcast your kids soccer game live to your husband, or wife, traveling on business.  Is this StarTreck shit or what!

Apple will introduce a tablet device, it will sell over 5,000,000 units in the first three months.

The Large Hadron Collider (CERN) in Switzerland will create miniature black holes, the earth will not be sucked into one of them, and if it is, you won’t be around to bash me for being wrong.

Other

Plans will be announced by the NHL to move a hockey team to Quebec within three years, most likely the Phoenix Coyotes, Atlanta Thrashers, or Tampa Bay Lightning.

Derek Jeter will be publicly embarrassed by something, no one is that perfect, everyone has skeletons, I love you Jeter but no one’s a saint.

Tiger Woods will NOT go on Oprah with Elin, and @stein will owe me a hamburger.

The brokerage firms put out price targets for most major assets, along with average prices for most commodities so that clients can hedge their exposure.  Let me make this very clear, the only time when price targets make sense is when you are a deep fundamental investor and are willing to buy or cover when things look ugly and sell or short when the market is in love.  I have such a great disdain for much of the sell side community, I won’t even get started.  Ignore these predictions, all they are is marketing.  Ignore anyone who tells you they know where an asset will trade any more than 6 months from now and are willing to put money on that prediction.  It’s fun taking a guess at where things will fall in the months and years to come, but as a trader, price is king.  Pay attention to price above all else, allow it to confirm or refute your thesis.

I wish you all an excellent new year, and hope to see your predictions in the days and weeks to come.