KennethShaw.se

Overall market analysis: Bullish

Here I will start real quick with what I believe is happening in the markets: Greece is still worrying everyone, gas prices are rising, Europe is throwing all their cash into black holes and drums of war beating for Iran. All of these are very negative for the markets of course, however the positives: growing USA economy, housing market turnaround, ISM data rising, most macro indicators showing very positive signals and job growth.

So how is this data synthesized inorder to make buying or selling decisions? There is an amazing amount of data and statistics to show one factor or another, some data will give you a buy signal such as the recent housing starts data, or the manufacturing ISM data, then there are the signals that will give you negative signals, telling you to sell: Non-farm productivity, trade balance and CPI.

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Weekly review:

Last week i mentioned placing orders on TNGO and KORS on the breakouts. Never got around to that.. Maybe i will place order on them today. I am much more patient these days as I find the market to unreliable to go all in directly on the breakout. However I am seeing really nice gains on a few of my positions with CLR now breaking 19% in two weeks, i think I will liquidate this position at 25% and rotate my money in a newer breakout. This leads me to one of my newer rules for this market, one that I unfortunately been a little lazy on: Sell a stock after it has gone up 20-25%.

Now on 5 straight issues I have held on to a stock too long, on MKTX i had a 30% gain in a month, only to see it crash, now two months later its building up again. Had I sold and come back I could rotate my cash much better. Samething on BKI, HITK and CVLT. These where all very nice quick gains, and now they have only gone down and two months later starting to build bases, and with any luck they might actually get back to where they were and continue higher. A crappy place to be as an investor: luck.

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Market action:

The current uptrend is good, it almost took me by surprise when it started early January. Doubting it’s strength as I had been fooled by the market all 2011, I took smaller positions than I normally do, but as the trend continued I started pyramiding into all my positions. So far 2012 has been fantastic, with first month and a half results for my two portfolios at around 36% and 21%. I am not playing any leverage at the moment, as 2011 still has me a little cautious.

On Wednesday I was a bit surprised by the massive upside pop in Apple then consequent reversal to close down. This is usually a sign of changing direction or pullback for a stock. It is too early to judge what will happen, but don’t place any new orders on Apple until you know the exact trend direction here.

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Last week I mentioned my reserves about CPHD and CLR. Still have my reserves with these two stocks, and I will probably liquidate my position in CLR. CPHD made a big jump yesterday as did a few of my other positions. I’ve opened positions on SWI at 33,76. Placing a trailing stop now along the 13day EMA.

I like the fundamentals on SWI, fast growing, eating up market share monster profit margins to boot. Take a closer look at this one, though I think getting in now could be a little late. Who knows.. could take off much further.

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Stocks I like right now

In my last post I wrote about how my buy signals are chirping like crazy.. A pretty good call and I’m glad I started buying at that time. Results have been excellent and my last call CELG seems to be doing exactly what I wanted. Also BKI came down hard but still well over my initial buy point of 27.59 so I am looking at buying a few more here if it doesn’t show any more signs of weakness from here. Also another one of my stocks HITK which I started buying at 30 also took a 15% haircut and crashed well under my initial sell point. However this market is a tad different than earlier markets, so slight adjustment on my part are needed. So I figured it was an overreaction and my analysis seems to be correct as you can see on the chart below:

Hitk dropped from a high of 42.54 down to 32.89. Under normal market conditions this would signal a sell, however with the current market and HITK being a low liquidity stock, volatility tends to be a little higher. In any case the stock is back up to 39.99 and what was originally a sell signal, could have instead been used as a new entry. We are always smarter in hindsight.

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I know it’s been a while.. I promise I am still very active in the markets but these markets have not made it easy to profit from them I suppose somebody who spends all their day in front of a computer screen staring at charts would be more successful than I in these markets, but I enjoy having a life outside the markets as well. In anycase the volatility we have been experiencing since february 2011 has not really relented. These markets are brutal and I imagine a lot of people are barely breaking even (I’m optimistic here). For me it has actually been a pretty decent year 2011, with nice runs in MCP, TNA, TZA, Gold and Silver; These few wins have more than compensated for all my small losses. 2012 is looking positive so far and I will discuss some small strategy changes I have been working on over the last couple of months that I believe will prove quite usefull in 2012.

To say the least this market has been tricky.. In my last post I wrote about moving over to cash, while I have gotten buy signals I simply can’t play this market in the typical fashion. I don’t believe there is enough fundamental data to give me the confidence to go all in. I have changed my strategy a bit and so far it is working perfectly.

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Just got back from my little mini vacation up in Norrland (northern sweden) Was suppose to be a fishing trip, ended up being a summer cottage trip and visit different friends. Would have rather gone fishing, but I truly enjoyed myself none the less. I am working on a new piece, a much longer piece here for my blog with regards to the stock market and how it attracts the scummiest people on earth. All the major scum of the earth piles on in the stock market, everyone trying to rape everyone. But I will save that for a later day. Right now I will just give a quick update here as nothing has really changed; which means my positions are the same.

As you know I started buying AGQ at 188 with a 2ATR stop at around 160. That trade has played out well, now AGQ is trading at 254. A nice gain, I moved my stop a little tighter to about 245 now as I don’t see the point in giving back that big profit. Also, I pyramided at 210, so total profit right now is around 35% for a week and a half.  Not bad considering the market. I also bought a sizable position on DGP after the last mini correction in gold. I figured the raising of margin is only a good thing for the price increase. Now only the big boys can play. My portfolio is about 50% invested in those two positions and the rest in cash. I have not seen a follow through day yet so I don’t dare buy any stocks.

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As I stated in my previous posts; I always wait for the follow through day. This is absolutely necessary. A follow through day is a second consecutive day of high volume gains in the markets. This confirms that the markets trend has, atleast for a while changed. We saw this most recently last week where the markets crashed hard, only to rally big. But if you look at the chart, the markets rallied but the volume sank. This could be one of two things: either the small amateur money was thinking they could get some nice deals on stocks, or well, there really is no or here. Maybe some value funds came in and bought up some shares here and there, but in general the buying was minor and the selling was major. The funds were pushing up stock prices to sell to amateurs.

As always I follow my rules without hesitation. My rules have made me money, while following intuition or gut feeling has always lost me money. My intuition was telling me” jump in! these markets are cooking”, while my rules where saying “lets the losers lose, wait for the follow through”. So I waited for the follow through, it never came, and my cash is safe. Well, I bought AGQ as I describe last week which has given me a decent 15% so far. Moving my stops pretty tight there, I also have gold which isn’t doing anything. Again, a tight stop.

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Money Management:

This post is for those of you that want to make monster returns, consistently.

In all my firms I never allow more than 5 stocks to be held at any one time. These stocks must absolutely be the best stocks on the market. Most of the time I never have more than 2, and if the stock is really hot I can have all my chips plus margin on a single security. I don’t recommend this for everyone, but for me, it works.. However I have a system that I truly believe in as well. By keeping no more than 5 stocks in my portfolio, I force myself to find the best performing stocks. I filter out the losers and allow myself to the possibility for amazing gains. I simply can’t afford to get lazy and hold on for a -30% decline. It quite simply forces me to be truly tuned in with the company and the markets.

To accomplish this though, I have to practice a strict money management approach that will keep me in the game even when the stocks go against me. Many people don’t even know what money management is, they figure “If I buy 30 stocks I’m well diversified, thus I cannot lose to much”. This is not money management, this could best be described as lazy. When I purchase a stock I always know exactly how much risk I am willing to take on each trade, and when to double down.

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