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Thursday, July 29, 2004
Good evening friends,
Market Recap
Today continued with more of the same dull trading we have seen in the markets recently. There is not much to report other than the NASDAQ moving up by +22 points, that's a decent size move for this index. The Dow was up +12 points, and the S&P was up +5 points. Both the Dow and S&P are slowly creeping back up to their respective 200 SMAs.
In yesterday's commentary I mentioned that I felt the Dow would continue to the upside after that big reversal it had in yesterday's trading, closing up for the day with a positive swing of more than +100 points. These types of reversals often lead to a continued advance the following day. Although the advance was only 12 points for the Dow, it was still a positive day. However, do not get too excited over this latest rally. Volume has not been overwhelming and without volume, stocks can not sustain their advances. I suspect once the Dow and S&P run up against this 200 SMA resistance line, the selling will ensue.
We cannot turn bullish until all three of these indexes are trading above their 200 SMAs and all the lines are turning up. The NASDAQ has quite a ways to go before it will be in good enough shape to start taking long positions. One stock that is an exception (and is on fire right now) is PLMO. Read my recent comments on this stock, if there is one stock to be long this market, it is PLMO.
Short Positions
Some short positions that we have closed recently after gaining our goal of 10% continue to fall like rocks. They are TARO, COCO, and KKD. TARO gapped down $11.00 today and traded as low as $18.05. This is almost $30 below where the price was when we first recommended shorting the stock on our bulletin at $47. We covered COCO for a nice gain and planned to short it again on the next bounce. That bounce never came and yesterday it gapped down $3.00 and traded below $17.00 – that's $8.00 below where we first had it listed on our bulletin. KKD is another stock that has been on our list since March 14th at $35.00 which has gapped down again today and traded as low as $15.60 – that's nearly $20.00 below our listed short price. There are many more winning short plays from our bulletin including ICOS, QLGC, KLAC, ICGE, and MSTR.
Playing the Bear Market
Take a look at the listed price and compare them to the closing prices today and you can see that sometimes in Bear markets, it pays to just hold short positions rather than trading them. We have locked in gains on these shorts because that is what we do, we trade and profit is profit. We can not always time trades perfectly so it is better to lock in the gains when you have them.
The Advantage of Trading
Trading has many advantages over longer term holding, but there are some examples where holding for a longer term can work out much better than trading. This is the case with the stocks mentioned above. Unfortunately, we can not have it both ways, that is, trading and holding at the same time. My advice is if you would like to do both, open two separate accounts. Short some stocks and hold your positions until you see the trend in the market turning up and cover. If you are not sure when that will be, follow the commentary and you will know when it is time to cover and go long. We will be doing the same, just follow our lead. The bull will be back some day but right now, he is out of town. The markets and their charts need much more work before they become positive.
OTC BB stocks
- EGSR (Nice 15% move today from last nights mention)
- MAUG (Up 30% today from my mention here last night)
Please tell a friend about our service. We would like to become a referral service only. With your help, we can be. As always, thank you for your support past, present and future! Have a great night everyone; we'll see you all Sunday evening.
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