Entries Tagged 'Uncategorized' ↓

One of my resolutions for 2009 is to figure out how to make better use of StockTwits as a tool for the part time intraday trader. I realize it’s pretty ludicrous to be using what amounts to a day trading tool for a strategy of intraday trades in this kind of market, but my intent is to learn. In fact, when your blogging ad revenue is measured in the millicents per year, the learning is the only thing of value you can glean from doing this in the open.

My going in premise on 2009 is that we’ll see a shallow rally of the S&P 500 to about 1000 on low volume, followed by a continued fall throughout the year to around 770 and possibly lower. I’m more inclined to follow through on ideas that I come across which fit that philosophy.

I’ll try to post once a week on the ideas that have caught in my filters, and the trades that resulted. As we stand before the first full trading week of 2009, I’ve inherited a number of StockTwits-inspired trades that I need to close out before I can fully embrace the one-idea-per-week goal for the year.

The current open positions (and the source of inspiration):

Short NDAQ

I entered this in stages. Short NDAQ common at $23 and $24.50 for a cost basis of $23.50. Long June $20 puts with a cost basis of $2.47.

I found this one via @alphatrends’ post. This was probably a bad idea—the theory really makes no sense from a Madoff perspective, but may pay off if my bearish sentiment is realized early in 2009. As with most of my options-related failures, the timing is key. In the fall, timing mattered little when there were DJIA swings of 1000 points in a day; now that swings have slowed down, timing matters more.

Selling SRS January premium

I’m trying to sell some premium here on my open $SRS position at a basis of $86. Selling a January $70 call tomorrow on any early pop.

$COST Puts

Found this one in two places. While I don’t believe that the payment form limitations cited by @BuyOnTheDip will prevent people from shopping there, I do buy the EarningsBreakout channel check that people are going to focus on staples rather than on premium electronics. Therefore, I’m going short with the puts. Long the July $40 puts with a cost basis of $2.10.

Short BBY

Went in to buy an iPhone this weekend. They were out of what we wanted, so we left. I can’t decide if that’s a good channel check or a bad one, but it signals to me that they are retrenching. Short the common with a basis of $26.45, and also sitting with June $20 puts at $3. Not looking so good with $BBY up to $30 today.

Long $AAPL April $100 Puts

Cost basis $16.86. I still hold that $AAPL is range bound between $80 and $100, so this is sort of neutral. I was simultaneously long and short last week, but closed out my open call positions. I have a tight leash on this into a rally. I may have to hold this until the post-show return to earth.

So far, only the $COST move is in the money. As I close out one of these others, I’m scanning for other opportunities. And trying to stay too small to fail.

If I didn’t mention it before, this BuyOnTheDip tips for 2009 post rocks:

Read it here.

I can only hope to strive for such discipline.

A late day rally and gains of around 5% on 12/31 in both Buffalo Wild Wings (BWLD) and Berkshire Hathaway (BRK.B) propelled me to second place in the 2008 Family Stock Picking Contest by the thinnest of margins.

Berkshire Hatha Class B Ord Shs	-32.14%
Mindray Medical International Ltd	-57.27%
PowerShares Water Resource Portfolio	-32.57%
Buffalo Wild Wings Inc	+10.47%
Mueller Water Products Series A Ord Shs	-10.71%
Central European Distribution Corp	-66.08%
Cognizant Technology Solutions Corp	-46.79%
Grant Prideco Inc	+3.39%

Overall, my 8 picks were down 34.47% on the year, edging out Mrs Firebones (down 35%) but trailing Firebones’ Niece-in-Law (down 30.6%) and crushing Firebones Jr (down 45.88%) and the Nephew (down an amazing 65.18%). Overall, the aggregate picks were down 42.23%. Worst picks: the Nephew’s VympelKom OAO (down 80.02%).

The only winning stocks picked this year? The Niece’s PetMed Express (PETS) up 45.7%, Buffalo Wild Wings (BWLD) up 10.47%, and Grant Prideco, which managed to be acquired earlier this year for a 3.39% appreciation.

My real portfolio was down 26.72% this year. I would have been down around 33%, but starting in mid-September, I became a much more active trader, executing a number of swing trades in AAPL and SPY puts that made up a lot of ground.

Currently, I’m insanely short and hedged; a January rally is probably going to hurt me more than a January panic will. I have the suspicion that this year, we’ll see a very thinly traded zigzag rally up about 10-12% in the first quarter, followed by a much higher volume decline over the remainder of the year, as much as an additional 25-30% off that high.

This year’s contest picks, being submitted as we speak, will be up shortly.

I mentioned before that I love StockTwits. But has it helped me this year?

Sadly, the short term monetary answer is “not yet”.

However, the long term answer from an educational perspective is “yes”. Because as obvious as it sounds, while StockTwits is great for idea generation, ideas are $0.008333333 each, and ideas are no substitute for doing your homework.

Case in point: I buy the premise of most of the folks I follow on StockTwits that commercial real estate is hosed in 2009. And the ticker that is most mentioned when determining how to play the plunge in commercial real estate next year is $SRS. Makes sense. Go UltraShort Real Estate if you want to dial in profits, right? All the cool kids are doing it.

Wrong. $SRS is one of the inverse ETFs that is only really useful to hedge for a day, and it exhibits the fundamentally broken tomfoolery that TraderMark highlights, with the added negative of being susceptible to the sawtooth effect for eroding gains over any period of time that that Fortune8 demonstrates.

The short version: these are horrible vehicles to hold for any kind of intraday trade, let alone as part of any kind of buy and hold hedging strategy. Go read those posts before investing in any double or triple ETF, or in any inverse ETF. As TraderMark puts it bluntly:

I am beginning to wonder if due to the structure if all these ETFs are destined for a near $0 price in the “long term”.

But is my use of StockTwits to blame here? Absolutely not. I plunged into $SRS trusting a premise and voices I agreed with, and even had one good short term trade on $SRS. I was the one who didn’t fully understand what I was investing in before jumping in. I was the one who didn’t read the prospectus. I’ve learned my lesson (and I’m stubbornly still long $SRS at cost basis of $97 and change). But here’s the happy ending. The very insightful blog posts above (TraderMark’s and Fortune8’s) came to me through StockTwits participants including Fortune8 and TradeFast. So I wouldn’t have learned my lesson without getting references to their more detailed analysis that explained what was going on.

My only regret is that they didn’t tweet that stuff in the beginning of December rather than at the end. The good news is that I’m up enough from my $AAPL and $AMZN trades this year that I can tolerate this $SRS pain as I look for an exit (take it now and treat it as tuition? Or hold it and hope for more irrational exuberance to take hold?) and look for a more suitable proxy for a commercial real estate collapse.

So in the end, I paid for a couple of lessons this year. In this one, I not only got reinforcement on doing homework, I also traded up voices I’ll listen to: Fortune8, TradeFast and possibly TraderMark (if this silent twitterer is the same TraderMark from the blog.)

My observation over the course of December is that StockTwits currently holds much more value for the daytrader than it does for the buy-and-hold investor, or for the casual intra-day trader. In fact, I’d say 95% of the value of StockTwits accrues to day traders. There was money to be made in $SRS this week by through the use of StockTwits, but to make that money required a day trader’s level of attention. One of my goals for 2009 (which I’ll detail later this week in a kick-ass post for the ages) is to learn how to exploit StockTwits in 2009 as a tool for someone who isn’t a day trader, someone with periodic, limited attention span. In short, A StockTwits User Guide for the Idiot Retail Investor.

Stay tuned.

Unfunnyman Jay Leno is moving to 10PM (9PM Central) next year as NBC tries to shake things up and improve their ratings for the timeslot.

The real story here is that NBC gets about four different things: first, as ad revenues fall, they get a cheap-to-produce air-filler. Second, and perhaps more importantly, they buy time. By locking up Leno, they prevent him from directly competing with Conan O’Brien out of the gate, and all but ensure that a quick Leno flameout marks the jumbo-jawed one as damaged goods for long enough to let O’Brien settle into the new time slot. Third, they get to keep Leno around as an insurance policy if O’Brien’s humor doesn’t capture an audience. Finally, Leno’s shtick has a short shelf-life, especially five nights a week in prime time; by forcing it to play itself out in a single-season overload, they can make it even more difficult for Leno to go elsewhere, as other networks won’t want to take on a broken format and a big salary whose career has no third act.

I don’t see much upside for Leno short of the money and the option of riding in to save the network should Conan fail miserably.

And the PETS shall lead them

A long time since the last update—very busy with work and the vacation days and weekends have been spent trying to salvage some alpha by putting cash to work in very aggressive daytrading behaviors which have netted around 110% return on a very small amount of cash, mainly through a combination of swing trading AAPL and hedging the rest of my shredded long portfolio with SPY puts.  More details on my foray into trading in a future post.

But the family stock picking contest is in need of an update, just to humble all idiot retail investors like me who think that individual stock picking combined with a buy and hold strategy makes sense in the long run.  Of the 40 stocks selected by the 5 participants, only one is in the black: PetsMed Express (PETS +48.18%).

I happen to be in a close second in the contest now, with my eight picks (BRK.B, MR, PHO, BWLD, MWA, CEDC, CTSH, GRP) down only 37.88%; the worst participant, identified only as “The Nephew” is down a miserable 69.06% on the heels of his -5% performance last year.

The quick rundown from top to bottom:

In the lead

The Nephew’s Bride (pets fxi vlo nvs pep wfmi fpl ba) -37.79%.  PETS is up an amazing 48.18%, but this can’t offset FXI (China) being down 84.4%, and Whole Foods (WFMI)  down 74.07%.

Me: (stocks—see above) -37.88%.  I’m basically getting killed due to a combination of Buffet’s financial exposure and my global exposure (what I thought was a lesson learned last year).  Best stock: Buffalo Wild Wings (BWLD: -1.12%).  Grant Prideco was acquired for a combination of cash (yeehaw) and Valero stock (booooo!) in April; that didn’t help.

Berkshire Hatha Class B Ord Shs	-26.12%
Mindray Medical International Ltd	-57.92%
PowerShares Water Resource Portfolio	-36.54%
Buffalo Wild Wings Inc	-1.12%
Mueller Water Products Series A Ord Shs	-35.29%
Central European Distribution Corp	-59.30%
Cognizant Technology Solutions Corp	-43.43%
Grant Prideco Inc	-43.34%

Middle of the Pack

Mrs Firebones (down 40.15% with AET DE ARG CVS NTDOY AAPL COST GMCR) got creamed due to Aetna and Deere (each down around 62%).  Retail exposure hurt as well, although some of the quality stocks held up okay relative to the market.

Firebones Jr (down 51.48% with CERN ADDYY VIA.B PEP SNS TWX SCHL PIE) has one down 67% (PIE—picked solely because the ticker symbol was PIE).  I like his chances to improve before the end of the year through strength in Scholastic.

Bringing Up the Rear

The Nephew (down 69.06% on bidu isrg fwlt vip cmg stp nov rimm).  Suntech is down 89%; when your best stock (ISRG) is down 58.97%, it’s hard to dig yourself out of the hole.  Quick analysis is that this is overexposed to energy at the height of that market; looking at it another way, the double whammy of oil falling from $140/barrel and the falling dollar crushed him.

Overall

Overall the combined portfolios are down 47.17%, compared to a positive return of 15.82% last year.  There is not a single major index that the combined portfolio is beating.  My picks happen to be beating the S&P, the NYSE Composite and most of the international indices, but trailing the three Dow Jones averages (Industrial, Transportation and Utilities).