Unloaded some more longs on this +50 points S&P500 day

S&P is up 50+ points today. We gapped up at the open, stayed in a trading range for the day, then slowly rose up in the last hour, but only to lose a small chunk and settled at 850, again. The volume has been low throughout the day and the internals didn’t look too good. That’s what prompted me to unload about half my positions in the last 45 minutes. The recent beating in my account certainly is making me being very cautious now. I’d rather save my ammo to enter higher later when we get confirmation for a rally than wait for one with bloated bullish positions.

Looking at the S&P 500, TICK, and Advance-Decline line. Aside from the open gap up peak, both the TICK and A-D line failed to impress throughout the day. Actually, it was lack of strength in the numerous 840 tests and the weak 850 breakout about 3:20 that worried me. Notice the lower lows in both the TICK and A-D line at the 840 and 850 breakouts in the chart below.

S&P 500 internals

The first to go was -90 DELL @ 9.90 at 3:25pm for about a 50% loss. I bought DELL at the beginning of October for $16.49 and it has been underperforming throughout the two months. There’s been little volume since I bought, up or down. Even with the exuberant buying on the market today, DELL failed to break above $10 (it did close at $10.14). Most important reason for me selling this long term holding now is that there’s very little volume even on this up day when everyone’s expecting a real bear rally.

DELL

Next up, I sold my C calls from the strangle placed Friday. As I said earlier in the day, the news that the FED is bailing out Citigroup has rocketed its share price from $3.17 at my time of purchase to $6.50 on the morning rush. However, C share price eased down throughout the day and failed to break $6 with high volume. I sold at about $6.05. I purchased the +2 Dec 5 calls for $0.79 and sold them for $1.77. This was a speculative play and I didn’t want to be greedy. So I sold when C share price showed it’s lacking steam to continue to move up ahead.

Citigroup

Lastly, I sold my +2 ABB Dec 10 calls purchased at $1.55 for $1.70. A breakeven trade after commission. The drawdown was humongous in this trade since I have missed some previous stops. The ABB share price action is a lot like DELL today, a lot of fireworks but no real substance. Yes, the price is up a lot today, but there’s no volume from it. In particular, in the last 15 minute, ABB dived back down to its major pivot point of $11.10. I quickly unloaded my calls then.

ABB

Like everyone else, I am really hoping for a good bear rally. It would do everyone, both bears and bulls, some good at this point. The thinking is, after so many fake rallies lately, this one has to be it, right? However, having learned my lesson in bottom picking in this bear market, I’m putting my hope/logic aside and interpret what I see in front of me. From today’s price and volume movement, this rally doesn’t seem like it will follow through.

I do hope I’m wrong though, if we can hold the 845/840 level on the S&P500 tomorrow. Then I would be looking to add to my already 60% long holdings.

BOUGHT +4 DELL 100 DEC 08 13 PUT @1.80

DELL

Covered my short put on DELL shorted at $1.29 yesterday now bought back for $1.80. A loss of 51 cents. That works out to about $200 for my position. Things didn’t look good for DELL after it broke $13. I covered today at the open when we gapped up a bit. The open gap up volume was low compared to its previous similar priced $12 level. DELL has been my weakest position so far. I might unload the rest of my shares at a loss on the next rally.

Three main reasons for my cover, 1) uncomfortable with the position due to price-volume weakness recently, 2) risk management in preparation for a possible test of 870 and below on the S&P, and 3) loading my ammo by selling the underperformers and adding to my stronger positions on weakness if we fall from here.

SOLD -4 DELL 100 DEC 08 13 PUT @1.29

DELL

S&P 500, TICK, and Advance-Decline line

Looking like we’re oversold on the market. DELL is holding up nicely today despite the 30+ drop in S&P. So I’m putting in a swing trade with a short put Dec08 DELL 13 strike @ 1.29.

Upside: Strength in DELL shares (positive change) in light of a down market today. Up volume seems slightly more than down volume for past few days on DELL too. Broad market price weakness not supported by intraday TICK and A-D line. Short term reversal expected.

Resistance: $14 then primary at pre-crash low about $15.

Downside: DELL price still in narrow trading range. We are not on the high side in that range. General market rally not supported by volume yet.

Support: Lower trading range of $12.

Bottom line: Today’s market weakness seems unsupported based on intraday data. I entered this at about 974 on the S&P 500 after touching 972. This is a short term bullish position.

Mid-week Positions Review, October 21, 2008

CAF, DELL, ESLR, SLW

Like the market, my holdings are going sideway this week near their lows. Based on the price/volume observation this week, here’s my short-term ranking from strong to weak.

1. ESLR
2. DELL
3. CAF
4. SLW

I feel ESLR is strongest because of the last hour spike last Friday on 1 million+ volume. They are now sueing Barclays and Lehman to return their 30.9 million loaned shares.

DELL is showing some resilience despite negative news on Yahoo today. It is testing its low the 2nd time at end-of-day today on a regular late-day volume. The next day or two will be important times for DELL in the short term.

CAF is just drifting sideway for now on low volume.

SLW is now under pressure because of weakness in precious metals and the Euro.

Positions review after the crash in first week of October 2008

CAF, DELL, ESLR, SLW

It’s time to review my positions as promised last week. After the record up day on Monday and then the lackluster follow-through Tuesday, today is probably going to be a down day in the markets. Given my intermediate term outlook, I am inclined to hold my positions. However, I need to unload my weakest link to reduce my risk.

Above is a quick snapshot of my current holdings.

Notice that DELL and ESLR are holding on nicely on this down (DJX -3.18%, SPX -3.57% as of this writing) day after the previous spike. This is a very good sign indeed as it shows they’re likly to hold on to the previous ~20% gain, at least for now.

Actually, the price action of ESLR seem very healthy in particular. There’s been a couple of big volume spikes in late day trading. Although it does seem to be in a constant downtrend, as you can see from its chart.

As for CAF and SLW they are both below support at the moment. CAF has broken its $25 support last Friday and is trading below it at the moment. SLW is definitely the weakest at the moment. If it isn’t such a cash cow, I would probably be selling it in yesterday’s rally. Furthermore, it still seems to be holding on to its decending support line on the daily chart today.

SLW

At this point, the question I ask myself is, if I’m in all cash now, would I be buying these companies at this point? CAF – yes, DELL – yes, ESLR – yes, SLW – yes. Is this the bottom? I don’t know. I’ll just have to wait and see. However, I will watch the day-to-day action of my holdings carefully and unload one of two of them to reduce my risk.