Didn't cut losses as planned and now paying dearly

ESLR

I placed some limit sell on ESLR last Friday at $6, and then lowered to $5.7. I lowered it again to $5.6 in the morning and actually thought of executing a market sell when it was around $5.55. In that hour or so, I pondered should I exit my ESLR to limit my exposure to market volatility. At the time, ESLR was my weakest position, and my 2nd most money losing holding.

My intraday signals were showing weakness, but my daily was undecided. Just before lunch, I decided to keep my shares (and cancelled my exit working order) because I want to hold this for the long term (at least weeks).

In retrospect, I really should trust my signals. I knew the market could dive in the short term as we haven’t reached capitulation and widespread fear yet. I have let my emotion got the better of me by not wanting to miss the bottom. In hindsight, the phrase “it’s better to be safe than sorry” couldn’t have been more appropriate.

ESLR closed at $3.47 yesterday, way below my initial stop loss target of $5.6. The time to cut losses short is long gone. It’s either surrender now or wait for the calming of the market.

I decided to wait through the storm in this round. I still think we are very near the bottom. Hmm… haven’t I said that before already when ESLR was at $6.0+ … ?

DJIA

Seriously, I will wait a few days until making an order. There’s too much emotion in the market at the moment. (i.e. WSJ: Central Banks Cut Rates World-Wide in Emergency Move)

SLW and ESLR broke supports and stops

DJIA

Volatility

Dow Plunges 350 on Unemployment, Factory Reports. Lots of panic headlines today. A definite 180 degree turn from yesterday’s, and another 180 from the day before. The flip-flopping sentiments of the media are just too funny. This is definitely a time of high volatility and uncertainty. Even at today’s “plunge”, the fact is, the markets are still up from last week. We could very well be seeing the bottom being set in this bear market. I think the worst of this downturn has unfolded in the past year already.

In any case, I am definitely a bit early in my long term entries. Both SLW (-15.6%) and ESLR (-14.1%) have broke support, but still far from 52-week lows. I am reluctant to sell at this time because the market is in panic mode. Yet, both prices are below the stops I’ve set for myself.

I would go long on SLW at this price if I had the fund. The indicators are on buy alert too.

SLW

Silver

ESLR

ESLR is more risky at the moment because although the price is off a lot, it’s still dancing around the 20 dma. It could very well break the 52-week low from here.

BOUGHT +250 ESLR @5.99848

ESLR

Upside: Indicators all positive divergence, money flow steadily increasing. DJIA is down this morning a bit and ESLR is holding support at $6.

Resistance: 20 dma at $7.30

Downside: Two up gaps to be filled. Fast, recent rise.

Support: $6

Target: 50 dma at $8.44. Sell limit entered at $8.40

Stop: $5.6

SOLD -386 ESLR @5.3515

ESLR

Sold all my ESLR for a small profit. News of Barclay picking up Lehman’s mess means that ESLR’s deal might not go to worst case scenario. Price of ESLR shot up 20%+. This seems like a good time to exit (sell on rumour). I expect some volatility around the $4 – $5 range as there are still a lot of guesswork going on regarding ESLR’s deal with Lehman. However, the recent low of $3.3 is likely to be a bottom. I’ll wait for a better re-entry in the $4.x range. Fee = $5.79

BUY +386 ESLR @5.18 LMT

Evergreen Solar, Inc.

Today’s WSJ headline, “Wall Street Shakeup Rattles Markets.” Lehman filed for bankruptcy and Merill sold itself to Bank of America, reportedly. VIX rose above 30 today, a recent high. The market is definitely very volatile today, but it’s not down as much as people have hoped. DOW reached a low of 11087 but has been around 11190 most of the day as of now (13:07).

DJX and CBOE Volatility Index

Transaction fee = $5.79

Upside: The Money Flow Index broke below 20 at 18.42. Daily Stochastic is at 10.825 and crossing over the Slow Stochastic line. MACD positive divergence (i.e. new price low, but not lowest MACD). And 18.3% of shares are shorts, as of last month.

Resistance: Friday’s high of $6.30. And stronger resistance at $7.60.

Downside: New 52-week low, bear market, and oil below $100.

Support: Round number $5.00.

Bottom line: Not only is ESLR at a 52-week low, it’s at a level not seen since 2005. While this may not be the bottom of current downtrend, today’s capitulation (18% down on 9M of 6M avg volume) seems like a good entry point with respect to risk/reward ratio. In particular, the company itself isn’t any worse than before, it’s just being discounted along with other solar plays because of the market turmoil. Lastly, the price is way below it’s 200 and 50-day MA with 18.3% of shares shorts.

Stop: Price closing below $5 for 3 consecutive days. Update: Will see how the price plays out this week and reevaluate my position now that the Lehman problem is known.

Update: ESLR went down to $4.47 intraday because of a share loan to Lehman (which went bankrupt today). Effectively, in a worst case scenario, ESLR would have 30 million more outstanding shares without receiving a penny.

In hindsight (ESLR closed at $4.56 with 22.8M volume), I should have researched ESLR’s connection with LEH, MER, or AIG (the three financials in troubles this weekend). This boils down to inadequate due dilligence on my part.