Sample Newsletter: Model Strategies and Hot Topics

STRATEGY: MODEL TRADES:

Updated for 01/13/12

COMMENTS:
The markets indexes ended up on the positive side today while we had selling in several positions, including LINE which dropped on news of a secondary offering of 17 million. JAZZ also pulled back while QCOR held pretty close to $35 most of the day. We'll have to see if it can get back over 37 as it had several brokers still holding a buy on weakness stance. If the market holds positive tomorrow the VIX could drop under $30 and I"ll be most likely looking for a sell of our 150 shares. I could be a buyer of EDP if it shows some positive motion and a possible bottom. Tomorrow is Friday the 13th and some will be superstitious and may avoid trading. Hard to say if it will be a bear or a bull Friday as our futures are positive and the Asian markets are mixed.

USA INDEX FUTURES: S&P: + 2.90;          NASDAQ: + 7.00;             DOW: + 17.

ASIAN MARKETS: DOWN

FIXED MODEL: Based on closing price on 6/30 I replaced FAIRX with PRPFX with an equal amount (dollar wise).

NOTE: Found this in e-mail on 9/15 for using Bollinger Bands to see changes in market trends (easy to use on stockcharts.com):

http://club.ino.com/trading/2010/09/short-term-trading-with-bollinger-bands/

http://www.rockwelltrading.com/326-the-best-indicators-for-day-trading-part-3

The chart below comes from Ian Woodward's blog on Highgrowthstocks.com service I subscribe to and a 60 day free trial is available also. This is pretty highly technical stuff, much of which I don't understand myserlf. Ian was with IBD a number of years ago in the early 90s when I first became acquiated with him on Prodigy money board. SEE CHARTS BELOW:  

REPEAT: I only update the mid-week alert once a week and in the meantime new arrivals are asking what to do. I suggest letting the charts tell you what model stocks are coming off supports and you can also get some information on what www.stoxline.com says in regard to buy or sell along with targets. They can help you with the technicals if you feel a little weak in that area.

Model Trading Procedures: As much as practical I provide advance notice in the strategy section of the website the night before the next trading day of possible prices or what stocks I am looking to buy or sell. Occasionally an opportunity develops during the day that is too good to pass up as stocks sometimes drop on rumors or raise guidance, etc that make them attractive.

STOCKS OF INTEREST: 9 JAN - 13 JAN.  (Earnings down to a crawl).

MON: AA, MG, SCHN, VOXX;
T
UE: RFMI;
WED: LEN;
THU: None;
FRI: JPM;

Here are the closing 50 DMAs as of last Friday (in red).

DJIA supp 6469/8087/9936/10597/11986 - (12359) (Fri close)
NASDAQ 1626/2099/2616 - (2674)
S&P 500  666/1039/1240 - (1277)
Russ 2000: 342/588/731 - (749)
(SEE LINK)

NOTE: One of my favorite strategies (not original, but one used by Wall Street in bygone days) is to sell half on a double, especially when it is still less than fair value. In Jan 2011 we sold 200 of 600 JAZZ at 20.58 for 169% gain from 7.65 buy on 8/27/10 and then sold 200 more @ 32.35 in April for 200% gain and the balance of 200 shares from 19.68 buy on 1 Jan also more than double, but is riding on gains as the original principle has been returned.

 

HOT TOPIC:

UPDATED FOR 1/15/12

Market weak this am and partially on JPM and probably being "bear Friday" and Friday the 13th. I was hoping it would be the bears who were superstitious and it looks like the bulls are the ones not buying today. I mentioned adding SQQQ if Nasdaq was down 12 points yesterday and it was at the open so I bought 300 SQQQ for the model at the open. I have been having some chart problems this morning and I am late getting out the buy note. We have had SQQQ in the model before to give us a bit of hedging. We also are up in EQPW which reports 1/19 and HFC and VXX are both up as well. I don't anticipate any more trades today as I prefer minimal trading on Fridays. If news comes out that has me change my mind, I would consider another trade today, but that is pretty well unlikely.

MODEL CHANGE: Bought 300 SQQQ @ 17.40. Cash Balance: $16,577.

8:00 am 12 JAN

Market is coming back off lows a little bit. If it starts going the other way I would be interested in buying 300 SQQQ again, but would like to see Nasdaq down in -10 area as it was at -9 but back to -5 area at last look. QCOR fighting the shorting blogger who seems to have plenty of "bear" connections as it looked good in premarket but quickly dropped to test $34 area. I am just holding for now but still would like a trim in 37-38 area of 100 shares. CHKR hit with profit taking and no news as is happening to JAZZ which has had a nice run in January so far. Good runs are targets for profit taking, especially as we get closer to earnings reports. This quarter they report a little later as most are reporting annual reports along with the quarter. The big companies pay the most and get the first attention of auditors as the smaller companies have to wait in line. Speaking of LINE, it is down on 17 mil share offering and a drop was expected as I saw the news last night and pricing this morning. OIL and gold are up so that helps a little although our primary bright spots in the model are VXX and HCC. Looks like CDE is bouncing a little while QCOR is hanging around $35 area for the time being. I am mostly watching today.

8:10 am 11 JAN

I took some time to look up reason for QCOR quick drop and found some group (shorters like muddy waters?) had raised a caution note on "marketing practices" of QCOR and they are questioning them. It sounds like shorting language for trashing a stock. Not a time to jump in with a buy as it could fill the gap back to $35. and who knows how big the group is. It had nearly 6 days short interest with 35% increase last month so it looks like they have been setting up for a kill. Otherwise things don' tlook tood bad with some normal profit taking. Gold is up a little while QCOR is hitting 36 now and down about 5 ugly points. I have been holding since 2010 and hate losing gains, but will wait a little longer now to see if we find support at 35. DOW down 50 points now after coming off lows so it is a caution day.

8:10 am 10 JAN

Sorry for lateness, but was interrupted by a phone call. I am looking to sell VXX if the VIX breaks 20 or VXX breaks 30 as the market is trying hard to go higher and ignore Europe for a change and that brings on short covering. Big losses by hedge funds last year and they could be in trouble again if the market goes higher as they tend to gain most when the market drops. I am also looking at putting HFC back in the model again and just need to determine prices. I'll get back later if I make some actual trades. MIND and SIMO look good today. HFC dropped hard on news of Obama playing politics and delaying Keystone decision conveniently until after the election, but now he has to make a decision by the end of February. To open the pipeline could be a big boom for HFC to recover its losses. It still has strong earnings estimates for the next couple of quarters. It has very little short interest and 1.5% yield. It was in the model before. I am still interested and keeping an eye on EPD. Plenty of good looking stocks out there. DOW has dropped some more so I'll hold off on selling VXX as long as it holds over 30.01 low for today. Did get a fill for HFC a little while ago and have put it back in the model as we also had it last year.

MODEL CHANGE: Bought 200 HFC @ 26.20. Cash Balance: $21.797.

8:05 am 9 JAN

Market still looking a little shaky today as the bears are hammering "look at Europe" on the table and trying to hold it down while bulls are hesitatant buyers in front of earnings. Congradulations to holders of INHX if you were so fortunate (not me) but I am holding QCOR from a year or two ago and it had a nice bit of news on Friday after the close. I'm not in a hurry for buying in front of earnings and a market that could be somewhat over bought. I have some interest in EPD for the model but would like it back closer to support in 46-47 area. Let's primarily watch the market today as I don't have a strong feeling about it as it seems to be slipping back.

8:00 am 6 JAN

Market start up on news of drop to 8.5% unemployment number with a bump in December as it gapped up on those numbers and some bank rallying but offset by ongoing worries about Europe. At least the DOW is off its lows and down about 40 points at this time and could even finish positive today, depending on who is stronger, the bears or the bulls today. A positive close would be very good to get next week started off right. JAZZ is the big mover today as we have had it in the model since late 2010 and from single digit area. It raised guidance last nght and has been strong today and helping our model. MIND dropped to 22.30 low and just missed my buy area a little bit closer to $22. Good charts abound and many are very tempting if the market can hold its course for a while - that is a big if. Consumer electronics is the lead group today so far and AAPL is also helping hold up the techs. I tend to be more cautious on Fridays. NLY sold near the close on Friday as it had a rating of 3 and decreasing revenues forecast for down the road. I'll be looking for another dividend play like CHKM or EPD for a replacement and perhaps even AGNC again.

MODEL CHANGE: Sold 300 NLY @ 16.10 (from 15.96 start on 1 Jan). Cash Balance: $27,037.

8:00 am 5 JAN

Market is testing low of day with DOW down triple digits as the lipstick is coming off the pig as the bears start the day with "concerns about Europe" once again. I recall how in bygone years how they would have "interest rates" on a daily basis to panic the market into selling for their profit. Nasdaq is holding up fairly well with AAPL hanging in there with a couple upgrades. EPD looks good today in fixed model and CHKR in both models as institutions have been buying into the dividend plays to start the new year. JAZZ and SIMO are both hanging in there in the trading model, but with tomorrow being "bear Friday" I doubt I buy anything today unless we get a bigger pullback in MIND (holding 22.62 low so far). JAZZ has a conference next week for possible reason it is holding up. AAPL had a couple upgrades and positive comments from Jim Cramer. Caution remains in place.

8:00 am 4 JAN 2012

It is no surprise that the market went up yesterday on optimism for Europe and the global economies and then dropped today on concern for Europe - sounds rather familiar doesn't it? EZPW getting sold today following QCOR selling yesterday that held us back from keeping up with the market. However, the fixed model (heavy in energy and dividend plays) had a gain of 2.3% for the day vs 0.8% for the trading model. I am not very happy with NLY performance and slight decline in estimates for 2012 so I'll be looking for a place to sell before long. I think we were better off with AGNC and that is a possibility or even EPD which had some positive news today. FTK is one I should have been watching as it broke out today. I am also watching HFC as a possible model stock again as it dropped on news of Keystone pipeline delay until 2013 by Obama, but he has to make a decision (by law) by end of Feb. Still cautious today unless the DOW recovers and shorts start covering again.

8:00 am 3 JAN 2012

Nice way to start the new year and too bad we didn't have todays action on Friday to give us a better result for 2011. Oil and gold are up leading the commodities as many of the stocks gapped up at the open today and the DOW has been hanging around + 240 to 250 area for the last little while. I don't know if it can hold it for the day, much less for tomorrow, but we'll enjoy it while we can. Most of the portfolio stocks (carried over from 2011) are positive with the exception of VXX (hedge position - volatility index) and CHKR and JAZZ. CHKR had a big run up at the end of last year so some profit taking is not unusual. I do want to add another 100 sh of MIND when I see a better buy point closer to 22. It closed out at 21.84 on Friday. I doubt I will have any trades in the model today.