Question:
It looks like you didn’t make the ADBL and CRDN shorts part of the portfolio. Will you notify by email a buy to cover or should I just follow you targets you gave? Both look great so far. I’m kicking myself for not realizing the climax tops of DHB and XXIA as I’m sure you are, too. Good picks but both went down so quickly. Such is life. This is the first time I’ve shorted a stock so I’m pretty anxious about the whole thing. It helps that they both dropped on good volume yesterday. Thanks for your efforts. The web site looks great. Dave
My Response:
ADBL and CRDN are part of the portfolio and will be added there as soon as I tweak the portfolio to allow short positions (I did not expect to be going into short mode so soon when the new portfolio system was built!). I’m hoping to get a hold of my programmer on Sunday to make the changes. .. and yes, you absolutely will be notified by email of a buy cover for these positions. As far as targets go, they can change depending on market conditions, news in the stock, etc. So I would never carve a target in stone and live by it. As I mention in that short article, I look to take profits in short trade much sooner than I would in a long trade (although, the strategy would have worked nicely with DHB and XXIA!)… usually around 10 – 15%. You mention this is your first short sale.. do me a favor Dave and be careful. Start small with these and ease into it. I don’t jump in with both feet with short selling either.. maybe put one or two trades on and don’t move to another unless i’ve locked in profits on the initial trades. This is particularly true in this situation where we are still technically in a bull market.
As far as those DHB and XXIA trades go, it was gut wrenching to see big gains wiped away in just days. When something like that happens it’s important to learn something from it. What went wrong? As far as DHB it had all the making of a "big winner" which means that you typically let ‘ride out’. I was counting on the first couple of weeks of January as positive weeks for the market. I probably got caught up in this and didn’t put much stock in that big reversal the day after the big news. I kept thinking that the stock would bounce, but I was wrong (looks like insider selling was too much – I still think bad news is around the corner for this one.) You have to look at the charts, objectively at all times and listen to what they tell you. That trade just reminded me of that. I got caught up in "hoping" for a bounce rather than listening to the "red flag" reversal. As far as XXIA, I would disagree that it was a climax top.. they usually happen much later in the move of a stock (like in a 3rd or 4th stage base). However, I did feel that after that big surge in price that it would be difficult for the stock to keep it up (it had already tripled since August). Again, I wanted to ride out that first week or two of January to see if it had a bit more juice in it.. I was blindsided by the quick sell off. Yeah, that was the most difficult week that I can remember in a long time, particularly when you add the TASR trade to the mix. There are times when it seems everything goes wrong and that the market knows you own a particular stock and is out for revenge on YOU and only YOU!. I know every investor has felt this way at some point. The good news is there will be better days ahead!