So it's another meltdown....
Tuesday, July 31, 2007 at 11:07PM Being a trader in this environment is definitely tough. This has nothing to with the fact whether you have 20+ years of trading experience or not. It's simply tough out there. Ok, lets rephrase it, it's tough for those that are actually "trying" to trade this market. If you have been on the sideline the last little while, you can literally laugh at this in a comical fashion.
Basically, market's short rebound since yesterday which carried into this morning, got severely rolled over. We are using the term severe because it really felt that there's just no hope in sight, to trade (long side) out of it. Of course, all market sell off feel that way and this time is no different. The "smart" way again is to sell into market's strong open this morning and lock up whatever the profit you've been carrying 24 hours ago. In our opinion, we don't even think most people had that many profitable positions to begin with to sell into the morning strength. More than likely, many people have used the morning strength to let go or lighten up whatever the losing position which they weren't able to sell during last week's debacle.
If last week's sell off was due to some worrisome news on potential sub prime fallout, then today we tasted a dose of reality from that fear. The culprit is AHM and we are sure you must have heard of it by now. Without needing to analyze the actual effect this can bring to the financial market and god knows how many other companies in a similar situation, we just need to realize how severe and devastating the mentality is among the market participants. Yes, it can get much uglier in our opinion. Coupled with one of the worst trading months coming up, we can get fairly rocky within the next little while. So basically, this comes down to the question, is this market worth trading? In our opinion, the market overall is not playable. Trying to time this market movement with sector leading stocks just don't work unless you have deep pockets and a heck of a long term perspective. To us the little guys, we just have to do what we know best in a situation like this. We stay put! Save money. This doesn't mean that we'd lock up our computer and go away for a long while. It just means that we are going to be very very very disciplined about our stock selection and setup. Cutting the number of positions and sizes down to bare minimum is simply the way we go here. Think of it as a challenge to us the professional traders.
Some stocks recently noted...
CRNT, for an hour or two, this play reminded you what was going on earlier last week. Yes, it's only Tuesday and already people are pushing for an IBD run-up. We are following this one closely to see if there's enough interest on this IBD thing, it may just ignore the overall market sentiment fo the time being. That's a big if, though.
LULU, this is a recent IPO we started playing off the UA earnings. Again, when the market sells off hard, you pretty much want to stay away from everything.
Shippers, don't be fooled that this is the sector worth holding onto. We think it's better to take some profit or trade them in a very short term fashion rather than waiting for them to get shot down like solars. Momentum stocks can suffer pretty dramatically when overall market gets sold off. Relative P/E on these don't mean much when they all have pretty much climbed over 100% last little while.
Solars, all eyes on FSLR eps tonight and AH result isn't very encouraging. There's also a secondary overhanging this stock and we really don't want to speculate what the deal makers going to do if the stock gets sold off hard. Basically, if FSLR gets sold off hard tomorrow, there's pretty much no point playing any other solar stocks.
..just to bruise some more, this came out AH...The Wall Street Journal reports BSC already forced to shut two hedge funds that bet heavily on the risky subprime-mortgage market, is now facing big losses in a third fund that has roughly $900 mln in mortgage investments, according to people familiar with the matter. The fund, known as the Bear Stearns Asset-Backed Securities Fund, ran into trouble in July and has refused to return investors' money for the moment