Spotlight on Solars, Part II

Climatic, climatic and climatic!   This is how we described action with TSL, JSDA and JASO toward the end yesterday.    Looking back, we felt that it was definitely a right thing to sell/ blow out our positions into the strength and leaving home with little to no position yesterday.    Was today's early downgrade merely a coincidence or was today's decline inevitable?   Whatever the conclusion anyone can come up with, we think odds did favour a pullback based on yesterday's action.    Momentum stocks tend to move up in a violent fashion and they can come down just as violently.    As traders who trade a lot of this kind of stocks, we have to respect the beasts' potential and act accordingly.  

For us, in case those are not familiar with our style.    We sell momentum stocks aggressively when they reach a climatic phase in our view..   We also sell most if not all of our position if stocks breach 9 ema or in an attempt of doing so.   This is not be mistaken with stocks that climb 20% for us and then start fading.   We do not wait for these to come to 9ema, we leave with most of gains in tact.   Use CIMT as an example here.   A $3.70-80 buy in, climbing to 4.60-70's...we do not wait for it to come down and hit 9ema like yesterday.  Look at it this way, if a stock you bought at $38...it goes to $46-47.   Will you let it slide back to $ 41's?.   We hope not , so look at a cheapie stock the same way.   These are some automatic reflexes we preach as part of our trading discipline.   Trading is solely about preserving most of the gains out of a play while cutting the losses as early as possible.    We use a rather conservative approach when dealing with these super momo stocks.   Here is a rundown...

TSL JASO SOLF FSLR, so now the stocks have pulled back and what do we do now?    We'd be eyeing 9 ema for the support and to see if the pullback can stop there for a potential quick rebound.   Otherwise, we'd be eyeing yesterday's high as the potential b/o point for re-entry.    The one thing we don't want to do now is to enter a trade here, where they closed today.   This is what we feel is no man's land and it just offers nothing but uncertainty.

JSDA, this is the exact same situation as solars and to a more extreme degree.   We really wanted to see where this stock would settle once the volume settles down.   Again, going in and picking an artificial bottom may as well mean that you are treating this game like a craps table.  

RCCC, this one held up really well but we think better entry pts are still ahead of us.  Others behaving SYNL, MFW.  Eyeing GROW, TRT some.

All this can change as lots of market moving co's. are reporting tonight , so we'd see how the market is going to react to their earnings tomorrow.   Unless the momentum is clear within a particular sector, we'd do what we normally do and pick one earning play at a time and highlight only those that are worthy of DJIM.

A new day with different drama....

One way or the other, it's not so easy to take advantage of this headline driven market.    Extreme emotion leads to extreme volatility and we have just witnessed two of the most volatile trading days.     Now that the Fed thing is over, we can move on and focus on events that'll shape up the rest of the year.   The big picture is that we are still in a much better shape than a month ago.   Regardless how you judge Fed's recent decision, Fed is doing something to help out the credit crunch by addressing the liquidity issues.    That to us, this the encouragement this market needs, but we have to see if it's enough.  Financial stocks are just weighing in on this market, day in and day out too much.    Soon we will get some good insights off reports from LEH and GS.   Hopefully, these two would provide the kind of certainty this market needs to get some stability from the sector.

Solar plays,  basically you just can't go through a trading day without playing these it seems.   Crude broke $90 signalling a possible technical recovery and that should bode well for the solar group again.   LDK has been active the last couple of days and think this one needs to catch up to others in terms of valuation in light of the recent development and therefore might have more leg room.  SOLF is also becoming one of our favourite to trade along with STP JASO and FSLR.  Again, remember we noted the upgrades seen recently as a possible prelude to their action as we've seen in the past.   At least, 2 more are out this morning, including one on FSLR with a $300+ target.

GXDX, this is a biotech co. similar to WX and it's based in U.S noted in the forum Oct 31.   It came out with an eps report tonight and we think it's a very good report that showed a tremendous growth rate.    The issue size was only 5 million shares.    This one also doesn't trade a lot so the volatility can be high when it comes to trading.    Knowing what they just reported, we are putting this one on our active playlist and will add incrementally when opportunity comes.  There hasn't been many good eps report from small caps lately, so this is definitely refreshing.  It will be interesting to see if there is interest in this kind of play from the market.

Turned out the prudent thing to do yesterday was to sell the gap and not just consider it as we noted in yesterdays pre trading note. The swings are wild and you have to your trading hat on or lose all or most of your gains as the market digests the rate cut and the follow up liquidity plan.   It may take a few more days and it's best we wait it out to see a trend emerge.   Again.. .."what we need to see is the indices recover and hold 13500 on the DJIA and 2700 on the NASD to start thinking of accumulating positions of substance".  This would be a start!

Santa showed up...

The so called Christmas rally or the Santa Claus rally has been something of a mixed bag in the past.   There were years we just wished the Christmas season would last longer and there was last year which we all would like to forget.   This year, Santa is back to give us traders something to remember as of now.    This of course, is probably due to the fact that we had a very very tough fourth quarter coming into the Christmas holiday.     All of the problems we have had to endure as traders during the last while, from credit crunch, housing bubble and recession worry are being put behind this last few days of the year.    Put it this way, we won't deal with it until the new year.    It is about time that we can end this year in a rather peaceful way.

If it's peace you want, then you are glad to know that major indices have held up well and many big cap stocks have either inched up or stayed unchanged, in a non volatile way.    If you are like us who like to take advantage of this opportunistic time, then the only thing you'd be doing on a boxing day is buying and selling hot stocks online.     People, if you are serious in trading like us, then you would've tied yourself to your chair during the last few trading days.     These past few trading days have produced some of the best action since early October.    And if you were hurt by the downturn in the late November period, then now is the perfect time to get some respect back from this market.

Basically we are about half way over this holiday trading and we'd imagine most traders would be back in force after Jan 1st.    This gives us another 2 1/2 holiday trading days to do our thing.     Right now, we are playing stuff that are currently in play.    It is crucial that we stick to that theme for the next few days.

Solars, 2007 is the year of the solars and we think we'll carry some good momentum into the new year as well.    Today's action seemed to be spreading all over the smaller and less established solar players which include SOLF CSIQ CSUN ESLR CTDC etc., while the bigger names seemed to pause to catch some breath, with the exception of FSLR.      Yup, we are playing just about every single one of those smaller names today and we'd continue to play until the momentum stops.    Keep in mind, many if not most of those less established solar names are still not proven in terms of earning track record.    When some of these names reverse, it is crucial that you don't buy the dip thinking all solars are created equal and have awesome earnings growth.     Buying dips on plays like FSLR STP JASO SPWR... have good probability that they will come back in a hurry.   Buying dips on the smaller ones may get you into a situation that you'd lose another 30% before even seeing an uptick.   Bottom line, you have to know what you are playing distinguish the type of plays among solar names.

MELI, then there's this one!   If you cashed out last time after Cramer's mention, then today's the day to get it back.    We alerted early in the morning that it looked promising but we did not imagine it'd pull a move anywhere close to 20% today.    This one, unfortunately we have to agree with Cramer for once, has the marking of being a monster.     Yes, it can definitely go into triple digit based on what we have seen with other similar type of stocks.

Bottom line, there's no need to go nuts with all of the hot plays out there and just trade the ones you are most comfortable with.   Stay focused and stay clear headed, and we may just finish this year on a high note.