Click chart to enlargeThe drybulk breakout is slow, but at least it's happening. If DSX continues higher into the close, today's move will look impressive on a daily chart. We bought DSX instead of DRYS because DSX had the more defined resistance line, and was trading just below its 100dma. With both of these areas of resistance being broken simultaneously, it had better prospects for a decisive breakout than DRYS did.
We bought back into CF today at 155, trying to make a few points... again. On one of these iterations, we'll be left holding the bag. We've suceeded with this same trade so many times, though, that we have enough profits to risk holding this small position through 30 points of downside. We also have SMN, so there is no risk in buying up here.
Thursday is a big day. Both POT and CF report earnings this Thursday. POT reports before the bell, and CF reports after the bell. Normally we would lighten up or sell completely before the reports are released to avoid being Crox'd. We may hold a small amount of CF through the report thanks to the protection SMN affords us, but we will not be making any large bets ahead of it either way. How much we hold through the reports (if any) all depends on where the stocks are trading just ahead of their release.
23 comments:
Questions about POT:
1) The recent rise is quite impressive. Do you think, it will fall back to its 50 dma after earnings (sell the news)? Also, we will get a new contender with Intrepid Potash (IPI). That IPO has huge institutional support and might suck up money like a sponge (for example from POT, which could sell off).
2) Or could it be, that POT from now on will simply run in a new, steeper upward channel than before? Maybe, the rules have changed - after all, earnings probably exploded. I think, it was Mosaic which recently reported a 15fold increase in earnings (I could be wrong on that numbers). How high is the chance for that?
Thanx for the input, newfrankyboy
Only thing that worries me is the fact that DRYS is heading down today when the rest of the sector is heading up.
EXM sure has remained impressive though! Leader of the pack again today.
Nice post as usual snot. Waiting for DSX to be around 32, where I will look to lock some profits.
I am too scared to jump into ag at the moment. It just looks too bloated to me.
Have you found any other sectors looking to breakout. It looks like the dry bulkers are already doing so, one by one. I would like to diversify instead of putting all my money in dry ships.
--clarke
Ag is a funny sector. If these were just "normal" stocks, we'd say they're the hot stocks for 2008 and they'll be trading in a steeper channel for the rest of the year. Problem is, they are tied to commodities which can be wildly volatile. If a commodity price scare sweeps the market, the ag names can get unjustly slammed.
It's almost like trading oil... one force majuere can decide your fate.
But like any market, it's not about how strong the actual fundamentals are, but about how strong people think the actual fundamentals are. In the case of Ag, everybody is awaiting that pullback. Their fingers are hovering over the "buy" buttons. With that mentality, the eventual pullback will probably be short lived, leading to a very rapid and tradable recovery. As long as you are holding some SMN for that one fateful day, you should not have any qualms about trying to scalp a few points a day out of these names on every dip. While we are not interested in buying a large position in CF "up here", we are trading in and out of it every day.
If you like the lesser known (and more volatile) names, check out Compass Minerals (CMP).
As for POT and CF's reports Thursday, is there anyone out there that doesn't expect them to blow away estimates? It isn't like GOOG where people were doom and gloom ahead of the report.
We're likely going to be holding a small position in CF through earnings unless there is a huge run-up ahead of them in which case we'll get out.
As for drybulk, EGLE and DSX look like they've broken out enough to gather attention to themselves. DRYS may be next. It has yet to break its resistance line (connecting Nov and Feb's highs).
We're just letting this one ride for now because we don't have many long positions. If we get 30, we may just get out then. It's not like this is a leading sector or anything. This was just a quick "don't bet the farm" kind of trade. Definitely not a core position.
I have vowed never to hold into earnings. I have been hurt once.
I don't know what to play long, before the DJI makes 200d. It is still 300 points away. I am scanning for candidates, on the verge of a breakout for a small 4-5% gain, not big bets. Just small gains to make up for my FXP loss.
I was looking at the 2001 bear market. The resemblence is uncanny with this one. If history is anything to fall back on, the descent will be a very quick one. 1500 points within a week or so.
So, I will hold very small long positions.
--clarke
Snot,
Why are you interested in drybulk names like DSX and DRYS? They were last years winners. Their earnings growth is negative going into 2009.
Clarke,
Our charts don't go back to 2001 unfortunately (the one shortcoming of TD Ameritrade's software).
If this market dropped 1,000 points in a week, we wouldn't be suprised at all. The price of oil alone is enough to keep growth in the U.S. stagnant for the forseeable future. But what do you see as being a potential catalyst for that kind of pullback if earnings season wasn't even a drag on the market? Without a catalyst, we could be stuck in a rangebound (12000-13000) market for the next year.
Jack, drybulk isn't a fundamental trade for us. Purely a technical breakout. It isn't a core position, so it doesn't have to meet any criteria. It falls under the fun trades category where you don't bet the farm.
"Without a catalyst, we could be stuck in a rangebound (12000-13000) market for the next year."
So, I take it that you deem the banking crises to be largely over? Any additional de-leveraging and writedowns/offs to be absorbed by central banks?
btwn-the-lines: read Snot's post on UYG and you'll get your answer.
Snot, I cannot figure out any particular reason which could stun this market, given the glut of news it has already absorbed. Probably a bernanke rate hike can get things going.
Let me try and see what the reason was for the 2001 second downturn wave. The problem is it is difficult to get such specific news information from the charts.
--clarke
http://www.nytimes.com/2002/08/23/business/23CND-STOX.html?ex=1208923200&en=7bff2174b793461c&ei=5070
http://money.cnn.com/2002/08/23/markets/hotstox/index.htm
This is what I got from the google archives. Seems to me, from this a rate hike could infact trigger it or a probably another set of massive writedowns in yet another novel investment vehicle. Whatever happens, I guess, we shall know in about 2-3 weeks.
--clarke
snot, whats your take on VMW, they are reporting tomorrow AH/-
Will highly appreciate your feedback..!!
Clarke, thanks for finding out what made 2001/2002 a double dip correction. That article shows you just how little it takes to turn the market around. We can rally when Bear Stearns goes under, and can plummet when we don't get a rate cut that would hurt us anyway. It isn't far fetched to think that the Fed is done cutting rates considering how weak the dollar is already. Maybe when Wall Street starts to accept that the rate cut is not a done deal, they'll throw a 500 point tantrum to get the Fed's attention. Just before the meeting, in a classic spolied child display, they'll take it down another 500 points so they can bully the Fed into cutting by 50bp instead of 25.
Hadn't thought of it, but that's a very real possibility considering the recent economic reports were considered tame. If the reports weren't troubling, then the Fed really has no reason to move.
After all, it's easy to bully the Fed in an election year. They have no choice but to keep the market intact. Cramer alone could probably bully the Fed into a rate cut this year.
haha, yes cramer's wailing was one of the funniest moments on TV ever
--clarke
Like to hear comments on Valence Tech, (VLNC). Li-ion (Phosphate Based) rechargable batteries for new electrical vehicles, apparently will make huge business with Tanfield and Ford.
Also, worth to check for Rubicon Tec, (RBCN), makes zapphire substrates for semiconductors. lasers, very high-tech Co.
catalyst? I think the GDP number will shock people.
I sold my dsx today, small 3% in a couple of days
--clarke
watch SIRI, some unusual movement this morning, may be FCC finally made their decision
--fleacountry
Snot,
LDK's chart is looking very interesting. Can you post your analysis on it with moving averages. What software do you use to get your charts?
I can't believe that SMN hasn't broken below 30 yet. Both Ag and Steel are flying.
Quite the calm and orderly market decline today.
Still holding DSX, couldn't watch the market today. DRYS broke out for sure. It's becoming obvious that it's the potash based fertilizers that are the focus of the rally. POT, AGU, MOS, IPI clearly outperforming the others. We may just have to start daytrading POT instead of CF. It's just that CF lends itself so well to daytrading because of its wild intraday swings.
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