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Navigating an Unsure World Into Quarter-End

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The goal when trading is to be in a position to use price to your advantage.

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Editor's Note: Todd posts his vibes in real time each day on our Buzz & Banter.

It's a new day - and a new world, as evidenced by the traction in European bourses and the early stateside jig.

We've spoken a lot this week about the potential for Cyprus to trigger the next phase of the financial crisis and assume the role of MicroStrategy (NASDAQ:MSTR), circa 2000, and American Home Mortgage (PINK:AHMIQ), circa 2007.

Clearly, that analogy - those analogies? - will only be known with the benefit of hindsight, but I thought it might be helpful to share the chart below. When Minyanville flagged AHM on August 29, 2008, the S&P (INDEXSP:.INX) rallied an additional 8% - before dropping 57% in value in the following year and a half. History doesn't always repeat - nor is it written that it must rhyme - but I offer this chart in the spirit of perspective.



I have been trading around some short exposure in the S&P - detailed here and here, and every day (all day) in real-time on the Buzz in Banter (click here for a free two-week trial).

To top-line, I initiated a SPY short into the rally on Monday (25% position of a full position), doubled down into the early rally yesterday (bringing my exposure to 50%), and pared exposure - as a function of discipline - into the sharp sell-off yesterday. (I peeled out of 10% of my risk.) Yes, I should have covered more when the tape was in the hole, but if wishes were knishes, I'd weigh 300 lbs.

My plan is to add back some short-side exposure into rallies - and cover into dips, also known as "trading around a short-bias - under the all-important S&P 1580 level.

Against that exposure, I am long some BlackBerry (NASDAQ:BBRY), which happened to get a double-notch upgrade at Morgan Stanley today (the stock is trading up 7% in the early goings). Consistent with the game-plan shared in recent weeks, I intend to make some sales into the March 22 US launch of the BB10 - just trading, from the long side - as a function of yes, discipline.

As a reminder, Scooter McGavin (that's me with a bum hip in Disney) will be out-of-pocket next Monday through Wednesday, so at a point, that has to factor into my risk profile. I normally prefer to flatten exposure while away from the fray, but that'll be a game-time decision as a function of time and price.

As I told my wife last night, "Who needs a roller coaster when I do board one every day in the global financial markets?"

Random Thoughts:
  • I like to Question Conventional Wisdom; I can't help myself, it's part of my DNA. And while "timing is everything," as evidenced by the timestamp on the column I just linked (declaring the financial crisis was over), I would offer that the only way the financial crisis is over (I don't think it is) is if a social crisis emerged...which would lead to, yep, a financial crisis (truth and trust are the grist of bull markets).
  • As I added some S&P short-side exposure, I rotated out of my Facebook (NASDAQ:FB) short after the 7% nine-session decline. This is an important zone for the stock - the right shoulder of a potentially negative head & shoulders pattern - but I'm keeping my risk tight, both in terms of price and concentration of risk. So it's said, I also have a newbie cannabis play on my books, but I can't speak to particulars because it's so thin.
  • In a stunning point of recognition, Minyan Craig emailed me yesterday to ask, "What, there's no Minyan March Madness Tournament this year?" WOW! I've been so wrapped up in work that I completely spaced that! We have set it up, so please CLICK HERE for details and get your picks in by 12 p.m. EDT tomorrow!
  • If you're digging the Buzz & Banter - or want to learn more about our FINRA and SEC compliant intranet/outward facing communication and content tool - and wanna flip the switch for your office/team/firm, we can do that....we can do that, and we would be much obliged! Please email me for more information; it's a game-changer, in my view.
  • Good luck today and remember, profitability begins within!

R.P.

Disclosure: Minyanville has a business relationship with BlackBerry.

Twitter: @todd_harrison

Follow Todd and over 30 professional traders as they share their ideas in real-time with a FREE 14 day trial to Buzz & Banter.
Position in BBRY and SPY.

Todd Harrison is the founder and Chief Executive Officer of Minyanville. Prior to his current role, Mr. Harrison was President and head trader at a $400 million dollar New York-based hedge fund. Todd welcomes your comments and/or feedback at todd@minyanville.com.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.

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