Turnaround Tuesday: Trading Positions, Cannabis Specs, and Levels of Lore
Pick your spots and leave emotion for the other guy.
Denial, Migration, Panic; we know it, we live it and yes, sometimes we love it.
Now is such a time for the bulls; they smell Valentine’s Day and they're eating it up. With the mainstay market averages up 5-7% barely one month into our young year, you can't blame them for feeling groovy; annualize that performance and we're talking 2013 returns in the 80-125% range!
While select stocks may achieve returns like that—some already have, although they're microcaps in the cannabis space—odds are the broader market proxies won't continue at this pace. The trick to the trade—and valuable insight to investing as a whole—is to see the entire probability spectrum and adjust risk based on the perceived outcomes while defining exposure along the way.
It's easier said than done; since the November 2012 lows, "buy the dips" has paid off in spades. In bearish phases, "sell the blips" is the stylistic approach of choice. If you're not in one camp or the other, and if you don’t have the means, ability, and desire to proactively trade, hit-it-to-quit-it (my chosen method) is a good way to rat-a-tat-tat your way to performance without the nagging stress of outsized overnight risk.
With S&P (INDEXSP:.INX) 1520 approaching (that's been a target since December 2012) and the four-letter freaks still stuck in a well-defined range (NDX (INDEXNASDAQ:NDX) 2700-2750 is the zone to monitor per the chart below), I'm getting mixed signals on the top-line technical stuff. Yes, the tape acts great and the banks don't break, but therein lies our task at hand: respect, but not defer to, the price action.
Yesterday afternoon, in my one and only work sojourn from bed, I scribed the following Buzz:
"Be that as it may, with Facebook (NASDAQ:FB) at our $28 price target, I peeled out of my remaining short position. Note, this price-target was mentioned last Wednesday, when we wrote:
"As for BlackBerry (NASDAQ:BBRY), which I tried to buy at $12 and ended up paying $12.93 (after missing my entry), I plan to peel out of 1/2 my position as a function of discipline into today's 13% rally, and place a trailing stop on the leave.
"Finally, while I've made some sales in the cannabis space, I will note that many of these (very thin) stocks are up another 30-40% today, reminding me once more of the biotech space in the early nineties. I am not one to look a gift horse in the mouth, no matter how medicated he is, so I'll continue to feed the ducks (or horses) and make sales in this complex."
Fast-forward 16 hours; I got to MVHQ bright and early today in an attempt to catch up on yesterday's to-do's, and I punted my remaining BlackBerry in the pre-market at $15.57 because, as much as I dig the new device, 18% in two days falls well within my hit-it-to-quit-it stylistic approach. It's still a name I believe in; I’m just picking my spots.
- I also sold my remaining cannabis proxies—my self-proclaimed Single Best Idea for the Next Decade—as I've learned that stocks that rip 50% over and over and over again are in the blow-off phase of that particular move. And yes, I left some money on the table—but that's OK; I don't want to be greedy, I just want to be profitable.
- Once upon a time, we offered that strong credit markets would manifest in the equity realm through 1) stock buybacks, 2) M&A, and 3) LBOs. The Dell (NASDAQ:DELL) news qualifies on that final front.
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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 firstname.lastname@example.org.
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