While majority of market pundits are overjoyed @ the prospect of year end rally, i am extremely concerned for next seven trading days.....
What is bothering me the most is the fact that we have rallied strongly due to Janet Yellen effect. After each rally point comes digestive period & we may have entered one of those fast paced pullback.
Majority of traders are too optimistic which is a very reliable contrary indicator. That euphoria generally ends in a fast pullback.
I monitor "euphoria meter" quite closely which includes famous pundits & message boards, both are in an "extreme euphoric mode"
Many strong stocks have rallied strongly retracing all the muddy water effect & some......thus time to lock profit & reduce exposure.
Generally my "action" is indicative of my worries.
After i had acted in selling some key position & reducing my exposure by half, comes the report of bears @ only 15.5% which is a 25 years low...lowest since March of 1987........1987 brings painful memory for me of a "major crash"
Lowest bear ratio is a very reliable "contrary reading"...means we are extremely vulnerable to a serious down move......
Please do NOT ignore above "euphoria analysis"
OK...so how vulnerable are we.......?
@ any major down move we have a history of close to 10%.......
Since year end & month end are coming to play we may be spared with close to 6% down move......
Do NOT under estimate the power of 6% down move in indices......that may result in 12% down move in many stocks...which is quite painful for any portfolio......this also means that IF you have 3 stocks in your portfolio & they are all down 12%...you can do the math & impact on your portfolio & equity.....
I am hoping that in next seven trading days we may be looking @ close to 1700 in S&P 500 which is a pullback of 5.45%.....YES i am expecting a "fast pullback"
SO..IF you are going to time your trades, hold everything in terms of buying till 27th of November......for booking profit it should be sell @ open on Monday.....
When markets are overbought, even good earning reports may face "sell the news" & down they go......
We all need to recognize that "most of the good news are already priced in " based on Friday's close.....
IF you reduce your exposure "substantially" then you are not vulnerable to losing profit or equity.
As we all know that, not all stocks will face similar pullbacks & some may move UP or maintain their uptrend....thus a reduced exposure is ideal.
Hopefully i have given a "safe road map" to protect your profits & less vulnerability to market downtrend.
Good luck with your OWN comfort level & strategy.
BLOG does NOT give buy or sell.
PS...as we have many new worldwide BLOG visitors these days, i welcome them all for visiting us daily. Please support our BLOG advertisers by clicking on their ads & evaluating their services or products.
Saleem
11 comments:
Hey Saleem,
Your view is definitely contrarian this week, keying off that extremely low bearishness reading. I'm expecting more of a digestion week, but I never really considered a large pullback--it is an interesting theory. At least overall valuations don't suggest anything of major warning yet. Regardless, I'm sure some interesting opportunities will present themselves this week...
Stocktrader
Hi Stocktrader,
Just going with my usual analysis which differs from popular conclusion.
By 26th closing we should know IF my contrary view had any merit.
Saleem
Hi Stocktrader,
Bought TSL @ $16.74
Saleem
Hey Saleem,
Good luck with TSL. I see all the Chinese stocks up again on positive sentiment overnight.
Bought MS @ 30.55. I was also considering AMTD here, but decided to go with MS which has more diversified revenue streams and more cost-cutting possibilities.
Stocktrader
Hi Stocktrader,
Housing prices in China was UP more than 10% Y/Y...which was higher than expected.....
Good luck with MS.
Saleem
Hey Saleem,
The risk/reward in CSIQ looks great here. Really only about $0.35 of downside indicates a reversal versus $3+ upside. Unfortunately, I won't enter because I can't bail if needed due to the 3-day rule-- I'd be stuck until Wednesday (because I made all the sells on Friday to free up the cash).
Stocktrader
Hey Saleem,
SODA is spiking on comments at a conference. I should have just stuck with my names. They are saying the Q3 slowdown was a blip and expect/see Q4 reacceleration. Well, I knew that based on the conference call and numbers, but when everyone else didn't see it, you have to respect the price action, right? I was hoping I could buy this in late December for next year, but now I'm wondering if the short interest could make this a potential huge play in this year's end?? or is that too much of a stretch?
Stocktrader
Hi Stocktrader,
SODA is a great buy right now....GO for it!!!
Saleem
Hey Saleem,
Yes, I did buy SODA @ 57.417. I decided downside was limited to that $55ish level again, so I felt safer speculating here than in CSIQ given the "lock-in" situation I have right now.
Stocktrader
Hey Saleem,
One of the reasons I decided to go for it was given all the short interest, and this close to the end of the year, we might see shorts cover just to lock in their gains for the year instead of risking it and letting it ride.
Stocktrader
Hi Stocktrader,
Every stock including CSIQ is a buy if timing is right....currently it is overbought....
Saleem
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