Update

Been really busy at work lately and havent been able to update this blog as much as i would have liked to.

Quick update on my positions:

I closed out my oil and copper trades earlier this week. Commodities were starting to feel top heavy along with the broader market and i had nice gains in them which i did not want to risk losing. Closed out all other positions too last week. Only open positions i have now are long FAZ and long Nat gas.

Oil is in limbo right now. It might be consolidating in the 70-72$ range or just getting ready to roll over. I will wait on this one till the market tells you what direction it wants to go in and either go short or go long oil again.

Cant wait for the quadruple witching to be done with tomorrow so the market can get out of this intraday range bound trading and pick a direction next week. Sure does look like its going to be to the downside but my positions are relatively light right now to allow me to be flexible either way next week.

Start..Stop..Start..Stop...

This market is trading in a ridiculously tight range. Whats incredible is that we are trading in a ~40 point range in the S&P's but the intraday volatility is unbelievable. The violent swings intraday will give any seasoned trader heartburn. Until we break out of this range in either direction i will not be pressing my equity bets.

Commodities have been on a tear the last 2 weeks specially copper and oil. The reason i decided to trade futures this time around is because i wanted a pure commodity play instead of a derivative, diluted stock/ETF commodity play. So far the position has worked out well. 

I still believe the commodity rally will continue through the year. Though i intend to build a large core position in commodities, i will still occasionally trade around my core position. Nobody lost money taking a profit!

Long: FAZ, DRYS, Oil, Nat Gas and copper 

Short: Bidu 

Stalling or Basing?

I sold out of all my CME and POT calls this afternoon. Even though the market continues to rally and i have have made some money trading long in the past week, i just cannot imagine this market holding up here for much longer. Every single economic data that comes out usually starts with "The worst ever.." and end with "...since data collection began in 1950's". 

Yet every single morning the market just shrugs it off and rallies some more. After market close today, BofA announced another 825 million share offering priced at market at $10. I would like to see how this market trades tomorrow. If the market can digest this new secondary offer and if BofA holds above $10 tomorrow we might be setting up for another leg up in the markets and i guess i'll probably jump in and drink the Kool-Aid again!

Long: FAZ,DRYS, OIL,Nat gas and Copper through futures

Short: BIDU

Back to the Basics...

So after a long hiatus from this blog, most of which was filled with flipping stocks faster than you can say "Filled", i decided to get back to the basics of buying and holding again.

The market volatility has essentially collapsed from where it used to be late last year and this is encouraging more and more people to dip their toes back in the water. Although i do think we have run too far too fast off the March bottom, i will be looking to add to my positions on pullbacks this time around. 

My first trading idea for the year is ironically the exact opposite of my best trade idea last year...Buy Commodities! Yes i know it sounds crazy what with people still losing jobs everyday and BRIC economies  falling off a cliff but i think we have overshot on the downside with the selloff.

Natural gas has collapsed from $14 to $3. Oil drops from $150 to $35. All of these commodities  are pricing in a global depression but i think after the dust settles we realise that things might not be as bad as we are pricing it and we are "ONLY" in a global recession albeit a very deep one.

This "downgrade" from Defcon1 - Global depression to Defcon2 - Deep global recession will help lift some of the commodity prices to more resonable levels. I'm currently long natural gas and oil futures.

Long: Nat gas, Copper, Oil, POT, CME, DRYS

Short: BIDU, Financials(FAZ), 

Recession Stocks - Part Deux

Financial Markets dont get any crazier than this. The high volatility intraday movements can make any trader break into a sweat. I closed down most of my options positions and just started trading outright stocks to cut down on the volatility. A good litmus test of whether you are trading the right size for your portfolio is if you can sleep peacefully at night with open open positions in your portfolio. I definately could not with this market volatility, so 2 weeks ago i cut down my trading size and number of positions in my portfolio till things calm down a little.

As promised, here's the second part to my Recession-proof stock theme - Pawn Shops! One in particular that i own and love the business model of is First Cash (FCFS). They own 900 pawn shops across the US and some 200 odd Payday loan type of places. In an economy this bad with higher cost of living prices everywhere, CPI, PPI going through the roof, people will eventually downgrade on their shopping expeience to pawn shops which provide more affordable "not brand new but will do" items. Also, with people struggling to make ends meet with the higher living costs (food, oil, etc) they will be looking to pawn more of the stuff they dont use around the house at these places. The pawn shops literally buy these goods at pennies on the dollar and i believe a fair amount of people cant afford to reclaim them back specially in this environment. Their other business (money leanding) needs no introduction. They offer extremely short term loans (1-2 weeks) with a ridiculous interest rate of ~200%. Ofcourse the people that actually borrow from them can barely afford to pay back the principal, let alone the interest charges thus creating a visicous circle of being forever in debt.


FCFS is already a big core holding of my portfolio which i bought in around $15 and is now up to $20 netting me a 33% on my investment in 2 weeks. I sold some today around $20 to lock in some gains but will probably buy again on a pullback to $17 area.

Also bought GS calls yesterday and flipped them at close today after GS rallied $15 today. Bought more SHLD calls, TSO stock, XOM stock and LVS stock today

Recession Time!!!

As i predicted in my last post on Friday 13th, we did get a follow through rally in the NASDAQ early this week. But also like i said this rally was nothing more than a short covering rally so treat it like one.


Today was a confirmation of how bad this market is. Banks still need tons of capital to re-liquify themselves (Morgan this morning, Lehman, UBS, etc). The regional banks are in even worse shape and you can see it in stocks like NCC, etc.

Now for the recession story: I have reiterated it countless times on this blog: high gas, high food prices, no jobs, low home equity = Recession!!! and i made my first recession play today.

Since recession isnt something that you can time through option plays (like earnings) and usually takes 2-3 years to get over, i will limit my recession trades to only stock trades. My first pick is Devry University (DV). I have been itching to get long this stock and just got filled on my limit order of $58.7 this morning. With so many people jobless, one of the biggest fallback option for them is to go back to school to either better themselves in their industry or switch industries. Ofcourse a lot of them will choose to go for MBA's from top tier schools but i believe a large percentage of the unemployed population will choose cheaper, faster degrees from universities like Devry. These people have the same problems we all face (see recession problems above) + NO INCOME. They will try to maximise their continuing education potential while finding the cheapest alternative. This is where DV steps in. Real cheap degrees ($25,000) compared to a $150,000 MBA. Even if 20% of the people looking to go back to school choose DV instead of top MBA school, its a huge bump in their revenue stream. Also, Devry and Apollo group are the only 2 leaders in this field.

I will keep posting in series about Recession stocks, so look out for Part 2 soon

Some relief today

I've been busy this last week and havent made any trades this week. This market is too hard to trade and i prefer to sit on the sidelines protecting my capital and wait till the dust settles. It might have settled for a short time today. Today felt more like a short covering rally than actual buying. Nonetheless, shorts will take a couple of days to finish covering which might prolong this rally a little more. Lehman reports earning before market opens on Monday. If Lehman says anything remotely positive about the economy/ mortgage writedowns/ their balance sheet/ heck even the weather...this market will have a HUGE GREEN day. I assume the shorts wanted to cover incase anything like this happens and hence the rally all day today.

I bought a very small amount of calls on Cognizant Technology (CTSH) today. I've been eyeing this company for a while and finally pulled the trigger today. Indian software companies seem to be on a rebound here after selling off for almost a year. I actually also bought stock in Wipro Technologies on the Indian market last week.

Remember, the key in this market is to protect you capital so you can trade another day.