Wednesday, May 06, 2009

Buy Polar (scaling into short)

Given that bears are dead (or slightly underwater as some suggest - ha!) I only need to see subtle signs of a top to begin firing short. Risk/reward is favorable, since getting stopped-out at higher highs represents a small-enough loss, while if it is the beginning of an intermediate-term top the potential profit looms considerably larger.

Today is not perfect, but there are enough signs for this trader to scale into shorting:

-Volume has been heavy today and Tuesday without further advance (distribution)
-The NDX led a downward reversal today (NDX is a leading index)
-Sentiment lately is sufficiently bullish/hopeful (thus, sentiment is no longer a positive)
-The majority of leading industry groups today are poorly-ranked, while the clear majority of lagging groups on the day are higher-ranked (bearish tape-action).

This is not enough to pound any tables, blow bold clarion calls, or even warn the widows and orphans their dreams are re-ending. For that we need to see confirmation and momentum; this is nothing more than a potential set-up, perhaps sufficient to begin an attack and then (and only then) scale into something larger as a change in trend is confirmed and momentum takes hold.

Scale into an attack. I am small now and looking to get larger only as the price-direction justifies such action.

And don't do what I do anyway (especially as far as the futures position I'll next discuss). Smarter traders are likely out or even remain long at this point in time. Most of my readership thinks I am a very patient bear - that is because perhaps they have been attacking this beast on and off for 8 weeks now. I don't even know if I'm bearish anymore, to be honest. Nothing is going to surprise me now; in either direction.

More than ever then, I want to follow along as opposed to anticipating. I don't like the idea of thinking I know anything in this market.

I scaled into a reasonable amount of AAPL short today (8%); Apple is now lagging, following a potentially toppy, new-high reversal. At the same time I reloaded WNR long (4%); that one was breaking out of a 12-week base on today's earnings report w/ strong, rising volume; highly-ranked industry group and 96 RS-rank on its own).

I am also scaling into an NDX futures short (in futures-applicable accounts). If I am not stopped-out, I am hoping to hook at least a swing-trade here and possibly something more intermediate-term, depending. I'll convey trades via Twitter, but if you follow along you are following only yourself. I'm not giving advice. If I were, my advice would be not to take advice on futures trading. But I'm not advising that either, since in fact I am not advising anything. Go get a beer.

See? I'm already down now on shorting the NDX - you wanted to follow that? ...such a loser.

At least the WNR is making up for things.

Total Position: 1.85-to-1 net short, 12% invested

Currently Long (according to size): WNR (4.3%)

Currently Short (according to size):
AAPL (8%)

Futures Accounts: Short 40% NDX June, ave = 1407.88

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