Three New Short Positions For Thursday’s Stock Market Session

February 27, 2008

I am keeping all of these shorts small as the market is still in a bear market rally. But, I have to admit, there are a lot more people out there that are bullish on stocks and after contemplating a market top are now for sure that the stock market has bottomed. Well, while I doubt we have seen the lows for the market, I still never fight the trend and the trend right now is up in the short-term trend making shorts more risky (unless its name is TSRA) at this point. AKR is my favorite due to the slow long-term rollover, GLNG and CKP are both less appealing due to the chart patterns not being extremely weak. But the patterns are still very solid high reward/low risk short patterns. It will just be up to the market if these work. Right now, cash is king and the best example of that being proof it how HLEX and TSRA can form similar chart patterns but have two very different outcomes. If you went short HLEX expecting a TSRA type of return, you were left very confused by the EOD. And that is this market wrapped up in a nutshell. Short a little, get long commodities, and keep a lot of cash on hand for an easier market (a market in an uptrend for longs and a market in a downtrend for shorts. For about the past month, we have gone nowhere!

new short positions: AKR GLNG CKP

AKR is failing at the downtrending 50 day moving average, on strong volume. The stock has been rolling over for a long time but even though that was happening it still looked real strong and was nowhere near a good short. That was until February where the BOP started to weaken and more and more distribution entered the chart. The four clear distribution days along with the two red BOP bars help give this stock an extra “weak” look. Cut your loss with a close above the 50 day moving average, if the stock does not move lower immediately.

GLNG is breaking down below the converging 50 and 200 day moving average, on very strong volume. This stock clearly topped in November as it sold off on huge distribution and red BOP. After drifting lower to sideways for a little while on very low volume, the stock is now breaking down below both important moving averages on stronger volume. The RS line is not nearly as weak as I would like it to be and the BOP is not red which makes me cautious about getting too short this stock. Instead it will be small. If BOP would have been red or the RS line would have shown a negative divergence, I might take more. Cut your loss with a close above the 50/200 day moving average, if the stock does not move lower immediately.

CKP is putting in a very bearish engulfing candlestick reversal pattern, failing right at the 200 day moving average and breaking down below the 50 day moving average, on strong volume. If this stock did not have such an ugly top, I would not even think about touching this as it simply doesn’t have enough “ugliness” to today’s move. But the top in November on huge volume and red BOP led to an attempted reversal at the end of December that was immediately re-reversed lower on stronger volume. After a very low volume attempted rally (drifted sideways really), the stock put in this nasty reversal. To see the potential reward from this short it is best to look at a weekly so that you can see this $23 was once $6 in 2000. So it does have a ways it could fall. Cut your loss with a close above the 50 day moving average, if the stock does not move lower immediately.