First, this comes out on the wire: US SEN DODD: WE DO NOT HAVE A DEAL ‘YET’ ON HOUSING LEGISLATION, ‘IT MAY NOT BE POSSIBLE’ TO GET A BIPARTISAN DEALLess than 45 minutes later, the following comes out: SOURCES SAYING SENATE HAS REACHED A DEAL ON MORTGAGE BAILOUT BILL - Deal would have FRE, FNM bear much of the costs of a mortgage insurance fund.
Guess we’ll find out later which “version of the truth” wins out.
I wish I could tell you that this was all very bullish, and that the market moves today (especially in to the close) were healthy signs. But, I’d be lying to you if I did. Rebeltraders took positions in DXD and SDS. My personal account has a short or two and I’ve daytraded long and short positions. Anybody else play the CAT waves? Caterpillar(CAT) has been one of my “on again/off again” trades for a long time. I’ve played long and short. There is a way to make money in the market, although right now it isn’t real easy. We aren’t recommending any other trades right now, because in spite of this “rally”, anything could topple it at any given moment. You could continue to play it on certain technical levels alone and pray the fundamentals don’t catch up with ‘ya. It’s all about how much risk you are willing to take with your portfolio. I don’t see the need to cover my shorts yet (they are still within my “money management” guidelines), and I really don’t see a need to start taking on long positions.
4 Comments
May 15th, 2008 at 6:52 pm
Lisa - Your write-up here is my favorite since I’ve joined on. Nice.
What are your stop loss points for DXD and SDS?
At what point in the S&P would you change to a bullish theme?
I haven’t played CAT. I did stop loss out of my short position on POT today. I had a small position there. Fortunately, I spend most of my time every day taking profits on MU. What a monster rally. I actually reduced my position in MU today to 8% of my entire portfolio. Most of the time I have held it at 10% and sold when it got over that amount because of price appreciation.
May 15th, 2008 at 7:26 pm
Lisa,
I have not been playing CAT waves, but I hold CAT stock in my portfolio. Unlike what I expect is the approach of the majority of your readers, I am a long-term investor, not a trader.
Since buying CAT in July ‘04 I am showing a 23.5% annual IRR (including the dividends). Three-year annual IRR 25.7%, two-year annual IRR 5.5% and one-year IRR of 11.8%. With the market conditions over the past nine months the way they have been, I can’t complain!
May 16th, 2008 at 12:23 am
Dave: Why this one?
It’s late, so I’ll answer technical questions tomorrow, but I wanted you to know I did think about you when I saw POT go over $201 today. Figured you stopped out. I’m glad your MU trade has worked well. Thanks for bringing it to the attention of our readers, should they have wanted to play it with you. And, thanks for the updates and sharing your money management techniques on the position.
Mark: I’m glad CAT has been a long term winner for you! What is your stop-loss on CAT? Chuck laughs at me sometimes, because he knows how frequently I trade CAT. It’s good to hear from others who trade stocks on different time frames. It helps us all to keep things in perspective!
May 16th, 2008 at 8:58 pm
Lisa: I am a bad boy and keep very few, if any, formal stop losses. I make a quick check on how each holding did at the end of each day, and do a more formal look at all my holdings on a weekly basis. Any decisions I make to exit a position have to consider the underlying reasons for any decline in price, the longer-term outlook for the holding, immediate tax implications, future tax implications associated with limiting flexibilty to exit other positions later, alternative opportunities, and other factors. My livelihood does not depend on my portfolio, and with a long-term approach, I don’t make snap decisions. Granted, this approach means I have my share of losers, but I am not doing poorly.
With regard to CAT, I won’t start getting concerned unless the price drops to about $73. But that is just a warning point to pay more attention to it.