Great Trades

Great stock trades based on fundamentals and technical analysis.

Wednesday, January 28, 2009


Sold Longs, Now Partially Short

As we expected, financials have led the market's bounce back rally, aided by significant short covering. However, our trading model was early again to get fully allocated. It would have done much better scaling in more gradually, so we are adjusting the model to use smaller increments when scaling into new positions.

Today, our trading model has sold out of longs and is shifting back to short the market. The 100% long position (200% long for speculative traders) is being replaced by a 30% short position, 15% in the Dow and 15% in the S&P 500.

For active traders, Bank of America (BAC) has proven to be an excellent trading stock, moving up over 50% from its bottom at the beginning of last week, and up over 20% today alone at its high. It will likely continue to be an excellent trading stock, but the near elimination of its dividend (and thereby removal of a significant portion of its long-term investors), the high short interest, and the unknown effect of government interventions make the back and forth difficult to predict.

Open Positions: 15% short S&P 500, 15% short Dow Jones Industrial Average

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