I watch the ripples change their size
But never leave the stream
Of warm impermanence
So the days float through my eyes
But still the days seem the same – David Bowie “Changes”
Markets open a bit up, but the damage to the bulls’ psyche yesterday will leave a mark. As always, I suggest using a tranche approach to buying anything, do a little bit now and leave room for more later.
Remember how good it felt when all your highflying stocks were at all-time highs a couple months ago? The momentum stocks giveth and they taketh away. Use the playbook. Buy weakness (I have been scaling into a few long positions this week, like INVN, JDSU and TWTR) and remember to trim some next time they rally.
Yesterday was the four anniversary of the great stock market Flash Crash. Here’s how I laid out the playbook in real-time for readers of The Cody Word back during the Flash Crash back on May 6, 2010: “I’d be covering some shorts and would buy a batch of calls every 100 points down starting right now at 10450.” AND LATER: “Butterflies on 700 pt drop, but don’t lose cool. If you were wanting to buy start scaling.” AND THEN: “If you bought calls, you are now up HUGE! Sell 1/2 your calls and go home and throw a party for your girlfriend.”
Here are today’s must-read articles for anybody trying to keep the big picture in their head.
Charts Say Stock Swoon May Have Farther to Go – I don’t believe that the universe/capitalism will reward the drawing of straight lines on historical price patterns for a stock. Thusly, I do NOT do nor do I believe you can sustainably profit from any type of “Technical Analysis”. Art, maybe, but not profits.
But one of the most insightful options traders and options data trackers you’ll ever find, Jon Smart, made some great points.
Alibaba IPO search on Google News – 90,000 headlines in the last week about this topic. I have been patiently waiting to short Yahoo once Alibaba finally comes public. Talk about hype! How LONG have we been hearing about the Alibaba IPO and how Yahoo owns a chunk of it. Any upside for Yahoo from an Alibaba IPO has long since been priced into the stock. I expect $YHOO will make a great short side trade into the Alibaba IPO and there soon after for the near-term. Still gotta wait til closer to Labor Day though. Sigh.
How high can the drone revolution fly? – My latest Revolution Investing newsletter. “You see, the biggest problem that all these predictions and models for the Drone Revolution have is that they can’t account for the brilliant, innovative and ever new uses that unmanned aircraft and smaller remotely- or automatically-controlled devices will be used for in the future.” See also Monday’s blog post: Profit from the coming drone revolution.
High-frequency trading hurts hedge funds – not you – I talked about this terrific article at the end of my Monday Cody Underground podcast earlier this week. Important points for all individual investors throughout the well thought-out article, such as “As an individual investor, however, you are better off giving into it. Don’t fight it; simply accept that in some ways the market is working against you. There’s not much doubt that high-frequency traders are skinning investors, just as market-makers — the guys who maintained liquidity in stocks for decades — did in the past. They are getting theirs. It doesn’t mean you can’t get yours; you just can’t win playing their game.”