Monday, October 24, 2011

If the Big Picture is Confusing, try a Wallet Size

I still am not fond of Mondays.

If the Big Picture is Confusing, try a Wallet Size
I am going to be as honest as I can be (thanks James Altucher). It's confusing out there and I am confused.

The Euro debt mess never seems to move along. The slowdown in the US that was pronounced just a couple months ago has started to show signs of picking up. Stocks were breaking serious levels to the downside at the start of October, but now are moving through the upper end of the trading channel now. Safe to say I cannot have any certainty near term what is going on.

When the big picture is confusing, it can be helpful to go with a wallet size instead. On Monday October 17 I penned what I thought would be the dominant market force going forward:
The vicious rally seen over the past week or so has pulled major indices back from just about bear market territory to close to even for the year. Digest that little nugget for a second.
And I think there exists a chance for an even more extreme move
Maybe earnings season will go well this time around. Maybe the FED drops a bomb. Who knows, it won't take much. I think a run to the 200 MDA could happen fast (1275 - 1280) and if it does the chasing could be Lord of the Rings epic at that point.
So I was looking at psychology and blocking out all the other things as I looked at market action. The move since then has made sense through that lens.

I bought some positions today and those buys will help explain what wallet size pictures I am looking at right now. Click any chart for larger view.

I bought AVA this morning:
AVA is a diversified utilities company and has had good relative strength over the past months. The breakage to the upside of the triangle has volume behind it. This one is getting extended here, but the sector has been leading the charge. If it continues I will see higher prices. If it falters that may be an early tell on markets changing.

The second buy was for TX:
TX is a steel and iron company. I have been watching this one be accumulated for some time. I was looking for resolution out of the tight basing pattern and today may have pushed it through. Again, a leading look for the markets so far. This stock was found on an iBankCoin PPT screen that also gave me the stock BRO but I missed that one going crazy to the upside.

The last one is more of a speculative type of play, SATS:
Again, tight range was resolved higher, though the candle today gives me some pause. Another factor that made the pick attractive is best shown by a longer term chart:
When the price area of $25 is broken on this, it moves fast. Figured if animal spirits get involved it may move.

I was working on cement companies last night in the 12631 trading room and was liking CRH and that one was moving as well today (no position).

So what I have is a strong utility stock, a steel and iron company, and a technology speculative play. If the economy is indeed slowing and it's just a short covering low volume baloney rally then I would expect the steels to roll over fast. If fear grips the market selling high fliers like the utilities would probably happen. If no one wants to put money into anything speculative, then SATS will get creamed.

But if not, all these three have potential and all three will be my wallet picture going forward, they will tell me what I need to know.

Have a good night.

5 comments:

Jennifer Hillier said...

Do you need me to conjure up animal spirits for you? I got skillz.

Great post. Hope you make piles of money.

David Batista said...

GYSC, I wanna be JUST LIKE YOU! But since I suck at money matters, I guess--

Ooooh! Charts! Pretty!!!

getyourselfconnected said...

JH,
I request a Liger, bred for it's skills in magic.

David,
It's too soon to see if I will be right or not, market makes you humble every time.

Anonymous said...

Have been a devotee of your blog, now devoted follower on twitter. Appreciate your perspective, insightful and informative. Learn something every time. Thanks! @23aloha

getyourselfconnected said...

Thanks Aloha!