If you've been reading along, then you know that there was a long dry spell that I endured prior to this recent flush of success. In fact, the start of this blog (in March) coincided directly with my first ever negative month of trading. So if you've been here since the beginning, you haven't known me to be successful yet.
Let me tell you, it hasn't been easy.
At the end of May, I wrote a depressing post about working in a gray cubicle again...
At the end of June, I was more or less at the end of my rope and I declared July to be a pivotal month. For the record, I still like the word "Philosophistal."
As of last Monday, I was still down a few thousand dollars for the month. Never would I have guessed that the market was about to freak out and that I would finally get my shit together all at the same time. As it stands, I ended up pulling over $20,000 net out of the market in the last week. That's double what I had made for the first 6 months of the entire year.
I think that the number one thing that helped me get my game back on track (besides the market freaking out) was talking with my risk manager. Setting a tight loss-limit on my account each day freed me up from worrying about losing money and made me focus more on making money.
But there have been many other things as well that I've come across in these last 6 months which have helped me get my trading back on track. Perhaps I'll have time to reflect upon and write about them when I take off the last couple weeks of August. For one, I have benefited greatly from the traders who read and comment on this site. Were it not for me stumbling across Ray's blog in February I may have never found the Scalper's blog, and I may have never started this blog. And this blog has been a great tool of professional reflection for me.
Also it goes without saying that any trader in a slump needs strong support from his or her family. My family has been great.
Anyway, so July was in fact a pivotal month and for now, I can stop working on my resume and focus on hitting the market again. Like I said last week, I'm not declaring victory over "the slump" just yet. I'm sure I'll have bad days again. However, after getting through these last months I realize that what Bob Dylan said is true, "they say the darkest hour is right before the dawn."
As I discussed in the Virtual Office link, the market is currently in meltdown mode.
If you are a daytrader or a swing trader it doesn't really matter why the market is melting down, you're just happy to see some volatility again.
But I have to say, while I had a nice day, the morning completely sucked and I gave back a good chunk of change when it looked like the market was going to bounce at around 2:45.
If you haven't noticed, 2:45 is a very important time... Everyday, at 2:45 the market moves and I don't know why. If someone does know, please fill us all in via the "comments" section.
So it was a wild day of trading with big gains but also big losses. Such is trading when the stock market is a volatile beast.
I got short at 10:21 when it looked like the market was weakening and the stock couldn't recapture the highs of the morning. It worked out to be the perfect time but unfortunately, I covered most of the shares somewhat early, in the mid $38 level. The rest I covered just around $37.50. I made over $1200 in the stock.
My second best stock, ITU, was at one point, a huge winner for me that I gave a lot of money back on during the 2:45 squeeze.
At around 1:45 I noticed that UBB another large Latin American bank stock, was getting smacked around. I took a look at ITU and saw it still trading up. With the market just beginning to melt, I started getting short. I got heavily short (for me) and sold about 2500 shares between $47 and $46.80. The stock dropped quickly to $46.50 and then bounced back up to the $46.80 level. Then, it dropped hard to the "unched" level on the day. I covered some here, but not enough and the stock ripped back over $46.50. This is where I screwed up, covering most of my position.
In retrospect, this was a boneheaded move. The problem was that I had a lot of trades on and at that particular time, I was getting squeezed in most of them. I didn't even take a look at the chart... I just covered and made only a little on my initial trade. The stock dropped from here on out, and I got short again, but with a smaller position.
My worst trade of the day deserves a little attention because it had me getting back into a very bad trading habit, revenge trading.
I bought VNO at the open on the strength of all the "interest rate sensitive" names however, I never got a report back from the NYSE. The stock traded up over $107 but then back down to $106.75. I called my company to get some report and they said the NYSE was just crazed and not getting all reports back quickly. True story. Anyway, they called down while I waited on hold and got my report. When I got the report, I immediately sold at $106.80 and lost the 20 cents on my 400 share purchase. No big deal.
However, take a look at that next 5-minute bar... the stock spiked up to $110! Man was I pissed! So, what'd I do? I bought... and the stock plummeted down to $108. I churned the stock for the next half hour, angrily, sometimes making and sometimes losing but always trading angry. I lost over $300 in the stock before I realized that I was trading like a drunk and took the stock off my screen.
We will see what tomorrow brings. I'd love for you to share your stories on the day. Feel free to fill us in via the comment section. Days like today are fun to talk about.
Me, $6147 on 99,600 shares traded. Evolution, $390 on 52,000 shares traded. Bubs, $102 on 600 shares traded. Misstrade, no stock trades. Denarii, -$199 on 18 contracts. OBAT, -$714 on 8200 shares traded.
It was an interesting day in the stock market. I mean, stocks are moving all over the place like mad. Simply put, stocks haven't moved this well since last May.
It was also kind of funny if you were listening to CNBC. Bob Pisaniwas in "serious mode" and on a couple of instances warned viewers that "they are going to try to sell into this rally today folks"... which left me wondering what rally he was talking about.
Yes, we "bounced" yesterday, but as we discussed here the bounce came on light volume. Listen to Art Cashin, read the IBD... there is no "rally" to speak of right now. The "rally" died last week. It will now take a day of strong gains on excellent volume followed by at least one other day of strong gains on excellent volume before you can declare a new rally has begun.
Also funny is how not one market "expert" on CNBC today admitted to selling. One has to wonder who sold all day? Perhaps it was just a lack of "buyers" which is sometimes how they explain these sell-offs. Whatever. I'm pretty sure that the NYSE set a new volume record today.
Someone is selling and they are selling very, very hard.
This one really pissed me off because I was short and in a matter of 30 seconds, the stock moved a half point on only a thousand shares.
Previous to this wackiness, courtesy of the Hybrid Market, the stock was behaving fine. This is why it's hard to have full confidence in the hybrid... weird stuff comes out of nowhere. Notice after the spike that the stock went right back to where it "should be"... the spike was nothing more than a trade aberration.
After a bogus early morning rally... Clarence, The Rodent of Stock Market Volatility, has the bulls by the balls.
NOTE: Art Cashin is useful on CNBC. And I'll say that Dylan Ratigan is as well. At least the dude has a good sense of humor. Meanwhile, there have been lots of people yelling back and forth today on CNBC. It is time to click it off and listen to music instead...
UPDATE: With the market back up almost 100 points after the "raid" attempt between 10:15 and 10:45, I am left to menace Clarence, The Rodent of Stock Market Volatility, with my pet snake "Hester."
I don't really know what a "Bull Trap" is, but my guess is that it's a rally just like the one we saw today. Plus, it rhymes with "Bull Crap" which is what I think of today's market move.
I mean, I knew we'd bounce but CNBC is acting like the sky has been cleared and we're ready to run to 15,000 on the Dow again. Gimme a break! The market got killed on Friday, practically melted in the last 30 minutes of trading and on all time record volume no less. Today we rally 90 points on lighter volume and we're good? I don't buy it.
Anyway, maybe I'm just pissed because I largely missed the rally. That's probably it, in fact... I made money right off the open in a number of stocks but then got chopped up between 10 and 12. If I got long I lost money and if I got short I lost money. Things just weren't moving for me. So, I walked away.
When I came back to my computer around 2pm, I saw that we "rallied" nicely during lunchtime, about 100 points on the Dow. The solars were really moving, FSLR in particular and so I picked up one, LDK (that I saw mentioned on Stewie's blog this morning) that hadn't moved with the others.
I bought it at just the right time, at around $44.50, just before it jumped up to $45. I quickly took profits (since I'm too bearish for my own good) and watched it trade up another 60 cents, but it was my best stock on the day nonetheless. I made $301 on the trade.
My worst stock of the day was AAPL. I made a few trades in it and while in each trade I was right initially, I didn't get out with a winner once. The stock was just too choppy today and it was a mistake for me to keep going at it. The only good thing was that I kept my position size small in these losing trades. Still, I lost $360 in AAPL today.
Anyway, the selloff from last week reminds me somewhat of the drop in February. The market ripped down on incredible volume and then began rallying on light volume. I got so bearish that I was crippled mentally to take part in the rallies. I will be watching myself closely to make sure that I don't let the effect my trading too much. Today, it definitely did. I missed out on a pretty good rally... lots of stocks moved.
Let's see what happens tomorrow. While I believe we're headed back to the lows, I'm going to try and keep an open mind day to day... hopefully Clarence, "The Rodent of Stock Market Volatility" will visit again soon.
Denarii, $494 on 20 contracts traded. Me, $154 on 34,200 shares traded. OBAT, $120 on 4800 shares traded. Bubs, -$179 on 2000 shares traded. Evolution, -$1148 on 44,200 shares traded.
Well, it was pretty much a chopfest out there today. The futures held on to some support around the 1460 area and the market rallied. However, most of the juice of the rally came during the low-volume hours of the day, from 12-2pm.
Art Cashin, perhaps the only CNBC regular who has a real head for the stock market (as ironic as that sounds) in a segment with Pisani and Ratigansaid, "I would have liked to see more volume today. Volume that would have equalled that of the sell-off on Friday." Pisani immediately chirped up, "Yeah, but that was record volume on Friday..." without noticing that on Friday he was talking about how the financials were holding up... I mean, you can't have it both ways.
The fact of the matter is that the market sold off hard on record volume on Friday and bounced weakly today. I highly doubt the market is out of the woods. But we'll see. Perhaps Bob Pisani is correct...
Meet Clarence, the "rodent of stock market volatility."
While he's slightly less famous than Santa Claus, the Easter Bunny or his gay cousin "Punxsutawney Phil" I believe that in due time, Clarence, the "rodent of stock market volatility" will be a household name.
Meanwhile, this video is 5-seconds long. Watch it over and over again...
UPDATE: Apparently, Clarence is hungover or something because it's 11:53 and all the market is doing is chopping around.
Plus, there are a couple of recent "movers" that are reporting Tuesday that could move in anticipation late in the day Monday. They are, CF, MOS and VMC.
With all the recent volatility in the market, my earnings lists will be highly edited. Who needs to focus on earnings volatility when the market is melting? Volatility is suddenly everywhere.
For any of you who watch public television, you may have seen a fascinating segment profiling the underwater exploration of a shipwreck site called the S.S. Republic, discovered in 2003 after twelve years of searching.
That ship had sunk off the coast of Georgia in 1865 carrying a cargo of coins valued at the time at about $400,000, which in today's money is almost $200 million. It had been headed to New Orleans with the coins and other supplies to help in reconstruction after the Civil War.
You can see the page National Geographic set up here full of history and images.
More recently, the company announced in May 2007 that it had discovered a larger, still-unknown wreck off the coast of Spain code-named the “Black Swan”, with a treasure of coins and artifacts estimated to be worth about $500 million.
Can you say, “YARRR?!?”
Odyssey Marine Exploration is the company behind both of those finds. They primarily operate in shipwreck exploration but also have a themed shipwreck segment, exhibiting treasures and showcasing exploration methods. And if you can believe it, this is a publicly-traded company with the symbol OMEX on the Nasdaq.
So what's the big deal, you ask?
Well, according to this researcher we currently have a massive price dislocation, based on short-term news in terms of fundamentals versus valuation, and it's an opportunity worth capitalizing on immediately, before investors realize that they missed a huge chance to pick up shares on the cheap.
Shares closed at $5.0001 on Friday, giving the company an equity cap of just $235 million.
After the announcement of the discovery of the “Black Swan” the stock shot up from $4.60 on May 17 to $8.32 per share on May 18, an increase of 81%. At $8.32 per share the market cap is just under $400 million.
I know what you're thinking.... a current $235 million market cap when they just found $500 million of treasure? How can this be possible?
Well, the reason for such a low current valuation compared to find is because of short-term news, where the OMEX exploration vessel the Ocean Alert handling the “Black Swan” effort was forced to return to Spain after an apparent surprise boarding only a few days after leaving Gibraltar. Spanish officials had seized documents and even a laptop to gain information about the vessels activity.
According to Spanish newspapers the recovery effort was being conducted illegally, despite full transparency and OMEX covering all legal bases beforehand. Spain seems to think that the ship was in Spanish waters when in fact it is located in international waters in the Atlantic, unaffiliated with any country's territory.
Scurvy dogs the Spanish be, right!?
Odyssey has been straightforward and conservative in its approach to other shipwreck sites and I believe this time is no different.
So OMEX is wrapped up in court right now, trying to prove that their efforts are legitimate and have been made so by abiding by all necessary and applicable international laws. In the near term, this could put downward pressure on the stock.
But in the longer term, I have every reason to believe that OMEX is on the level and will persevere. And more importantly for us that the stock price will flourish.
Just think about the numbers.
To get to a $500 million market cap means that the stock would see $10 per share, and that is the value of the treasure from just ONE of their shipwrecks, the “Black Swan”.
I think you can extrapolate out what else can happen from there....
At some point in the future, famed Cuban dictator Fidel Castro will pass away. And as with most major events, positive or negative, there will be an opportunity somewhere to profit from his death.
I wondered how we could position ourselves to profit from it?
For starters, most investors seem to be pointing to a closed-end fund called the Herzfeld Caribbean Basin Fund (Nasdaq: CUBA), bidding up shares when there is news of a worsening illness and selling them off when reports say he is in fact healthy.
Just look at the volume on the chart.
The first major price/volume spike occurred just after Monday, July 31, 2006, which saw him hand over most of his power to his younger brother, Raul, after a message was read on state television that Fidel had undergone surgery for internal bleeding. CUBA's price that Monday had closed at $7.05 but by Friday, August 4 had closed at $8.30 on heavy volume, or a jump of almost 18%.
Similar volume-backed gyrations have continued to occur on both the upside and downside, depending on whether his condition is reported to be improving or deteriorating.
In fact, interest in the 'Castro death effect' has been so strong at this closed-end fund that its shares are now trading at a 45% premium to NAV (at the close on July 26 the fund’s shares finished at $13.78 while the NAV is $9.48). Which, of course, absurd – salivating investors are apparently willing to pay 45% more than the actual value of the portfolio's holdings.
What's extra strange about the current premium, however, is that the holdings of the fund have almost nothing to do with Cuba. In fact, the portfolio is mostly of companies surrounding the island, such as in southern Florida, Mexico, the Caribbean, and northern Latin America, all on the premise that those companies will benefit from a more open economy. What this means, though, is that investors appear to be buying nothing more than a ticker symbol.
Well, I thought that there must be something better than this and I believe I have come across probably the only company that U.S. investors have access to that has significant and direct assets and operations on Cuba – Sherritt International.
Sherritt is a Canadian company listed on the Toronto stock exchange under the symbol S.
I know some might scoff at a Toronto listing, but this is no fly-by-night scam that we so often hear about from our nearly unregulated friends up north. Sherritt is in fact an 80 year-old, dividend-paying, profitable conglomerate that did $1.1 billion in revenue and $245 million in profit in 2006.
Interestingly, however, because Sherritt has operations in Cuba, they are not even allowed to have an office in the United States.
But there is a listing for the company on the Pink Sheets at SHERF.PK.
This listing is not quoted so you will not see a bid or ask for the issue – it is traded in what is known as the “Grey Market”, which has no central interdealer quotation system. This clearly adds an element of risk to anyone considering purchase.
I checked out more on this company and I have to say I’m impressed. Its range of businesses will make your eyes pop:
Nickel mining
Cobalt mining
Fertilizer
Coal
Soybeans
Power and electricity
Oil and natural gas
Just from this list alone you have to wonder why this company hasn't been bought out, given what has happened to the nickel miners and fertilizer companies in the past year or two.
About 26% of 1Q07 revenues came from Cuba. Its operations on Cuba deal primarily with nickel and cobalt mining, oil and natural gas (Sherritt is actually Cuba's largest producer), and power. And the company is still investing and growing, with planned expansion phases going out to 2011 in some cases.
I can only guess what might happen politically when Castro dies but the potential exists that the economy might open up even a little. I’m thinking that Sherritt could benefit from this – increased demand for their products and services as investment flows in, especially given that they have been operating on Cuba since about 1995 and thus are rather connected and experienced.
From a valuation perspective, on the TSX website the company’s trailing P/E is at 8.6 as of Friday. It’s an unbelievably low valuation based on both average market P/E’s of 15, the range of hot commodity businesses that Sherritt operates in, and comparisons to the P/E's of companies that specialize in those businesses.
Now compare that to how investors have bid up CUBA to a 45% premium to NAV – all based on the hype over pretty much just a ticker symbol.
If all else were equal I would expect SHERF.PK’s share price to appreciate to the mid $20’s, just to get to “normal” valuation. After that it’s anyone’s guess. The idea of course being to get in before others “discover” that they have access to an incredible and direct play for the island.
Please note of course that there are some obvious risks, though. The stock isn't quoted normally, these shares are restricted and non-voting, you will not receive the dividend, there is time risk and political risk, etc., etc. Other than that, though, we're good!! Viva!
Just wanted to give a small introduction before my very first blog post.
But before that I must give DT props for giving me the floor this weekend as a guest blogger - and congratulate him on a huge performance during this past week! Great job and continued success!
I used to daytrade and work on "the Street" but now I work from home (in another industry) and mainly swing trade. I follow the market on a daily basis and get cranky if my time watching the close is somehow interrupted.
I enjoy doing research on potential investments and actually think forensic accounting and the SEC website are very exciting. When I do research I try to find companies that aren't in the spotlight, that for some reason aren't paid much attention as I try to profit from a relative value gap. My idea is to get in before others "find out" what a gem XYZ company actually is....
So I found a couple recently that I've decided to share with you - one today and one tomorrow.
Feel free to leave comments and thanks for reading!
It would be financially irresponsible and perhaps unhealthy for you to trade like I do. This blog is for entertainment purposes only. I am a trader not an investor. I don't make recommendations. Thanks, have fun here.
