TraderWise

I am cutting back on these names for identical reasons in all situations.  Stocks that had blown through support and now have made their way back to a resistance area or very close; identical set up as we see in the major indexes.  I will go with the same concept as with the indexes - if they jump back over these obvious resistance areas I will pay up a bit to buy at higher prices, but this will offer us stronger charts.  And very easy stop loss locations in case the market and/or stocks fall right back down.

I am going to continue to sell down exposure in long names - especially as our 'generals' are taken for a ride to the heavens.  Most of these I cut back last week as well.  Aside from these names I have a few others to sell if the S&P jumps 5-15 more points in the coming hours/days.

I am selling almost all remaining shares in Acme Packet (APKT) - it is now not even within sniffing distance of the 20 day moving average.  Keeping 0.1% exposure just to have it in the portfolio.

We have a very tiny long E-House Holdings (EJ) which we would add to on any breakout north of resistance but unlike many of our other names, this stock has been held back by some of its moving averages.  Since we are so lacking of short exposure, I thought I'd give it the college try since we have a low risk entry here.  I've put on roughly a 3% short position around $19.50.  We'll give this a 5% berth in terms of stop loss, which would also be a higher high than we saw this morning, i.e. $20.50ish.

There have been a ton of changes in exposure the past 5 sessions as the market has really punished many names in the small and mid cap space.  We only have light exposure to "weak dollar / commodity" names but they too have bene traumatized the past week.  The S&P could have upside to about 1110 / 1115 and then we'll see how it acts from there but between 1085 and 1130 I consider it all white noise in the intermediate term.  Over S&P 1130 and I'll reconsider a bullish stance. 

I am just being mechanical and conservative here and selling out the index longs (TNA & SPY calls) bought Monday on the breakout over S&P 1100 as we fall back below it.  Could be a head fake - we never know until after the fact, but we can always re-enter on a bounce back over S&P 1103-1104 or so.  For now capital preservation as we view a market that is long overdue to give back some gains.

Losses will be earned on both positions.

If I had more long exposure, I'd probably just grab a dart, pick 5 of the names below and toss 2% allocations into a basket of stocks since they all have quite similar set ups and very nice entry points with obvious stop loss areas that in many cases are only 1-2% higher.  But with so many stocks of interest from the long side so extended after this rally, and so far away from any support I don't want to chase those names. Hence it's difficult to expand the long side of the book... which would allow me to expand the short side and remain somewhat hedged. 

Since the market had been gapping up and down so much the past 4-5 weeks, I decided a few weeks ago to go back to the old fashioned hedging and build up a portfolio of names on the short side of the book, to offset longs. Coming into the week I was net long, and said if the S&P 500 jumped over 1120 my stop losses would trigger on the short side and I'd be even more net long.  Which was fine by me as 1120 was the level I had been waiting for to get constructive again.

Not so fast!

I restarted a position in Thoratec (THOR) on what appeared to be a potential technical breakout not too long ago.  However, the action the past 2 days has been troubling.  Yesterday the stock reversed down hard on a bit of a jump in volume, and this morning in a market on overdrive, it is down another few %.  Searching around all I see is a remark by the CEO talking about 'lumpiness' in the quarter which could be translated to 'miss'.  Maybe.  Either way I don't want to take a chance and will close out with a 5% loss.

Make that 2 material long positions...

DragonWave (DRWI) joined the "breakdown" party and my stop loss in the mid $10.90s hit; reducing our exposure by 60%.  All the same comments as I made for Atheros in the previous entry apply here.