Friday was a whole bunch of ugly until the final hour, when a rumour of a Greek bailout hit the wires and caused a massive short squeeze, allowing the market to largely undo the damage done earlier in the day, and in some cases, close green. I am not surprised at all by this, and let me explain why. In short-term downtrends, like what we've been in for the past few weeks, the bears tend to cover their shorts on Friday afternoon to lock in profits ahead of the weekend. This is pretty common knowledge on the Street. This reduces downside pressure on the market and actually puts upside pressure on it as the shorts cover. But, to bring in actual buyers, not just short-covering, you have to give them a catalyst. What better catalyst than a rumour pertaining to a solution to one of the market's recent major worries (Greece, which the smart crowd has known for months was a problem even though it just hit the headlines in the past couple weeks, but I digress)? This rumour sparks actual buying. It's a bit too perfect to be a coincidence, and I have no doubt someone strategically leaked the rumour at just the right time to the media. It happens ALL THE TIME on the Street. Check out this video from Jim Cramer about a similar matter he made several years ago.
I closed my CBI calls today. It broke below support, as I feared it would yesterday due to the increased volume on yesterday's downdraft.
ROST has a little uptrend going, and I'm liking a buy in this one.
We're seeing some big breakdowns, as well. EME, FUQI, JST, JTX, and NEU all broke down. My FUQI calls are pretty much worthless, of course.
The shorts are all working, and TSL just rallied back nicely. This could be shorted here. CHRW, EJ, NTES, QCOM, and R also appear to have further downside. ARO and GFRE also look like they could be shorted here.
I'm going to clean out the watchlist a bit this weekend.
Position: Long CBI, FUQI
Disclaimer: This is not a recommendation and is presented for informational purposes only.
Links in the post: http://www.youtube.com/watch?v=HRa0B34jMOQ
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment