Last week we reduced our exposure to Replegan Pharmaceuticals (REGN) because the risk to reward of being short
the stock was no longer in our favor. Lesson number one in stock trading is to have a reason why you are trading a stock and if you cannot articulate that strategy you should never have made the trade in the first place. In the case of REGN we entered the stock on the short side because it was at extreme overbought levels. An earnings announcement was weeks away and I had confidence that the stock would have corrected by then and we would be out of the trade. It appears though that management watched the charts and monitors the short interest. How do I know this? On Friday February 10th the stock closed below the lower band of its rising uptrend channel. That was a positive for us until management issued a press release after the close announcing that earnings had been moved up to the following Monday February 13th. I knew that we were about to get screwed. The lesson learned from this trade was to never ever underestimate how devious management can be when their stock is heavily shorted and never forget
how immoral bankers such as Bank of America and Deutche Bank can be by upgrading an extreme overbought stock in the hopes that they will get the dumb money off the bench and buy at the worst possible time for both longs and shorts. The other lesson learned is to never, ever react to a knee jerk reaction by the markets. We never forgot that the reasons why we shorted REGN in the first place were more present than ever and by the end of the week our $15.00 paper loss was reduced to $2.00 because we
had discipline and understood how the game is played.
Contrarian focus stocks
Companhia de saneamento Basico (SBS)- This is an extreme overbought stock which we will be looking to short as a
swing trade.
Synnex Corp (SNX) – This is an extreme overbought stock which we will be looking to short as a swing trade.
US Home Systems Inc. (USHS) – We traded this stock short for a profit a couple of weeks ago and are now looking once
again to short. This is an extreme oversold stock which is very near to us pulling the trigger once again.
EchoStar Holdings (SATS) – I discussed (SATS) last week and like the way it is behaving. We will look to add
as a short in the coming week.
Cobalt International (CIE) – This is another stock that I discussed last week and monitored. I like this as a
trade and should be considered a top pick.
Plains All American Pipe (PAA) – This is new to our screener and looks very good as a swing trade short.
Holly Energy Partners (HEP) – This stock is another top pick as a swing trade to the short side.
Willis Group Holdings (WSH) – This is our only extreme oversold stock and the weekly and monthly charts will help
us determine if this will be a swing trade or a long term investment.
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Ahead” video commentary on all stocks listed above.
We were trading Apple (AAPL) both long and short during the summer after Steve Jobs passed away. I identified a divergence in the Weekly RSI from the stock price which was making historic highs and at an “Extreme Overbought” condition.
Contrarian Trader Watch Stocks
EchoStar Holdings (SATS)- We are looking to short EchoStar due to it’s overbought condition
Regal-Beloit (RBC)- The chart indicates that although the stock is at extreme overbought levels there is a good possibility of the stock continuing it’s rally early this coming week. We will monitor it for topping action.
Cobal International Energy (CIE)- Another chart at extreme overbought levels which gaped higher on Friday. I am reluctant to chase this one down. I would prefer to ope a position on strength and average my basis cost.
Cedar Fair (FUN)- The $27.40 level appears to be resistance. Ideally we will see a rally through that level. If it does we’ll watch our indicators and volume to give us the green light to short this stock.
Apricus Bisciences (APRI)- This is our one stock that appears to be nearing a price point that I find attractive to get long of for a short term trade only.
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Hugoton Realty Trust (HGT): We sold the remainder of our trading position however, I did take some share and held them in our long term account due to the dividend yield and the future of natural gas in the United States. A truly great contrarian trade and congratulations to my members.
Texas Instruments (TXN): This wasn’t a Contrarian Trade but it was a continuation trade of a stock in an uptrend. We too profits on Friday after a very nice profit after 4 days. Swing trades like this TXN trade are some of or favorites.
Watch Stocks:
Dun and Bradstreet (DNB): This is an overbought stock ready to be shorted.
TZA- (TZA) is a leveraged 3x’s short the Russell 200 ETF that is very volatile but our favorite for shorting the entire maket.
Metro Bankcorp (METC)- This is an overbought bank stock which we would like to short.
Real Networks (RNWK)- This is an overbought technology stock that we would like to short
Regeneron Pharmasuticals (REGN)- This is one of our favorite short right now. Heavily shorted by amatuer shorts it’s ripe to fall
Sea Gate Technologies (STX)- This is an extreme overbought stock in the technology sector which we are looking to short
Repuplic Airways Holdings (RJET)- is an onther overbought stock ripe a sell off. We will be looking to short RJET
Tata Motors (TTM)- An Indian car maker ripe to fall for a trade only. This is an overbough stock which won’t be able to stand more upside.
US Airways (LCC)- This airline is simply another transportation stock among the cyclicals in rally mode but ripe to short after being sent to an overbought condition.
Zimmer Holdings (ZMH) This big cap stock is at a very overbought conditon and we will be looking to short it as well.
Hugoton Realty Trust (HGT)- This is a profitable trade. We took one third profits on the trade and will look take further profits at higher levels.
Broadvision (BVSN)- We took profits on this short trade. This is a tough stock to borrow so we took profits quickly once we so how few shares were available.
Michael Kors (KORS)- We took profits on this long trade and may look to get long once again.
Contrarian Watch Stocks
Colvis (CLVS)- Looking to eventually get short but may in fact get long first if we break out above $20.00 using a trading stop loss.
Inergy (NRGY)- This is an extreme oversold stock with more probable downside. We have a price target in mind which I have shared with members. I will send an alert when I begin accumulating.
TZA- TZA puts you 3x’s short of the Russell 2000 (IWM). I am looking to add TZA to the long side if they squeeze the shorts in IWM which won’t last very long. That will be our opportunity to add TZA at a good risk to reward level.
Apline Global Priemiere Properties Fund (AWP)- We are looking to short this fund due to the overbought condition.
Tronox Inc. (TROX)- We are looking to short TROX due to it’s overbought condition.
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We opened a position in Hutoton Royalty Trust (HGT) last week and plan on dobuling that position bringing our basis cost down. The stocks is being dominated by the break down of natural gas prices which appear to have bottomed in the short term anyway. I will sending out an alert to members when we do add to this position and when we take profits.
Watch Stocks:
Sears Holdings (SHLD)- We traded this stock long a couple of weeks ago for a large profit. The stock has continued to rally and appears to be topping out as it hit it’s 50 day moving average.
THQ Inc (THQI)- This is a penny stock which may provide some upside opportunity if it continues to consolidate.
(TZA)- TZA is a leveraged ETF which puts you 3x’s short of the Russell 2000. We are watching this ETF because although the Russell 2000 is in rally mode it is rallying on decling up volume. More details will be going out on my outlook for the markets to members in The Week Ahead Commentary.
Michael Kors (KORS)- This is a recent IPO which we are looking to short but not yet! This will be a short term trade to the downside.
Broad Vision (BVSN)- This is one that I have been watching for two weeks. Dicipline when approaching this short trade is essentail. We are near the point of where it is safe to open a position but not quite yet.
This week I discuss our trade of Sears Holdings (SHLD) which we took profits on last week. This contrarian trade made us a profit of 10% within a few trading days. I also discuss Hutoton Realty (HGT) which we are not trading to the long side. This is an extreme ovesold stock with and RSI in deep oversold territory and a double bottom stochastic.
