Sunday, April 22, 2007

"Gambling" Episode 3

Let's face it....this series is starting out really slllloooowwww.....

Unfortunately, i haven't seen the setup i want/need to get the returns i'm looking for.

(semi)interestingly, on the second day of my challenge, a stock that i hold in my IRA got a buyout offer.... (Tenke) received an offer (that they've apparently accepted) to be bought by Lundin Mining. I did really well on Tenke, but took on massive risk to do under 6 months it is better than a double, but i risked political uncertainties in Africa AND a wildly vacilating copper price.

Sadly, a double in 6 months still wouldn't have been enough to bring me to my goal of 200% appreciation in my initial capital. That really drove home the point to me that this was going to be very difficult to accomplish without using options and/or margin for leverage.

There were some interesting things that "went right" (so far) with the Tenke trade that would be nice to repeat on this challenge. without getting into all the political and M&A activity that went right, the biggest thing was that the trade went right "from the start", I let it "run" (rather than clipping it at 15 or 20 percent 2 months into the trade), and i gave the bigger move time to "mature".

Of course, with the house trade, time may be a luxury that i don't have....

Here are the macro moves that I'm looking at....

uranium plays (as i discussed/predicted here) have been under pressure since the spot went over 100/lb. not a huge suprise. i really like a couple of these....txm.v and iec.v are two of these....emc.v (emu on nyse) is showing *relative strength* in this sector wide weakness. this can often be the harbinger of bigger moves. i don't feel like this is a great time of the year to be takin new long positions in miners, but i'm watching developments (esp in these three securities very closely) right now, i consider these good longer term plays on weakness in the market, but probably not enough upside to accomplish my goal...not to mention getting 150k out of some of the smaller issues might negatively effect the price if i was to see that kind of runup.

gold -- i think it needs to correct....a little.... i can't be sure if it is now or after a move to test the 720's.....i'm too scared to short it, so if it can get down to the mid 600's and base (slow cup shaped chart) i will be looking at some ways to take my first BIG swing. longer term i'm very positive on gold still so i'll be trolling for a buying opportunity.

dollar -- while i've been calling for its death for sometime, i think it will rally as gold corrects...not a lot, but slightly. of course, again, i don't have conviction in this....late last year in my post "get your affairs in order" i called for a countertrend rally and then a retest of the low 80's on the dollar index. something just doesn't seem right (even though it's done what i thought) there seems to be TOO much negativity about the dollar and maybe it needs to give people a minute to get used to its current level before the jailbreak downward. again i don't have enough confidence in that to long something (the dollar) -even for this short term trade - that i believe is doomed long term.

gen markets -- dow over 13k....another slight pop...perhaps to 13200 ish on some "good news" then a melt-down. if/when it pops over 13k i will be looking for some individual US stocks to be buying puts on (bets they will go lower). i'd like to implied volatilities to be very low so the price of my bets are very cheap...may also look to buy calls on the VIX in this case (a measure of volatility which is usually quite low during gradually rising markets (like now) and quite high when all hell is breaking loose on the downside.

oil, grains, etc -- i don't have an opinion on these yet, although i'm looking closely at the natgas market on increased usage for oil sands remediation, and on speculation that people are being lulled to sleep on the hurricane front this summer with all the other crap going on in the world and last year's relatively benign storm season

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