Saturday, July 14, 2007

A FUBAR'ed week in Review

well, the week began with a hopeful date -- 7-7-07 and then ended on a Friday the 13th. Gold ended the week up, at an even 666 and nat gas was 6.66.

it's enough to make superstitious traders like fuBarrio schizophrenic....if he believed in lucky numbers. however, the only "lucky" numbers in fuBarrio's twisted mind are the ones in fuBarrio's "gains" column, and the unlucky ones are in his "losses" column.
for the week in review i'd like to bring back some characters that you're probably gettin familiar with by now, and at least one that i don't talk about alot....
in this installment i'm goin to "say it with pictures"....then i'm gonna add a bunch of boring words that will confuse, distort, and mislead so that you don't think you can do this stuff without me! :)

i've spent a fair amount of time talking about momentum....favorable chart formations....not buying falling knives, not "top calling" things that are taking off, etc. i've even went so far as to document and dissect my stoopid trade of txm.v earlier this year. so let's revisit txm.v's chart:

as you can see, after a spectacular runup (that i caught a fair portion of) the stock cooled as Uranium hit 100/lb on the spot market. Although Uranium has continued to run up, the speculative furvor in junior miners cooled and a lot of people tooke money off the table. Around that time the predicted "unfavorable" period for miners started and TXM.V along with many other junior U miners went into a dive.

as the summer rolls on I am hoping to see a continuation of the "cup", a retest of highs, a slight pullback (smaller cup, aka handle) and a breakthrough of the highs on high volume the next time it retests the old high.
this has really been the hypothesis all year, however, the depth of the "cup" caught me offguard on txm.v and since i wasn't watchin the chart closely decided to impulse buy when it hit a target price i'd set in my head based on the "old" action.

so, you may ask, "if you're so sure that it'll retest and break through why not buy now?" well, i do hold some txm.v as a long term hold (not a trade right now), but for a true short term speculation buying at the time of breakout (some hypothesize) has a higher chance of returning greater gains over shorter periods.

when reading the economist style manuel this last week....ok, it was just the back cover....i noticed that it said not to brag when you were "right" it was "pedatntic" (?) (or some other big word i don't quite understand). frankly, i was just thrilled there was no negative comments about startin every other sentence with a lowercase letter and putting lots of "....'s" between independent clauses.

anyways, at the risk of bein pedantic here is the chart for which i showed a couple of weeks ago as being ready to breakout:
notice that it topped out at 4.18 on Friday, up over 39% in few days. if you were actually followin along it actually "gapped" up one of those days and after being up over 15 percent in a couple of days retraced to fill the gap before heading higher still. a more complete discussion of gaps, and filling gaps is worthy of another post....look for that later (or google it).
so, in reference to "why not buy txm.v as a trade now" in a big way....reference my third chart....

a couple of years ago i was buying goldcorp all the way up this big peak....unfortunately, just about the time that gold pulled back in may of '06, management pulled some really shady deals involving mergers/acquisitions and some potentially non-arms length transactions (in my mind).
i was stupid enough to buy some in my IRA in the mid thirties on the way down the back of this waterfall....there was no retest of highs....and after touching 45 it is lucky to be in the high 20's well over a year later.
now, goldcorp is still in a potentially very lucrative industry. but, i don't trust management any further than i can throw them and it's been laziness and apathy (and a thankfully small position) that has kept me from sellin to date for another player....of course, i can't even get a tax loss out of it in my ira :)

it just goes to show, that after a big parabolic runup....a pullback can be a healthy consolidation....or the beginnings of a multiyear's hard to know until it's all over.
in case you're sick of looking at all these mining companies, you should check out sndk's multiyear chart. the reason i'm familiar is that by shear/dumb luck i caught a big runup in 2005 with a majority of my networth invested in LEAPs (long dated options).

since that big runup it has consolidated pretty heavily for a year and a half and seems to have wrung a lot of the speculative excess out of the trading/attention/ and volumes -- if by some miracle we can stay in a neutral to bullish US market long enough for sandisk to complete it's basing....when that stock runs it can mint you big money.

ciao for now,

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