50 gets .... 'jus a little bit'... of respect and recognition...

From the first time I came across Earth To Wall Street Dot Com I thought it had something special about it. No Bull, the real deal, a community willing to think, question, and unite ideas as a unique investor community...

Congrats, Chris, Greg , Adam, and everyone else on the Forbes Business and Finance Blog consideration. Quality eventually gets recognized...

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Here's my post for the eve... On this site we always try to learn from history an "capital"ize...

The same play on the QLD happened again today... and you know what to do when opportunity knocks twice... carpe diem mis amigos. I believe that success in the stock market much like success in life largely revolves around seizing opportunity. That requires... a lot of hard work, skill, perserverance, and some (maybe a lot) of pure luck.

I have a number of trading/investing rules that I look at before I ever make a move. The most important one:
Opps Knock: Stocks.

This rule reminds me to constantly search for ideas and opportunities and try to find the best ones... and then jump on them when I've done my DD and risk/reward analysis and everything appears to check out...

So we saw the SP, SRS, pop; test the 200, fail, then go through the 50... and I pointed out that this was an opportunity to go short with a low risk/reward ratio. Then it happened on Tuesday with Naz. Today, once again the Naz tested the 50, took out the stops just above, and fell back down.

Here's how I played it... feel free to comment if you would like...
QLD 50 SMA was at 82.99. I have a stop 1% above at 83.81. With a stock as liquid as the QID ETF I felt a 1% stop above the resistance (for the short) would be sufficient to dodge market maker stop removals. When I took a look at the markets and the QLD went back over the 50 then reversed under this was OPPORTUNITY. In fact... one of the signs to short a stock is when it fails resistance a second time... especially when the stops are taken out and it then reverses, because it is a signal from the market makers that at the resistance line buying opportunity has dried up (market makers are selling at the highest price they can get while abiding by the supply/demand requirements placed on them). Nothing but down from there usually.

So my stop on the original QLD from yesterday was high enough and was not hit (had it been hit it is likely that something had changed in the market and I would want to stop out). I then essentially doubled down at 82.76 on the short... placing the stop now on the entire short at 83.81.

Side Note: I had said on yesterday's post that I was considering lowering the stops to lock in profits but I felt that the strength of a break through the 200 and the 50 in this market was so strong that I was willing to let the QLD run unless it went all the way to 1% above the resistance line. I didn't want to get whipsawed... though this was a judgment call and normally I don't like to let the rule" never let a winner turn into a loser" get violated... Had the gain been larger and the 50 resistance not been so strong I would never have done this...

Ok... enough explaining with words. Below is the chart that shows the move above the 50 without very strong volume, the reversal below the 50, and the subsequent move in the QLD.




The nice thing here is that the QLD, though it may hit a few support areas along the way, generally appears to have a long way to go before encountering serious support. Combine this fact with the market fundamentals and I believe this has a possibility to be a nice trend trade. Still, I will lower stops as appropriate above key resistance areas to lock in gains in case something changes. Now the gain for me is high enough where I absolutely will not let this trade turn into a losing one...
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CMED 'heals'...
This company was way oversold and way undervalued in my opinion which is why I was fairly aggressive in purchasing the stock in the past week before the CC today. I know this company pretty well, I understand the business, and I know that the management consistently underpromises and overdelivers. In fact, as far as I have been following them they have never missed an estimate.

A lot of people were worried that its HIFU sales were slowing and that it would eventually stop accelerating its earnings. While the HIFU, which has always been a wild card, has not as of yet proven to be the future of such treatment (ARAY might be the company for this... another company I watch very closely) its IVD business has shown to be very strong. There are still a lot of questions that I have that were not answered on the CC. I will try to find out more. However, the company re-iterated what I mentioned... it is growing cash flow at 30-35% per year and at this points looks to continue doing so....

I just want to make one comment about China. While I realize its risks and I am always wary of it and Chinese stocks sometimes sell off heavily I always come back to these stocks. You know why?

Picture this: a small store, like WMT in the 50s, or a beer company like Budweiser, opens up shop somewhere in America. The amount of growth it experiences as it becomes national, as it spreads to from state to state across the US, that growth is hard to even imagine before it happens because it is so HUGE. If you have flown or driven across a large country like the US you will understand this.

Now step back for a moment and realize that China now is like the US in the 50s or even earlier, except for a major difference...

We're talking about taking that little start-up store or beer company or medical device company from one or a few select cities... and spreading it to a country that is, from a population standpoint, Four Times bigger than the entire United States...

That doesn't even include the enormous populations in surrounding countries (imagine have Indonesia (world's 4th largest population) and India (world's second largest population) nearby to trade to instead of Canada and Mexico...

I think you get my point...

Have a good night... and Chris and Greg and Adam... congrats again...

This blog is for informational purposes only. It does not give investment advice.