Wednesday, July 05, 2006

Shorting Harley Davidson (HDI)

The reason for this short (200 sh @ $54.50) was largely technical as HDI seemed to be making a double peak at the $55.50 level first established in Nov 05. Momentum indicators are forecasting lower prices at least near term. Although HDI belongs to the consumer discretionary space, its custormer base overlaps little with Walmarts'. So I do not expect dynamics like high gas prices to apply, although reduced home equity extraction should put a pinch to its sales. The short interest was 6.8% as of Jun 12, most of which I expect have covered during the sharp rally since then. Anything above $55.50 would get me out of this position.

The big news of the day was of course North Korea's missile tests. I always expect such affairs to resolve peasefully as cooler heads prevail. I guess that makes me an optimist. Gold was up overnight in keeping with its safehaven status. It gyrated after the opening and eventually ended up $3 something for the day. The same cannot be said for the gold stocks as HUI lost 8 points or so to 342. The 350 level it reached on Monday was actually a significant fibonacci retracement level as well as the peak made in Feb 06. It can also be argued that the HUI had finished a neat 5 wave from the Jun 12 lows. I ended up selling half of the AUY and NXG near the morning lows ($9.95 and $3.65$3.6608 respectively for about a 6% profit in each). It may well have been too early, but the prospect of the NFP number due this Friday, the coming earnings season and several calls for a top due on July 10 made me want to err on the cautious side.

This is not investment advice, please do your own due dilligence. Good luck and be safe!