Tuesday, March 13, 2007

Current short positions

Bear Stearns (BSC) which I shorted yesterday, dropped beneath both the 200 dma and last week's low on almost 4 times average volume -- richly deserved if I may add.

Below is a list of my current shorts/puts and when they were initiated.

Monday: BSC, MER, CTX, MTH, KBH
Tuesday AM: QQQQ, long GDX Sept 39 puts
Tuesday PM: EWM

The shorts now represent 60% of the total equity in my main trading account at TDAmeritrade which was up over 1% today. I do believe there is more downside to come. As a guide I'm applying the bear flag shown in the QQQQ chart here to get the downside targets. My rough estimate is $40 for the Q's and $132 for SPY.

Energy stocks were firm in the morning, only to be swept away in the afternoon. I'm not too concerned there. PM stocks were another story. Similar to the action on Feb. 27, they fared much worse than the major indicies, although gold managed to only give up $6 on the day. The damage to my account was dampened partially by the GDX puts which was part of the plan. Assuming gold can hold $640 and use XAU/Gold = 0.19 - 0.20 as an entry point, one gets XAU = 121.6 - 128. XAU closed at 128.54, not too far above the buy zone. The low end of that range (another 5% down) corresponds to an HUI of 300 - 305. I plan to exit my GDX puts before then and buy calls if the situation warrants. Although unlikely, another exit point would be last week's low of HUI = 315 if it holds.

That's it for now. Good luck and be safe!