Wednesday, May 13, 2009


I found another reason to play these dollar stock breakouts. MRGE saved my ass from taking a -5% hit yesterday. In fact, The 45% gains in MRGE mitigated the majority of my losses and I ended the day down only -1%. Whew! My strategy now is to keep buying imminent breakouts while weeding out half my long positions. My goal is to raise at least 50% cash. There are two reasons for this:

1) I manually looked through 400 charts, like I always do every night, and noticed significant (and shortable) breakdowns in many of the cheap names. This is telling me that the end is near. The dollar stock circus is gonna pack up it's bags and leave town.

2) I need to raise the cash to possibly buy FAZ, TZA, or TYP initially as a hedge, and possibly as full commitments if the next 2-3 days remain weak. As you can see in the 17-day chart of the SPX (below), we are pushing the limits of this pullback.

Current holdings: ABK, AHD, DVAX, EMKR, FLOW, GKK, HGSI, ICAD, MTSN, NNBR, PLLL, PWAV, SPRD, XTEX, MRGE, ABCW. BZ was sold yesterday for a +49% gain. I set my portfolio up with 5% allocations in mind for a reason. At this level, having large, concentrated positions is not smart. I can take a -20% hit and it will only amount to a -1% total loss. My MTD gains stand at 29%, so I can afford to make mistakes.

I will likely be buying and selling a lot of stocks today, cutting out the weeds and replacing them with some kind of vegetable seeds. Stay tuned.

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