Good, getting better…

Well I feel I’m really getting the hang of things in this game. I’ll give a run down of my positions and rational here in a minute but I want to talk conceptually now. I’m now using strict 7.5% trailing stops on all positions (I'm currently evaluating the appropriateness of 7.5% versus other %'s). This allows my stocks to consolidate after runs some without giving up additional upside potential. I continue to focus on attractive prices (i.e. those with low RSI’s 20-30 and have shown they are more likely to go up (through the MACD and the related histogram). I’m more and more focused on trading the price and not the company.

Yesterday, I closed my position in GG for a 2% loss. Today GG agreed to buy Glamis in a deal valued at $8.6B. The price came back quite a bit today on the news and the chart from here doesn’t look good. It was just above the trailing stop, but I cut it anyways. Without a strong rally in gold itself, GG will trade back down to 24 or so at which time I will look at its attractiveness again. The new company certainly will become one of the biggest players out there.

With the closed GG position I added a position in USGL which had worked its way down to an RSI of just below 30 on a significant drop. The chart just looked to good to pass up. The combination of the low RSI, an evening out of the MACD histogram, and major support at the 200 day moving average were just too much for me. I will keep an eye on it and the price of gold as they are likely to move in concert with each other. With the GG deal today there is additional support because we now know that the majors are out shopping for all levels of metal companies. GG was willing to pay a 33% premium on the stock of Glamis. I don’t think McEwen (C.E.O. of USGL) would ever sell, but these things can lend support to the whole industry. McEwen built GG before heading to start anew at USGL. He has aspirations of building USGL into a powerhouse and he financed the overwhelming majority of the company with his own equity (potentially by divesting some of his equity in USGL). But I don’t trade company’s I trade prices, and this one appears to be a good one.

As for my current holdings, I have a nice ear to ear smile going now. Here’s the run down on them. First, you’ll recall my disgust with myself over my handling of my initial trade in SNDK http://theskinnyreport.blogspot.com/2006/07/another-lesson.html. Well, not wanting to miss a good thing, I bought it after earnings, I thought it would move towards $60 and boy was I dead on. As of this point, I am up 28.2% in a little over a month. That’s an annualized gain of 282%! But it may not stay that good. Currently the stock is running at an RSI in the high 70’s which doesn’t regularly bode well without additional fuel to the fire (positive news). Hopefully she can consolidate some and stay above my trailing stop. Otherwise I would look to sell around $64 most likely as there is some serious technical resistance there.

One of the other positions is in PEIX which I discussed at

http://theskinnyreport.blogspot.com/2006/08/little-movement.html. Well, currently I sit with a gain of 16.5% in two weeks (annualized to 395%!). PEIX ran all the way to around $21 (which if it held would have made for a 30% gain) before consolidating some. But let’s not talk about maybe’s. I think it could be posed for another run here. This stock doesn’t trade in a narrow zone for long. Check out the chart, normally two weeks is the most she has traded in a narrow zone. So a move is coming, whether that move is up or down remains to be seen but my trailing stop is going to protect my trade. It likely will depend on the price of oil (discussed below).

With the closed GG position I added a position in USGL which had worked its way down to an RSI of just below 30 on a significant drop. The chart just looked to good to pass up. The combination of the low RSI, an evening out of the MACD histogram, and major support at the 200 day moving average were just too much for me. Additionally, the chart appears to be triangulating and yet to be resolved. At such a low price based on the RSI, it would be hard to imagine a scenario where it would resolve down (which would take the RSI to the 10-20 range). With the GG deal today there is additional support because we now know that the majors are out shopping for all levels of metal companies. I don’t think McEwen (C.E.O. of USGL) would ever sell, but these things can lend support to the whole industry. McEwen built GG before heading to start anew at USGL. He has aspirations of building USGL into a powerhouse and he financed the overwhelming majority of the company with his own equity (potentially by divesting some of his equity in USGL). But I don’t trade company’s I trade prices. I will keep an eye on it and the price of gold as they are likely to move in concert with each other.

As for oil, it’s a monster. Check out the link to Bill Cara’s discussion of the manipulation of the oil futures market http://www.billcara.com/archives/2006/08/energy_markets.html#more. Can you believe T. Boone Pickens had a personal take of $1.5 billion last year (that’s billion with a B!...in one year). Actual regulation in the market likely won’t happen and even if it did it would take years to get through. I think the pull back we are seeing in oil and the downside that is forecasted could be a major set-up of the Moms & Pops as Bill calls them. T. Boone and his boys are sending prices down just to ramp them up and have a repeat of the prior year. If the facts in the governments study are accurate, T. Boone could manipulate the market up and down as he wants. The man is playing with a stacked deck. If you can’t beat em’ join em’. And even if it’s manipulation he is into, the price will still tell the truth. I will be delving into this more to see how I can track the movements of T. Boone’s moves. Apparently, his fund returned 700% last year. For a guy who is already one of the richest men in the world achieving 700% returns on his money for any period of extended time is scary. The guy could end up in the trillionaire category at that rate, which to the best of my knowledge doesn’t exist.

I also want to discuss my overall performance during the last year for the purpose of a project that I’m going to be getting into in the next couple weeks which if things go right will be a major personal change for me. For the year I have had a return of 50.6% not including additional capital contributions during the year. My performance has been largely due to the increased time and effort I have put into following my stocks, developing my personal strategy and reading from some of the best out there. And the vast majority of the personal approach change has been in the last 7 months. I hope my performance justifies my next move, which I can discuss in detail when the time is right.