Wednesday, June 22, 2011

Five More Short Signals... Part 2

Before we move on to other stocks I feel like I should follow up on my post from last Thursday so that we can see what actually happened. 

It turned out to be just five short signals after all. I anticipated that Baidu would reverse to short along with the others, but it managed to finish the week just barely above its stop. I'm not sure if that's a good thing or a bad thing?

Baidu (BIDU): 
- LONG the week of 3.23.09 at $18.32. My first stop was $11.34, so the risk was $6.98. Closed last week at $117.66 with a $116.58 stop (the new stop for this week is $116.35). The percentage gain on this trade is 542.4%, and the reward-to-risk ratio is $99.36/$6.98 = 14.24. 

The other four stocks on my list (plus Caterpillar) all reversed to short as expected. Once again, I don't know if that's a good thing or a bad thing. After yesterday's rally it would be easy to say it was a very bad thing, but I think we'll need a little more time to know for sure.

Riverbed Technology (RVBD):
- SHORT Friday at the close at $31.93. My first stop is $42.96, so the risk (R) on the trade is $11.03. I scaled my risk/position sizing model down slightly to 0.75% to give me a 2.17% portfolio weight on this trade. (PCLN): 
- SHORT Friday at the close at $462.35. Using $550.34 for my stop the risk is $87.99. The only good thing I can say about this trade so far is that I took my risk all the way down to 0.25%. That gives the trade a weight of just 1.39%, but that's the norm more than the exception when I'm trading particularly volatile stocks like Priceline, CME Group, and Google.

Cognizant Technology Solutions (CTSH): 
- SHORT Friday at the close at $67.65. With my stop at $81.51 the R works out to $13.86. Once again I dropped down from 1% to 0.5% to reach a portfolio weight of 2.44% for this trade.

Aruba Networks (ARUN): 
- SHORT Friday at the close at $24.01. I used $35.02 for my stop, so the risk is $11.01. I used my normal (for the most part) 1% risk model for Aruba Networks, giving the trade a 2.18% overall weight.

Caterpillar (CAT): 
- SHORT Friday at the close at $95.95. I calculated $113.69 for my opening stop, and that means the risk (R) will be $17.74. For the first time on Caterpillar I had to scale down from 1% to 0.5% just to reach a portfolio weight of 2.69%.

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