The markets again have corrected, though more in terms of sector rotation than anything else, leaving the benchmark stock indices like the Dow Jones Industrial Average (DJIA) and the S&P 500 Index (SPX) basically at break even at the end of the first quarter.
Stocks such as Conn’s Inn (CONN), Zully Inc (ZU), Sturm Ruger (RGR), Sina Corp. (SINA) and Twitter (TWTR) have been volatile, with big moves up and then down. I am looking for opportunities to speculate in some of these stocks.
The rotation and moves of certain stocks in this market are significant, although this has not allowed many shorting opportunities. If you wanted to make money shorting in this market, you would have had to short some of these individual stocks that have fallen hard and not broad, stock market index-linked ETFs.
I have done many quick momentum trades over the last few months and I’m now monitoring the markets for new leadership. Potential candidates have been found in some stocks that have been resting for months.
I’m interested in Tata Motors (TTM), ZELTIQ Aesthetics (ZLTQ), as well as some solar stocks like JinkoSolar (JKS) and Canadian Solar (CSIQ). With the solar stocks, I’m being careful until (and if) a clear signal to buy occurs.
I’m also watch General Motors (GM) and its stock price, given all the negative news about the carmaker’s recalls and safety problems. GM has pulled back from a very strong uptrend since 2012 and I’m looking for a potential entry point given the recent selloff on bad news.
I have no way of knowing for sure, but the share price of both GM and TTM have potential to move much higher in price in my opinion. If the media slams GM some more, this may present a buying opportunity.
The major indices touched new highs in late March. In my opinion, the stock market is at an inflection point: It could move into a super bull phase, correct and then continue a bull run or head into bear territory.
In addition, I feel there is a chance of a an extreme break in the general market averages due to the lack of a meaningful correction since 2011. If so, I hope to take advantage a downward move through an inverse ETFs such as the ProShares UltraPro Short Russell 2000 (SRTY), the Direxion Daily Small Cap Bear 3X fund (TZA), the ProShares UltraPro Short funds (SQQQ), or the ProShares UltraPro Short S&P 500 (SPXU).
As I have said before, I do not commit to ideas if they work against my Trend Following portfolio on the Covestor platform. When the price action aligns with my portfolio goals, I add to our positions. At the same time, I have no problem with cutting losses when a trade goes bad.
This being said, I may make many short term trades to attempt to capture gains as we wait for our themes to play out. As always I’m on the lookout for breakouts in high quality stocks for potential buying opportunities.
DISCLAIMER: The investments discussed are held in client accounts as of March 31, 2013. These investments may or may not be currently held in client accounts. The reader should not assume that any investments identified were or will be profitable or that any investment recommendations or investment decisions we make in the future will be profitable. Past performance is no guarantee of future results.