Stock Trading Techniques

Due to a lengthy vacation, I was not able to update this blog for a month. For that I apologize. So, after all this time, a portfolio review is in order.

The first big news is the CROX disaster. Crocs makes popular plastic shoes. For months their management has been saying that everything is fine and they’d meet their earnings projections. On July 24 management announced horrible earnings and gave very poor projections for the future. In other words, management lied to its shareholders. This resulted in the stock losing more than 50% of its value virtually overnight. Since this was one of our covered call plays, we did not have a sell stop order in place (which is OK as we would have taken the maximum loss if we had entered one). What I did was immediately buy back our September $12.50 calls for $.05. Then, on August 18, when CROX had a quick run up, I sold our position for $5.25.

There probably will be shareholder lawsuits resulting from this, as frequently happens. We may eventually get back some of our money from these lawsuits, but they are not relevant to this blog so we’ll just put this trade behind us. There is no defense against lying management when they lead you in a positive direction then negatively blindside you.

The next major item is that on July 24 FXI split 3 for 1, meaning that for every share of stock we owned, we now had 3 shares. It also cut the stock’s price by two-thirds, resulting in the same overall value after the stock split and causing our sell stop price to be reduced by two-thirds too to $39.85. Unfortunately, on August 19 FXI dipped below our sell stop briefly and we were stopped out at $39.75. the stock is now on the way back up, but we are out of it.

DBA was also stopped out on August 4 for $34.75 when gold and most other commodity stocks entered a temporary sell-off. I saw temporary because, as with FXI and gold, commodity shares are again up and DBA is currently at $36.60. Oh well, we have trading rules and they’ve served us well during this tumultuous time in the stock markets.

With the financial sector in so much deep trouble, and those troubles only beginning, I made a purchase on August 8 of SKF, which is the UltraShort Financials ProShares ETF. An UltraShort fund moves up at twice the amount that the financials index goes down. The corollary of this ETF is UYG, which is the ProShares Ultra Financials ETF that goes up at twice the rate the financials index goes up. Since I believe the financials have no place to go but down, I’m betting we’ll make a lot of money selling (double) short via this ETF. of course, as fast as it can go up, it can come down just as fast so we have a stop just under the six-month low for the stock.

Our portfolio now consists of only three stocks: CMIN, PRW and SKF. Overall we are down $1,161, which is just slightly over 1%. Not bad considering the DOW is down almost 15%.

I’ll be more active on this blog in the future, but please don’t forget that this site is strictly an educational discussion, not stock trading advice. Neither Stock Trading Techniques nor its owners are registered as a securities broker-dealer or investment adviser with the U.S. Securities and Exchange Commission or any state securities regulatory authority. Read the full disclaimer for complete details.