My Approach Right Now to Trading and Shorting

These past two weeks have seen some of the best trading gains in my life time. My short positions have performed admirably well in this current market. As of this writing, my portfolio is 69% short still, and 31% in cash. I took profits on my large stake in ENI SPA (E) for a 9.5% gain. I still have positions in Abiomed (ABMD), National Instruments (NATI), and Baldor Electric (BEZ) that I am strongly considering closing out before the end of the day, despite them all being just shy of my target prices.The reason being, for me not waiting for the target prices to hit is because when considering the risk/reward of the market in terms of oversold/overbought and how much I stand to lose if the market bounces from here, versus how close I am to my target prices (meaning very little left to gain in additional profits), it behooves me to close out those particular positions.

Update: Just had my target in BEZ hit at 32.92, so I’m out there as well leaving me 61% Short and 39% Cash for a 12.7% gain.

I am truely hoping for total capitulation today, whether we get that or not, is anyone’s guess, but it we do, I shouldn’t have much of a problem hitting my targets across the board. I’m seeing where a lot of my colleagues are building up some long positions for the obvious bounce that is likely to come in the market. I’m not sure whether I’ll be joining in with them on that speculative trade, though I did do that the Friday after the mythical “Fat-Finger-Flash-Crash”, held over the weekend, and what I got was a handsome reward. Still, I am more inclined to play the bounce on Friday and hold over the weekend, because that gives the world governments a few days to put together some meaningless plan to fix the market turmoil, that will result in nothing more than a temporary feel-good “Flash-Rally.”

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Though I don’t get much into where the markets will bottom or top at, I will say this, that any future rally that we see in the markets, will be met with more aggressive short positions on my behalf, and will continue to do so until proven otherwise. I definitely believe we go below 10,000 on the down and below 1,000 on the S&P, and could easily see us hitting the low 9,000’s within the the next month or two. 

I am in the Richard Russell camp, and ultimately by year end, I think that we could see a market that has experienced the March ’09 lows or even lower. In my opinion having countries running amok is far greater than a Bear Stearns or Lehman Brothers going off the deep-end like they did in 2008.

This market is providing some great shorting opportunities, but right now (as in this very moment) isn’t the time to start aggressively shorting, instead I’d wait to get a nice, sizable bounce out of the market before building up some new positions – and you can count on me to be along for the ride.

Give me a ‘holla if you have any questions you’d like to ask me.