Big Wave Trading Portfolio Update And Top Current Holdings

Big Wave Trading remained under a NEUTRAL condition all week, until Friday. The NEUTRAL condition changed around 1:15pm EST when the market blasted higher following an already strong uptrend throughout the day. The move on Friday was more than 2% on the Nasdaq and volume was higher than the day before and above average. That is exactly what we wanted to see to have confidence in any BUY signal.

Sadly, there have been so many recent switches in the model that, under our current state of affairs in the market, we can not press like I would want to at this juncture. There was not a severe wash out, there was absolutely no fear in the VIX, and the II survey did not see bears ever take out bulls during the most recent pullback. We are at such low VIX levels that it is hard for us to see how any rally can create substantial gains from these levels. There will be stocks that overall do well compared to the market but these stocks will not be able to produce any meaningful gains with the volatility so low in the market.

Still, there are plenty of stocks moving but sadly they are moving in one day. If you backtest leading stocks going back 130 years you will see plenty of breakouts where you have time to get in the following day or on a pullback. In 2012, that has been basically impossible as all high quality stocks seem to move 10-30% in one day zooming well beyond their pivot point making any new long position a pipe dream. The most extreme example is a non-CANSLIM thin stock. DWCH. That 30% move in one day is impossible to buy, unless you were on it intraday. Other more rational examples involve a stock I have tried to go long for weeks but every time it moves it moves 8%+. SSYS. I can not chase these one-day moves in a tape that is so unfriendly to trends. A reversal per QCOR or WWWW seems to be the pattern when you chase. Very few can do a MLNX.

We are heavy cash but have been able to increase our long exposure the past week as we are in the black in 6 out of our 7 last long positions. All we need now are clean breakouts or perfect moves (price, huge volume, max-green BOP) to go 10-25% long a single position. More follow-through to today’s gains would be confirmation to look for additional pocket pivot point buy signals in CANSLIM stocks that have already broken out to new 52-week highs.

We have a good possible uptrend setting up here. We will just need to see more follow-through and make sure we do not reverse this move next week. This is still a market held hostage by government interference and it will not change until we know they are going to get out of the way. The best indicator we saw today that this rally could have legs is that money came out of bonds across the board on Friday. Nobody knows if this is going to be a one day pattern or a trend change. If it is a trend change, that bodes well for equities.

The future is unknown but for now it appears it could be a good week next week. Let’s see if we can get some follow-through and bust out of this trading range we are still in. Yes, we are still in a trading range. From May 4th to Friday, the Nasdaq has moved a whopping +0.06%.

Aloha and have a wonderful/fun weekend!

Top Current Holdings – Percent Gain – Date of Signal

BVSN short – 82% – 3/19/12
AVD long – 65% – 1/10/12
PRXI short – 38% – 3/30/12
MAGS short – 36% – 4/18/12
CAMP long – 34% – 4/26/12
CLGX long – 32% – 6/19/12
ZLCS short – 25% – 6/19/12