Market is Undecided and I'm Going with My Gut

The day was excellent for both my short and long positions until the last hour when the market went sideways in huge swings. The market closed right at support which is the worst place possible for my short positions. I waited until the close for more clarity as to which way we'd go for tomorrow in terms of set up. A close below support and I would hold my shorts while a close above by a decent number and then I would sell the short positions and go long. At 2:30 we had a big selloff and then a 50% Fibonacci retracement at 3:15. Later, we had another selloff at 3:30 to form a double bottom before rallying back to the %50 retracement level at the close. I closed SKF at 95.71 for a gain of $7.83 and FXP at 78.66 for a gain of $6.38. I took off my hedge because I think there is a decent chance we rally off the double bottom with a 30% chance of a gap up. Tomorrow should be choppy as value investors are starting to come in while the panick investors finish their exit. Even though the market was down, the volume during the double bottom close was huge which is telling me we should be flat to up tomorrow. Had the volume been greater favoring the downside, I would have remained short as a test of the August lows would seem likely, although it is not of the question in the near term. I think the morning tomorrow will be positive so maybe I'll re-enter at resistance for my shorts. I'm never unsastified after locking in profits. If we gap down/selloff hard again off the open, which is a 20% chance, then I won't be too bummed out since I have already bagged my gains. The worst feeling is giving back profits.

I've been long with LDK at $40.50 and have held it through for over 50 days picking up scalps along the way. I made it a long-term play so I didn't have a stop. I was pissed when it tanked to $30 and even worse when I didn't average down when I had the opportunity. My money went into E*Trade so I can't complain too much. Yesterday's candle was very bearish closing at the day lows on an up day so I thought it might have more downside pain, but the rally for LDK today on a down day in the market is a huge reversal. I ended up doubling down at the close ($34.20)in anticipation for a gap up. The increased guidance caught a lot of shorts off guard and tomorrow they should be covering. I'm going to sell half of my position back into strength and double back on weakness. This stock is like a short position itself acting in inverse to the market. The consensus EPS is $1.34 and LDK should have a growth rate of 50% which would give it a PEG of 0.51. This one is a bargain and the inventory report should be solid in my view. Also, the price of a bad report has mostly been factored in already. Limited downside with a huge reward in the future. Being backed by the Chinese government and a new facility already being built is added confirmation that they will succeed.

Another Chinese stock I've been long is STV. I made some good scalps near the IPO date and held a core position at $40. Again, I missed an opportunity doubling down at $30, but these Chinese stocks are really speculative and I didn't want to be in for more risk. The stock has been rallying on anticipation of blowout earnings which are released today. I'm gambling by holding my shares into the call. This just in, they beat EPS expectations, but on lower revenue, and so now I hope Wall Street decides to flood more money into this stock. I will be mad to see this stock drop like other stocks after reporting earnings. The number was $0.20 which beat Reuters' consensus of $0.15. I'm going to approximate the annual EPS to be $0.90 and a growth rate of 40%. The PEG would be 1.07 and that is a conservative estimate. Although speculative, this company is predicted to be the front runner when it comes to digital TV in China and has a lot of room to grow with solid margins.

HLYS was a bust on very light volume however. I'll watch this one to see if buyers are interested. The PEG is harder to calculate since their operations have lacked transparency. They are still growing and I think earnings will turn around in the future. I'd hold off investing in this one, but it should be worth a good trade in time.