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May 16, 2008
Encouraging Action in American Apparel
I am quite encouraged by the action in American Apparel (APP). After getting whacked again on Wednesday off a confusing earnings report and conference call, the stock has bounced back strongly. The initial post earnings trades held above the April lows and unlike in April a rebound got underway quickly. Also, volume spiked for one day but fell by 75% on the second day. If volume continues to slide and the stock works higher I think it will be a sign that the shorts are losing traction and any longs looking to sell are long gone. Positive catalysts lie ahead including new executive hires, compliance with Sarbox, and monthly comps at extraordinary levels. Given the history a negative surprise is possible but I think the tide may be turning here and if it does, the shares could double. I added in new accounts on the initial post earnings weakness.
Posted by Steve Birenberg at May 16, 2008 10:02 AM in eda
1.AS EXPECTED THE MARKET ROLLED OVER AGGRESSIVELY AT THE 200 DAY MVA.THERE ARE SOME REAL STRUCTURAL PROBLEMS IN THE MARKET RELATED TO CREDIT AND ENERGY.HOWEVER,THE LARGER PROBLEM IS THE FACT THAT THE MARKET IS GENERALLY CONTROLLED BY TRADERS,SPECULATORS,HEDGE FUNDS AND FAST MONEY.
"BUY AN HOLD"ONLY WORKS IF ONE CAN HOLD POSITIONS FOR YEARS AND BE WILLING TO SELL QUICKLY AT HIGH POINTS.THE FAST MONEY MOVES GROWTH STOCKS UP QUICKLY AND VICIOUSLY TURNS THEM DOWN FOR MULTIPLE GAINS.THE ECONOMY IS NOWHERE CLOSE TO STABILITY.BASED ON THAT PREMISE,ONE WOULD GUESS THAT THE MOVERS WILL WANT THE MARKET TO MOVE UP IN THE FALL[AT LEAST TEMPORARILY] .WITH THIS IN MIND,WHAT CHANGES CAN ONE MAKE IN ONE'S APPROACH TO THE MARKET? WOULD ONE SELL INTO ALL RALLIES/SHOULD OPTIONS BECOME PART OF EVERY PORTFOLIO?
2.A BUBBLE IS DEVELOPING IN ENERGY.SHOULD ONE SELL BEFORE THE BUBBLE BURSTS OR SHOULD ONE CONTINUE TO HAVE ENERGY STOCKS TO BALANCE AGAINST THE DROP IN STOCKS WHICH OCCURS WITH ENERGY SURGES? SHOULD ONE HOLD A LARGE AMOUNT OF CASH AT PRESENT? I FIND THIS MARKET MUCH MORE FRUSTRATING THAN EVEN THE 2000 BEAR MARKET/RECESSION.
Don't mean to be short, but I am on vacation in Europe with my son for the rest of the month.
In general, I agree with your commentary. I would say, however, that buy and hold means buy and hold. NO need to to try to trim positions unless your position sizes as a per cent of your liquid assets are high.
Posted by: Steve at May 22, 2008 01:34 PM