What a month! Both hwo and gre have had big moves so far this year putting me up over 20% on the year already. At one point last week, hwo tagged $2.99 and gre tagged an insane $1.20 intraday. Had those levels held I would be up a ridiculous 50% on the year! With gre, the move to $1.20 was due to one buyer who aggressively bought stock and once he was done the sellers quickly moved in knocking the stock back to $0.75, but even at $0.75, it's still a healthy move up YTD, and it seems the stock is starting to attract attention. With hwo, I took 10% of my position off the table at $2.92 and the stock has been pulling back after briefly tagging $2.99. Anytime in the recent past that hwo got this overbought and turned down, it would lead to a nasty correction of at least 20%. I never took profits when the stock got overbought in the past because I still believed it was cheap and I felt if I traded I would risk being left on the sidelines if the stock kept going higher despite overbought conditions - something I've seen happen with other stocks plenty of times. This time around though, for the sake of prudence and to keep my sanity in the event of another nasty correction, I took a little off this time. I really, really, hope my sale turns out to be a bad one and the stock will bounce back shortly to new highs. The company is set to release cap ex plans next week with the potential for a dividend hike. This news release will be critical in the short run and I'm hoping it's a good one. Although hwo got overbought, the move feels a little different this time. Not only did it breakout to a 4 year high, but it seems as if a new batch of investors have discovered it and so the stock may be more resistant to dips this time around. There are certainly a few potential catalysts this year that could move the stock north of $3. Hopefully the news next week will do the trick.
As far the markets go, it's a tough call here in the short run. Earnings season seems to be pretty good with about 2/3 of companies beating expectations so far. We tagged 1500 as I expected and with the market being up 5% YTD, it's on pace for a 60% annual return which tells you it's very ahead of itself. I said the same thing around this time last year and what happened was that the market managed to climb higher still and starting a topping process in mid March. When the correction occurred in May it almost wiped out the entire gain for the year. I expect something similar to happen again this time but I'm not going to take any action (i.e. a hedge) until I get a good vibe that the market has made an IT peak. There are some danger signs but there's also some hold outs as well. IT peaks are usually a multi-week process anyways and so I don't feel the need to jump the gun especially now that I increased my cash position a bit with my sale of hwo. I'm now at 25% cash.
I know for myself that a 20% gain in a month is unsustainable as well and I have to be mentally prepared for lean months ahead. I will do my best to mitigate or even avoid them but I also know it's a mistake to take profits just for the sake of taking profits. Riding the bigger trend is the way to go although at times it can make you really sick to your stomach to have to endure the set backs. I'm still smarting from that nasty November I had.
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