Easy Come, Easy Go

The title pretty much says it all. Today's action erased all of yesterdays paper profits. It's always fun to see the account go from +4900 to +1400...NOT. This highlights a few things. One, the market does not act in a rational and expected manner. Two, I am not properly diversified. Three, Shaw Wu wanted Apple shares cheaper for himself(clients).

On a day where nearly all the big names reporting earnings were beating with good increases and guidance, one may assume we would rally. Nope. The exact opposite happened. I am not sure if people just wanted to take profits, or if the concern was that all the profits were being helped by international markets.

The tougher thing here are my positions. None of them are technically broken. AAPL just erased a lot of paper profits, I am still up 20% on my calls. And it held 160. GS finished barely below 180 on a decent down day, plus I am still below(albiet slightly) my maximum loss tolerance I said I would sell at. QQQQ's also are not broken and below my max loss limit. So, by my rules, I stay in the trades.

This highlights that my complete bullish bias is possibly a liability. If I had some put positions mixed in, I would likely not have had as large a loss today. It is always smart to have both bullish and bearish plays, for situations like this. I will start looking for some bearish plays.

Obviously majority of my loss came from AAPL. It reacted to a downgrade just like it reacted to an upgrade the day before that. Shaw Wu, an analyst cut it to Neutral from Buy based on valuation. Which I find humorous because I never heard him talking about that concern last year when it was up at 200 trading at 39 times earnings. He voices decent concerns but I think AAPL was unreasonably punished in the original sell off. Not to mention it is well insulated to US slow down due to overseas sales. Bottom line, exit is not signaled, so I am still in the trade. The only thing I could possibly do if I wanted to do here is add to my position. However, since it is before earnings and I am already down in general I am not going to take on more risk.

Tomorrow is also an unknown(as with every day). Even with Yahoo beating earnings estimates and reaffirming guidance and raising short term, the stock did not respond in after hours. In fact, it favored the opposite reaction, Yahoo declined and Microsoft went up, generally signaling that in an arbitrage situation people are thinking it wasn't good enough to make microsoft up its bid for Yahoo and could in fact still have them make a hostile bid for the company. That's good for MSFT and bad for YHOO. Tomorrow will be interesting. Apple releases earnings after the bell and we'll see if it is what the street is looking for, it could be extremely good and still have something that disappoints(like iphone or ipod sales) so we have a sell off.

Rules will be followed, hopefully it is for profits and not losses. Stay tuned...