Today morning I have bought STEC back on its reversal.

09/23/2009   09:30:47   Bought  3  STEC  @  31.799

Today’s trading of STEC ended up lower than on Friday, but most of the day the trading was a side way direction. I moved my trailing buy order lower to a new price at $31.55 per share.

As I said in my weekly stock picks review I still think STEC is a great investment, which has been driven down by a panic without any solid base and it will potentially go back to the levels around $40 – $45 or even higher as those fearful freaks in the market realize there was no need for panicking unless the new competitor hammers the company down, which won’t happen tomorrow, next week or even next quarter.
To buy back this stock I will use a technique called Trailing Bar Momentum Reversal Strategy… (uf) which simply means I will be trailing my buy order down a few ticks above the previous day high. STEC’s Friday’s high was at $32.95 so I am setting my buy order at $33.5. If the price won’t reach this level on Monday and the stock slides further down, I will set the new buy order for Tuesday based on Monday’s price high and so on as long as the stock reverses and starts rising again.
Let’s see what will happen tomorrow.

New stock picks this week:

none

Existing & new holdings:

Contribution this week: $0

Current capital exposure (total risk of the entire portfolio): -1.74%

New positions available to open: 1

Starting account value = $1,691.45

Account value = $1,668.12 (without margin)

Buying power = $943.87

[tag]Portfolio Gain/loss[/tag] this week = -1.38%

[tag]Portfolio[/tag] Gain/Loss for SEPTEMBER 2009 = 0.79%

Portfolio Gain/loss for 2009 = -24.51%

[tag]Annual Return[/tag] (CAGR): -33.54%

I was searching through the net to find why STEC has been so brutalized and turned my 18% gain into a small loss (thanks to my trailing stop loss) within a day. What I found shocked me and I still can not believe that someone can react and panic the way we could see in this stock.

What happened? A competitor, Pliant Technology, announced it would (I am stressing the word “would”) enter the enterprise solid-state drive market with its enterprise flash drive. If I understand English well, “would” doesn’t necessarily mean “will” and even if it really will enter the market as announced I would wait how it would affect STEC.

It seems investors had different opinion and were not reacting to what the company will do and how well or bad it will do after the new competitor shows up. They just simply dumped a fundamentally good stock in a volume I haven’t experienced since my first trading day. The volume was 7 times larger than normal. The following day (today) the stock continued falling. In the very first moment of trading this stock it was obvious that it was missing any support from institutional buyers. Maybe they are still waiting to start buying.

Analysts (well I know about one analyst so far, Betsy Van Hess) decreased target price for this stock even though they admit this announcement won’t affect STEC fundamentally and they see a growth potential in at least upcoming quarter (Aaron C. Rakers). There may be some pressure on the stock’s price during the next week which may lower the price even more, however, I am keeping the stock in my watch list and buy it back for cheaper price at its reversal.

The Street Insider brings the whole story about this stock

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Today, after huge drop of price, STEC has been sold at stop loss:

09/18/2009    12:28:16   Sold  3  STEC  @  30.0106

New stock picks this week:

Medifast Inc (MED)

Existing & new holdings:

Contribution this week: $0

Current capital exposure (total risk of the entire portfolio): -3.89%

New positions available to open: 0

Starting account value = $1,657.54

Account value = $1,691.45 (without margin)

Buying power = $853.83

[tag]Portfolio Gain/loss[/tag] this week = 2.05%

[tag]Portfolio[/tag] Gain/Loss for SEPTEMBER 2009 = 2.20%

Portfolio Gain/loss for 2009 = -23.46%

[tag]Annual Return[/tag] (CAGR): -33.04%

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Yesterday I moved my stop loss orders for FUQI (FUQI) and Visa (V) higher so my total capital exposure of the portfolio decreased to -2.34% and I was allowed to open another new position.
I was thinking whether to add a position to existing FUQI holdings or buy a new one. I performed a research and it seems that FUQI may grow to $30 – $35 level and that maybe the end of its growth. I was not able to evaluate this information on my own and decided to play safer game and instead of adding to an existing holding I decided to buy new stock – Medifast Inc. (MED). It is a small cap company producing weight and health diet products which will play more and more significant role in our lives. It was on my screener list for some time still showing momentum.

Today I have bought some shares of this stock:

09/09/2009   09:54:15   Bought  6  MED  @  18.338

At the price of $18.34 per share I could buy only 6 shares which represents 3% potential loss of the portfolio if the trade turns against me. I set the stop loss at $13.82 which is 24.65% potential loss on this trade and max trade risk exposure will be $28.91

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New stock picks this week:

no new positions

Existing & new holdings:

Contribution this week: $0

Current capital exposure (total risk of the entire portfolio): -3.30%

New positions available to open: 0

Starting account value = $1,655.06

Account value = $1,657.54 (without margin)

Buying power = $963.81

[tag]Portfolio Gain/loss[/tag] this week = 0.15%

[tag]Portfolio[/tag] Gain/Loss for AUGUST 2009 = 0.15%

Portfolio Gain/loss for 2009 = -24.99%

[tag]Annual Return[/tag] (CAGR): -34.88%

Are you interested in Reverse Scale Strategy and see how it works when implemented to even a small account?

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