Technology... why does one think that if one day technology moves up a tad higher this is the bottom? That is totally ridiculous. Stocks don't go straight down, they pause to refresh themselves and continue down at a higher acceleration. Valuations are still astronomical not to mention the tottering key economies in Japan, and South America. Its very difficult covering and closing puts and short positions when I feel totally and absolutely that we are just in a "pause that refreshes" before more downside.
America likes bargains. I like bargains. TECHS ARE STILL NOT BARGAINS. Traders/Investors are not attracted to stocks that trade at 30 to 70 times earnings. They are lately not even attracted to stocks that trade at 20 times earnings. For me shorting a tech at a rally is a BARGAIN. You get an extra uptick and another chance to short a SLIGHT rally, for even bigger downside. We have tracked this market for years now and we recognize the BLIMPS are still blimps. Even when some are no longer blimps like NT, SUNW and NVDA, they continue to sell off. How much more so for those that are still BLIMPS and are still trading at high multiples. I find it very challenging and must exercise much restraint to close a postion on the short side. Virtually every single short we shorted in early May hit the bottom once again, and they are still moving down. When I cover them, I almost KNOW they will continue down but I don't want to be short during the bear flag rally, I'd rather reshort or buy the next level of puts. Only one exception is BAC which is ironically which is one of the banks I have been using for 10 years now.
This market is like a limbo pole which is an analogy I posted months ago. The limbo pole can be lowered and lowered after every "false bottom". PALM, SUNW who might look they have reached bottoms in the past weeks but they are continuing to power down. So why would you buy a stock like QLGC or MXIM? Why buy a dress that is worth $10 for $40 to $50. You wait until the $10 dress is priced at $5, then you might consider buying.
If traders don't know what to do in a bear market and are constantly waiting for that magic bottom and a good chance to go long, they miss all the chances to play the current downtrend. I figure eventually I won't get the bottom and might be stuck in a put or two but they will probably end up being the QCOM or QLGC 10 to 20 strike price so I'll take that chance.
Being very actively a part of this market during the lovely internet and oil service explosion to the upside, I was just as willing to give these up to the short side (This is when stocks such as Cliff's Drilling and Nobel Drilling were soaring weeks and weeks). I was lucky as I started Market Gems just at the beginning of the internet explosion to the upside, getting into NSOL, VRSN, GNET, JNPR, TBIX, VRIO, PHCM, NTBK, YHOO CMGI and a host of others super early by virtue of using them commericially to start my own website. Some other good luck was getting onto the EARNINGS PLAY track in early 1996 and discovering the important of earnings plays before it became "in" to talk about overvaluation. That was one step before the BLIMP phase when valuations were exploding it was as if discovering an accounting problem when valuations were checked and seen to be UNSUSTAINABLE. SEBL was one of the first tech shorts, then came Q(wak)COM.
Now that folks can see what happened, I give them enough credit to play technology wisely now and not fall prey to manipulators citing "coast is clear" so they can dupe the wary investor into going long.
Amazingly. some traders still insist that 'reading charts' is macho and they won't look at fundamentals, premarket downgrades, sector rotation or earnings reports. They soon will be getting retraining in other fields like a bunch did during the tech wreck.
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