Thursday, March 02, 2006

Answers to Your Questions

A reader recently sent in a link to some Jim Cramer recommendations back in February 2000. I thought it would be interesting to see how the sweaty, bald fellow's fervent suggestions fared.

It was difficult, because five out of the ten hot picks are no longer with us. I don't want to dig to see what happened to them, but suffice it to say that the 90% loss cited below is probably generous:


I've been getting a lot of questions recently in the Comments section, so I thought I'd answer a few here:

Why would you recommend shorting ADSK on a big volume, big gain day?

First off, the puts I bought on this yesterday are already up 20%. Second, the reason is because I thought this chart was a total gift. As you can see from the chart I posted with the recommendation, the price was coming right up against resistance. That makes for a very low risk, high reward trade. The fact that it was a big up day simply made the puts that much cheaper.

Do you check the news each night on your holdings?

No, not really. I'm a technician. To my way of thinking, all the news is already built into the chart. If something huge happens to a stock, I'm naturally curious (such as with GOOG earlier this week). But by and large the chart is all that matters. I don't care about anything but the ticker symbol.

How many positions to you have at one time?


Usually about 18 or so. Perhaps 10 shorts and 8 puts. Something like that.

What's your basis for your bearish stand?

I could go on at great length, but I really try to cover this (in bits and pieces) on my blog. The simplest answer is this - - look at a REALLY long term stock chart (the Dow, for example, from 1900 to present). In my opinion, the arguments for a bear market completely outweigh the idea that stocks could push on to new highs. The Fibonacci fans, the retracement levels, the trendlines - all of them spell "doom" over the next 10 years.

Why do you express frustration at the market's lack of direction when it's been up for the past three years?

I recognize that many indexes - particularly the small caps - have done very well since late 2002. My point is simply that over the past six years, there really hasn't been meaningful motion. And surely no one can point to a clear trend for the past year or so. The markets simply bobble up and down.

Wow, if this short recommendation is as good as your AAPL, NTRI, and OIH short recommendations then I am in for a treat.

Well, that's very cute. AAPL and NTRI are still, I believe, fantastic shorts. OIH is more iffy, but I try to state stop prices whenever I make a suggested trade. If you don't find the blog helpful, please don't waste your time.

7 comments:

The truth hunter! said...

Thanks Tim! Your blog is great 'cause it doesn;t try to hype the bull-sh.t case like so many others do (ie. mainstream media, Jim Cramer in particular) He actually was recommending GM at $50 back in early '04. Anyways, no one is perfect, but that guy would not see a cloud in the sky even during a hurricane. Sorry, Cramer, not trying to bash you too much, but you are one hyper-bull that will be dropped by CNBC as soon as this market shows how bearish it really is!

Tim Knight said...

By the way, you can look at the aforementioned big picture of the Dow at http://tradertim.blogspot.com/2005/07/century-long-pattern.html

Des said...

Mr. Knight,

Cramer is a fool (those who purport to be unconvincd should watch 30 seconds of his TV show for unequivocal proof); thank you for saying so in an indirect and yet fact-saturated way. I enjoy (and benefit) greatly from your comments here. Please do continue, while ignoring the "cute" bloggers. Best wishes, Des

Jon Christman said...

Tim- I enjoy your blog. I apprciate the clarity of your technical examples- and I am able to see how experienced technician can look at the chart and in some cases give me a whole new perspective.
I look forward to meeting you in Las Vegas.
Jon Christman
christma@wfu.edu

Anonymous said...

Looking at the Fibonacci fans, the retracement levels and the trendlines in a REALLY long term stock chart will determine the future course of the stock market and by extension the future course of the economy as well. Trader Tim, you are brilliant. You should win the Nobel economic prize.

Tim Knight said...

Hi; I'm kind of weary of smart-alecky comments from Anonymous readers, so I'm only letting registered users comment from now on; sorry to the rest of you for this inconvenience.

OFUD said...

Hi Tim,
I find the extremes of bull and bear tend to mean missed opportunity unless a person has a portfolio full of puts (in the case of the passionate bear) or calls (for the raging bulls). If your making money from either camp with exclusive trading of only one type of trade then I say bravo. My viewpoint is to act on what the market and chart are telling me. Right after I placed a put on AAPL I read your blog. It had just bounced down off resistance after checking the neckline at $71. Monday could be a profitable avalanche on the play. My 14 year old daughter also bought a put and hopes to buy accesories for her iPod with the money she makes on the trade. My CRS, JLG, & CELG calls are up 40,50,70% respectively at the time of this comment. I also have some tight stops on other trades that are showing a bounce up or down and the next few trading days will be providing a profit or stopping me out for an acceptable loss and I move on to the next trade.
The comment calling you out on NTRI and OIH was revealing...here's a person who expects you to be right every time you place a trade...I more so appreciated your money management style in your comments on putting ADSK after a big volume day..."the price was coming right up against resistance. That makes for a very low risk, high reward trade."...BEAR or BULL...that kind of trading will make you money even if your right 4 out of 10 trades. NTRI is closing in on a head and shoulders if it breaks $36 and my 14 year old daughter is making money on her AAPL put (so far). With OIH rolling up against your call that makes it 2/3...nice trading Tim!
Small loss on 1 trade and nice solid gains on the winners...any comments on how you handle your tax issues would be appreciated (by those of us making money trading that is).

Trade what you see and keep your losses low!

OFUD