Importance of waiting for a proper setup.

On my ZIXI trade (see previous post) I entered my position prematurely, luckily it worked out well anyway. Now I've done the same thing with my shorts in NTRI and NURO. Although both were overbought, I had no confirmation that the stock would be reacting to that. Moreover, I entered these short positions because I believed the market was overbought and we were due for a pullback, which I still believe. Still, I should have waited for the market to turn, which it hasn't yet, and now I'm swimming against the stream.

On NTRI, it penetrated resistance at the 50 dma. If I had waited, I would not have entered the position. As it is now, up 4.14 % today, I may be stopped out before the day is up. If the market turns down, I suspect NTRI will cross back through the 50 dma and continue down.

On NURO, it appears unable to penetrate the 50 dma resistance and is down slightly less than a percent. That resistance is saving me from my imprudent premature entry. No doubt it would be dropping more precipitously if the market had already begun its pullback.

I will stay in the positions for now. Although I anticipate a pullback, trading against the market is a tough way to make money, and I'm not forgetting the axiom that the market can remain irrational for longer than I can remain solvent. If the anticipated pullback fails to materialize, I will be out of these positions.

Short NURO at 31.66 and NTRI at 36.83.

Both stocks showed up on this MSN Screen of Doomed Stock (explanation of screen here), have shown recent weakness, were below their 50 dma and were overbought. The market looks ready for a pullback, so I'm initiating these short positions.

Sold ZIXI at 2.47 and 2.44 for 14% gain.

Sold ZIXI at 2.47 and 2.44, at 15:05 and 15:06 respectively, for an average price of about 2.45 and a gain of almost 14.5%.

Until this afternoon, I thought ZIXI was a busted play like MXO because it failed to move. In fact it took a substantial down turn after I initiated my position on Dec. 27. I knew (see previous post) I pulled the trigger early, so luckily I had the sense not to put too tight of a stop on it. On Jan. 4 the stock turned up but still closed at 2.04, below my entry price of 2.14. I was thinking today about cutting my losses. The stock shot to an intraday high on news and, luckily, I exited near today's high, the stock closing well below it.

Covered MXO at $6.95

On Dec. 30, I covered MXO at $6.95, essentially for a break even. Although it did turn down about on Dec. 28, the day after I opened my position, it failed to follow through. (Sorry about the delayed post. In the future I'll keep them closer to real time - at least the same day.)

Short MXO & Long ZIXI.

(Click to enlarge Chart)

SHORT MXO AT $6.98.
MXO showed up on an Overreaction screen of stocks making a one-day move up in price of 30% or more, a level often unsustainable in the short term. MXO recently jumped over 53% in one day. If you look at the stochastics, it is also overbought. It also dipped intraday below support at $7 and closed below that level after I entered my position.


(Click to enlarge Chart)

LONG ZIXI AT $2.14.
ZIXI showed up on a screen for stock which are up 25% or more in five days at or above their six month volume average. This stock corrected by tanking more than 10% today but seemed to find support above the $2 level and the 50 day moving average. The stock is not yet oversold but may be soon. We shall see if my entry was premature.