Tuesday, December 12, 2006

Who’s Your Dummy?

BBY crashed today. How long ago did the insiders know and what did they know? Somebody knew something - somebody was selling into earnings with both hands.

This chart tells the sad story for all to see. Next time you see a dummy spot (11/22) with a blow-off top (11/27) on the very day that Wal-Mart warns and then see it confirmed on the very next day (high volume lower high lower low) you might want to say – sell, sell, sell. And if you didn’t get it then - why didn’t you see it coming when the stock began declining into earnings?



And had you sold short on any one of those days – or bought some ITM puts going into earnings (today) – you would be sitting pretty right now.

This is not an easy play to make – you need to think like a trader and understand that that head fake on Friday and Monday is meant for other people not you. One thing about retail, especially the big stores, they track together. What affects one is assumed to affect all especially when it comes to sales. Circuit City took a bigger hit than BBY.

When you have a portfolio of stocks or derivatives these are the kinds of things you have to watch for. These are "tells" in the parlance of poker and when you see one you can't be so in love with your stocks as to hold them - remember there is always tomorrow and it only costs a commission to buy them back. (And yes I know about taxes and wash sales and blah blah blah - and I can't think of a better reason to lose money).

Now a little test - without looking do you know when your stocks are announcing earnings next? Do you know which are the top 3 stocks in the sector where your stock appears and do you know when they are going to announce?

I don’t watch or play BBY nor do I shop there – they are too expensive.

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