Tuesday, February 1, 2011

First Blog - Introduction, January Trading Recap, Egypt Turmoil


With the exception of 3D TV, I tend to be a late adapter when it comes to technology. That doesn't mean I am unaware of new technologies, I am just usually late when it comes to actually embracing the technology. So it should come as no surprise to anyone who knows me that I would wait this long before attempting a blog myself (according to my quick google search, blogging has been around in its current form for over 10 years).

This blog is going to be a bit of an experiment. I have a rough idea of what I want it to look like, but no doubt it will transform itself into something completely different over time. And if nothing else, it will provide me with an additional avenue to work through my trading strategies as I summarize them here.

So, without further adieu, here we go...

January Trading Recap

January is officially in the books now. Looking back it was a mixed month for me. I manage several accounts for myself and others. At a later date I will try to summarize my different trading strategies, but for now these accounts can generally be categorized as either Trading accounts or Long-Term accounts.

My Trading accounts performed very well in January, up 13.7%. These accounts have been up in each of the last 8 months (they have averaged gains of 11.7% per month over that period).

My Long-Term accounts did not perform as well, and were actually down 6.5% for the month. Much of these losses were just giving back gains seen in December, but losses nonetheless. One thing to note is that while these accounts are "long-term", they are not necessarily all conservative. Some of these accounts can be very concentrated in individual sectors, or even individual stocks, so P&L swings in these accounts can at times be even more volatile than my Trading accounts.

My focus when it comes to this blog however will primarily be on my Trading accounts, as that is where most of my activity is focused on a day-to-day basis.

Egypt Turmoil - Trading Ideas

I'm not going to pretend that I am an expert on everything that is going on over in Egypt. Obviously I see the same news that everyone else sees, and have seen the markets react to this news like everyone else.

As far as Egypt's impact on North American equity markets? I subscribe to the view that Egypt was just an excuse for traders and investors alike to sell stocks after 5 straight months of gains. Has this presented a buying opportunity for those clever (or lucky) enough to raise some cash along the way? Absolutely.

The question is, where is the best place to deploy new money?

I have a couple of ideas on that, and they all revolve around a "made in America" energy policy.

Some people, like T. Boone Pickens, have been pushing hard over the last few years for an American energy policy that puts an emphasis on natural gas. Outside of a few references to natural gas in some of his speeches, Obama has done little to move forward on such a policy.

Almost anyone in the energy sector I speak with tells me that utilizing natural gas as a fuel makes perfect sense in US. Maybe the turmoil in Egypt will give the president reason to reconsider his priorities. And even if it doesn't, it should give the markets reason to have hope.

That being said, I am not necessarily a bull on natural gas prices (at least not yet). Certainly the cold winter has helped to chip away at the natural gas in storage in the US and to put a floor on spot prices. But the fact remains that there is still more supply than there is demand, so in the short term I do not expect the front month futures contracts to jump much on this news.

However, in the long-run, if natural gas is given serious consideration by the president, natural gas producers will stand to benefit. A number of these companies have either already, or are on the verge of breaking out, which makes me all the more interested in them. Names I like in this space include Petrohawk (HK), Devon (DVN), Chesapeake (CHK), Range Resources (RRC) and Southwestern (SWN). I went long Southwestern today @ 39.47. Target on SWN is 45, stop under 38.50.

SWN Chart: (click to enlarge)

Another way to play the turmoil and spike in oil prices is in the alternative fuels space. Possible names there include Clean Energy (CLNE) and Westport (WPRT). From a technical perspective both of these names look pretty ugly, and up until today had actually been short CLNE. However I think the current situation has the potential to put one or both of these names in play again. I picked up some WPRT today around 15.81 on the TSX (WPT.TO). Stop under 15 bucks. This is definitely a case of trying to catch a falling knife, so be careful and don't ignore stops!

WPRT Chart: (click to enlarge)

Good luck and good night,

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