The Market

So a while back, when I first started this blog, I thought that the market had bottomed out. March 10 was the day I thought to be the bottom. Right around this time Bear Sterns had collapsed and been partially saved by the Fed and partially saved by JP Morgan. The S&P 500 Index hit 1273.37, and began to slowly, with great volatility move upwards. However, since the 08 peak in May, the market has lost almost all of its gains. Its down a little more than 10% since May 19th, and currently just above 2008 lows. If the market moves below this, which has been acting as a support, stocks could continue to fall for months.
Because I'm beginning to realize I was premature in calling a bottom (though theoretically March 10 still is the bottom) I think that some of my stock picks should be reassessed. I picked Citigroup back in March, with a price of 20.71 a share. Obviously now is a better time to buy, as you can get shares for 3 bucks cheaper. However, I would hold off on C, wait for any more write downs, analyst downgrades or macroeconomic bad news. Citi might drop even further, which could spell an even better entry point for what I still believe to be a good long term play.
I want to reiterate that most of my picks have done well regardless of the current demise because they are strong companies which were completely undervalued during the last round of market lows. There are many more out there, and even more that overall market sentiment is down so far.
I'm waiting for a sell off in companies like Apple and other solid companies who are not affected directly by sub-prime/credit losses. I missed getting in on this sell off last time (except I did recommend buying AAPL) and I've regretted it. Below I've included a couple of entry points for some stocks I'm watching. These entry points are based on the previous sell off, some technicals and looking at price valuations.

Google Inc. (GOOG)
Buy target: $500
Fwd P/E at this price: 24.85

Apple Inc. (AAPL)
Buy target: $150
Fwd P/E at this price: 28.85

Research in Motion (RIMM)
Buy target: $100
Fwd P/E at this price: 25.77

Wal Mart Stores Inc. (WMT)
Buy target: $55
Fwd P/E at this price: 15.89

Fly or Flop: Electro-Optical Science (MELA)

Electro-Optical Science (NASDAQ:MELA) is a small cap ($122.14M) company that is pretty one dimensional. MELA is a firm that's goal is to produce a non-invasive way to diagnose melanoma. It has been public since late October of 2005, and traded side ways since. Currently MELA is trading right under $8 a share (7.93 close today) down from high close of $9.30 May 30th.

However, the price right now is really irrelevant. MELA is going to release results from the trials they are running with their flagship product, MelaFind, this year. If successful, MelaFind would essentially change the way melanoma is diagnosed. Currently, biopsies are performed in order to determine if a mole has cancer. However, this procedure leaves scarring and is expensive. MelaFind would be able to detect cancer without these side effects.

I'm no expert on cancer, medicine, or even health care companies. (Or really any companies for that matter.) But I can see that this company's product has the potential to be in huge demand. The question is whether or not the product will be approved. And that's a big question. If MelaFind doesn't pan out, the company is essentially worthless, at least until they made major changes. The stock would plummet. However, if it does work, there is no doubt it would be incredibly lucrative for any stock holders. A buy out would be a big possibility, which could double or triple current price. Also, the company has enough cash to potentially market MelaFind themselves.

Analysts appear to be optimistic about the company. It has an average rating of 1.7 (1 being strong buy, 5 being strong sell) according to Yahoo Finance. Recently the company briefed investors on the PreMarket Approval (PMA) process at the Needham Biotechnology and Medical Technology Conference in New York. The President & CEO Dr. Joseph Gulfo mentioned he is looking forward to a "busy" end of the year.

I think that the prospects of this company are pretty good. There is a sizable chance that the product could fail, but the studies already performed have yielded great results. Right now melanoma detection is a crude science, which basically involves carving up the patient. Melafind is poised to change all of this. Also, if it succeeds, MELA will see huge growth. There are no other products to suck away profits, this company has put all its eggs in the MelaFind basket.

Check out the Electro-Optical Science website for more.

You can see the Needham Biotech presentation on the Investor Relations section.

Don't be a Greedy Dumb Ass Like Me

So I'm writing today to talk about screwing up. I've been riding high recently, mostly on my investment in Visa (V.) This made me cocky, and also stupid. I decided to try some swing trades, pretty much going off of nothing. Let's just say I learned a lot.

Here is the situation:

Kodiak Oil and Gas Corp. (AMEX: KOG) is a pretty volitle little stock. Its way up this year, but I looked at it after it hit $4.00 a share, a recent high. From there I figured it would drop, which it did from the beginning. However, it kept dropping. I was looking for an entry point, and I bought soon after the mega drop (see chart 1) at $3.60 and $3.72. I sold some shares right before close at just about $3.80.

Pretty sweet right? Nice 5.6% gain in under 2 hours. But the problem was I got greedy. I kept a majority of shares waiting for $4.00 again. I watched shares the next day open at $3.60 settting off a my stop sell order at $3.70. Ouch.

It doesn't end there. I figured I had avoided much of the worst, and so I kept watching the stock. On Tuesday I watched shares continue their demise, and waited for a entry point. After seeing the trough at around $3.40 for about 30 minutes (see below chart), I missed the boat and couldn't get a price below $3.49. I wasn't worried however, because I was counting on a return to $3.65-3.70 and making up my losses from the day before. However, shares didn't rise above $3.55, and I ended up keeping shares overnight (BAD IDEA.) I missed selling at $3.60 the next day, getting really greedy, and came back a little later to see prices were wayyyy down. Today I'm looking at KOG pricing between $3.25 and $3.40. Pretty sucky.

This is the epitome of crappy, stupid, pathetic day trading at it's worst. I gave up taking 5.6% gains in favor of chasing more. Then I tried to win my losses back by trading the same stock in the same way, and not taking gains when I had them. DON'T LET THIS HAPPEN TO YOU!!!!!

My strategy for these trades was sound. I looked for waining negative volume, bought at a low price and watched the price grow, however, I got greedy and couldn't sell for a small gain. Now I'm faced with stupid losses, and have to either hold onto a stock like KOG, or else sell for a sizable loss. Lesson: Be smart with swing/day trading. Remember, if you make just 1% a day after fees and commissions, your making over 200% a year.