The market's new and old leaders

Two days up does not make a new bull market. We need to watch for an IBD style follow-through day and watch for breakouts from sound bases. This market needs to prove itself so don't get too comfortable.

This doesn't mean that it is time relax, however. Keep a look out for new leaders and stay away from broken down former leaders. Take for example the two charts below. Chipotle (CMG) has held up reasonably well and looks to be forming a nice base.

Flotek Industries (FTK) is a different story. I know this company very well as I owned it way back in June 2006 and sold around February 2007 (Yes it was painful watching the run that followed). I had to laugh though when I read that they blamed their recent earnings warning on "bad weather". That is what they said just before that big dip in 2006. It looks like the market will once again punish FTK severely. This is going to take a long time to recover (probably over a year) but I wouldn't be surprised to see it hit 55 again. Flotek went too far and too fast and I think the management started to believe their own hype for a little bit.

Who would have thought

My goal was to find IBD stocks before they made the IBD 100 list. Well I did it with Flotek Industries. This week FTK debuted at #12 on the IBD 100. Pretty amazing.

I bought it at around 15. Unfortunately, I sold out at around 28, so I've also learned a valuable lesson about selling too early. I knew it would go higher but sold nevertheless. I should have just sold and got my principle back and let the rest ride. Lesson learned.

I think we'll get another chance with FTK however. They only have a couple more quarters to report triple digit growth. I expect to see a substantial pullback when the year over year growth gets back to the 20% range.

Earnings for Flotek Industries (FTK)

Good 'ol Jerry Dumas is reporting the earnings of Flotek Industries tomorrow. I'll be listening intently and watching how the market reacts. FTK has made a huge run recently, giving me no opportunity to get back in. Interesting to note that there has been a lot of insider selling this last month, especially by Jerry.

I'm looking to jump in at around 32 or 33. It should be an interesting day.

Flotek Industries (FTK) Price and Volume Warning!

Don't get me wrong because I love Flotek. The company is great and should have bright future but the chart is flashing some warning signs. Most importantly, FTK is making some new recent highs on dramatically lighter volume. I have posted a candlevolume chart to help illustrate this point. What is clear is that institutional investors are not interested in buying FTK at these levels. There have been some relatively high volume selling days in the early days of January and February.

One should keep a close eye on FTK, especially with earnings coming up soon. If you are interested in buying, you should wait for a pullback.

The Spectacular Collapse of Amrep (AXR)

I wrote about AXR, #1 on the IBD 100 list, a short time ago and compared it to Empire Resources (ERS), a former #1 on the list. I predicted a collapse and that is exactly what we got today, with Amrep dropping by 22%.

The volume on the Nasdaq was lower than on Friday so we didn't pick up another distribution day. Nevertheless, the price destruction of AXR was the final piece of my market top puzzle, with US Global Investors (GROW) having already tanked. I therefore sold out another long position, AllianceBernstein (AB), with a nice 23% gain. (I got out of my IMKTA and HRZ position last Friday.)

So what do I have left? I'm still holding those QID shares I bought at last Thursday's open and a small core position in FTK. This makes 90% short right now. I plan on adding to that QID position after the first short covering rally.

I'm also thinking about shorting AMK at the first short covering rally, which should be huge since the short interest increased this last month to 84%.

Damn, this stock market stuff is sure fascinating!

Bearish but still long. IMKTA, AB, FTK

I learned my lesson some time ago when I sold out a position for no good reason only to watch it rise 20% in a matter of weeks.


Sure, I've been bearish about the market but that hasn't stopped me from holding my long positions. In fact, I even started a new long position at the height of my conviction that the market would turn lower. I found that buying one of these ultrashort ETFs was the key to my mental well being. For instance, I purchased some shares of the QID and put in a very tight stop. If the market went up I would be stopped out, but still have my long positions. If the market went down I would make 2% for every 1% the QQQQs went down. That gave me some peace of mind and a feeling that I would have time to exit my long trades.

As of now I don't have any QID shares and I'm currently enjoying the rise of my recent long position. Check out IMKTA.




I'm sure a pullback is in the cards but IMKTA has moved up almost 10% since I bought the flat base breakout.








AllianceBernstein is a model of strength. This one has been easy to stay long.














Like I posted earlier, the massive decline in crude prices has hurt everything connected to oil. I have been looking for an oil pullback and was ready to cut my FTK shares down on such a price break. Considering the beating that many of the other oil stocks have taken, FTK has held up pretty well. However, I think the bad weather in the Rockies will hurt Flotek's 4th quarter and expect them to report an EPS towards the lower end of their estimates. Who cares, the shares I still own are all profit. When oil turns around I'll add some more. Here is the chart. Notice the the recent distribution days and wild price swings (today especially). I'm looking for it to get down to the 21.50 area.

Buys, Sells, and Naked Shorts!!!

The excitement continues today. I put in another buy order for the QID again and this time my order was filled. It was pretty scary watching it sink another 2% after I bought it. The good news is that the Nasdaq closed under yesterday's highs, which suggests that we will probably head down again tomorrow. We shall see.

I took my principle off the table for Flotek Industries. I'm going to let the profit ride. There is strong support at around 22.5 and it will be interesting to see how it reacts when it reaches this level. The bottom line is that these last couple of days have been the first days of strong distribution since FTK took off in October. I'm going to be very cautious right now.

I found a very interesting stock today that I think I'll buy tomorrow. Ingles Markets, Inc (IMKTA) is a supermarket chain in the southeast. It popped up on my CANSLIM screen recently. Today, she broke out of a flat base on the second day of big volume. Very nice strength considering the volatility we've seen.

Finally, I tried to short US Global Investors (GROW) today but couldn't because there were no shares available to borrow. Too bad because it dropped a whopping 13% today. Bummer. I did short Ford (F) today as it bounced off of confluence again.

Oil spill

Holly cow! There was some crazy action out there today. I must admit that the wild ride definitely distracted me from my day job.

Anything remotely connected to oil and natural gas got absolutely smashed today. I cut my Flotek position in half and will wait and see about the rest. While the volume in FTK today was well above average it didn't come close to the high volume panic selling I witnessed in some other small cap oil service stocks (see ALY and BTJ, which found some support at their 50 dma).

To make matters worse, I put in a limit buy order of 52.32 for the QID when the market gaped up this morning. I missed that huge reversal today by 0.15. Jeez! Oh well, judging by the drops some of the market leaders had today I think there will be some more opportunities.

At least I still have good old AllianceBernstein.

Flotek and a warm fuzzy feeling...

Would I feel as good as I do right now if I didn't have to experience the pain of a near 45% decline in my shares of Flotek Industries? Maybe...well probably.

Perhaps the real questions is: would I have held on to the shares of any other company experiencing such a dramatic decline? Hell no! I'm not supposed to hold losses past 10%.

Forget all of Flotek's proprietary chemicals or its patented petrovalve, the real asest of Flotek industries is Jerry Dumas, Sr. His honesty and confidence comes roaring through every presentation and conference call I've listened to. He isn't afraid to tell the truth and also isn't afraid to get angry, both at himself and at the market. I admire the man very much and want to thank him for the great job he has done. I was very close to selling my entire stake in FTK at the absolute lows, just because I couldn't take the pain anymore. But after listening to their Q2 conference call several times, the enthusiasm of Mr. Dumas renewed my resolve and I doubled down instead.

Thanks again Mr. Dumas. It looks like the market is finally waking up to your company's growth. I've seen posts on Marketgainer.com and Streetinvesting.com about the amazing moves that are being made by FTK.

Jerry comes through

It has been a long ugly ride but it looks like we can finally say goodbye to the lows for Flotek Industries. On the last conference call management confidently provided very high guidence for revenues and it looks like they came through, big time. Sales are up, margins are up and, best of all, earnings are up. If this is what being a value investor is all about, I'm not so sure my stomach can handle it.

They have their Q3 conference call on Monday. More good news to come, I hope.

On another note, my previous thesis about shorting the cyclicals is dead and buried. X, FCX, PD, ect. are all up huge today. This is on top of some previous strong moves. I have no short positions and haven't had any for a long time. It might be time to change the name of the blog?