Monday, January 25, 2010

Bookkeeping: Cutting Back Braskem (BAK) by 2/3rds

I am not seeing much recovery at all in our pool of stocks, which are focused overseas and "smaller to mid cap" - so perhaps whatever rally there is are in sectors we are not in like big cap pharma or whatnot.  Very few names in my watch lists are popping; instead there is a good mix of red and green despite a benign market today.  I have to continue to respect the individual charts and if I'm proven wrong will pay up to get back into stocks at "safer" places on the chart.  Otherwise I continue to liquidate long positions 1 by 1.

Brazilian chemical maker Braskem (BAK) is following "countryman" Gafisa (GFA) into purgatory and has broken support at the 50 day moving average.  Hence, we'll take 2/3rds of our exposure back at a 10% loss and protect the remaining capital.   If it continues down this path, we'll expunge the last portion...

The general index in Brazil - the Bovespa - also broke down late last week, breaking the 50 day moving average and making a new "lower low" versus mid December.... more warning signs, especially if these things do not reverse quickly.

We seem to be losing both China and Brazil as the stocks in these countries are under performing the past 2 weeks.... not good. So we lost the "momo" hedge fund tech stocks ex Apple last week even before the market crumbled, we seem to be losing the 2 hottest countries on Earth, but I suppose people will keep the faith as long as Ben Bernanke will print more money. 

The areas of worry - technically at least -  are starting to pile up from this chair.  However, any ounce of caution has been a fool's game for so long... so we'll see if I'm made a fool again.

Long Braskem in fund; no personal position


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