The Tasgall Group

After noticing that CUBA (the closed-end fund, not the country) is trading at a 70% premium to its underlying assets, I started to think about shorting the fund… Here is my thought process and the end result. (more…)

Once again, the most reliable indicator I know is flashing a sell signal for equities… I’m declaring my prediction — today is the top of the current rally in the stock market.

What’s the indicator you intelligently ask? I went long on a broad stock market index this morning! (more…)

I was just doing a quick review of the markets, and Gold was certainly not the only commodity that was squelched today… Crude oil was down 3.8%, silver down 5.1%, copper down 4.2%.

The interesting thing is that Natural Gas started the day down quite a bit (around 3%), but rallied into and after the close to finish up 2% for the day. Here is the 30 minute chart to see the price behavior intra-day. While the rest of the commodities were struggling just to pare losses, natty gave a pretty noticable divergent performance. Zooming out to the daily chart for NatGas, it looks like we could have the beginning of a trend change, especially considering how little the drag the rest of the energy/commodities didn’t stop natgas from posting a decent day.

I found a decent index (XNG) that tracks 15 natural gas producers. The XNG finished the day down 2.6% despite the 2% gains in the natgas futures. Likewise Canadian trust companies that are heavily weighted towards natural gas reserves (like AAV) finished the day down ~5%. If there are a couple more days of strength in the futures market, we could see some of these stocks turn around.

As the Dow is trying to close at a new high, it looks like Gold wants to tuck tail and run.

As I feared, it looks like Gold is going to take a stab at the support in the $560 range… today it is off over 3.5% or $22 and is trading at $581 (December basis). Gold Stocks (HUI) are off by over 6% right now. Normally a market would gradually grind its way down over several days or even weeks, but apparently Gold is in a hurry to go down.

It looks like my last post on the topic was a little early, even though I did lay out the possibility of this drop. My advice stays the same as before…

I should also mention that although gold stocks make up a very small portion of my portfolio (less than 10%) they are responsible for over 90% of the daily volatility across the entire portfolio. They are also responsible for most of the profits, so the volatility is not in vain… but it can be stomach churning if you’re not prepared for it.

I’d like to look at the technical situation in the gold markets and compare the current correction to the market situation back in 2002. Hopefully we can learn something, and maybe even anticipate the direction of the gold market a bit… I’m not going to cover the fundamental story, or why we want to own gold… that’s a topic for another post…

There are many a gold bug that think that gold will travel in a straight line — straight up! They buy at any price, and expect the world to fall apart on any given day. It would all be a lot easier if the price of gold moved in a straight line, but alas, we have to deal with reality here.

Price changes in gold can be violent, and it’s incredibly painful as you expect prices to go straight up, when in reality they go down by 21% in a two week period as the HUI index did from 9/11 to 9/21.
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As I’ve noted in the past, Natural Gas has been trading very low lately for a variety of reasons. With a seasonal pattern of bottoming in September, I’m interested in looking at how to invest in the potential upside of this essential commodity.Importantly though, my view of the futures market for Natural Gas is not very accurate… Not surprising, you need to look at the other futures contracts, not just the most commonly cited front-month.

When you look at the other futures contracts, you will notice that the prices are in cantango, which is not a big surprise when you think about it. Here are the prices from Friday: (more…)

The subject of stop-losses is such an intensely difficult topic to discuss.? I’ve had many latenight debates in trading forums and chatrooms and I’ve been through every camp in my experience as a trader.? The best answer I’ve ever been able to come up with is that answer famous and frustrating for its truth: it depends. (more…)

We have talked in the past about having larger stop-loss threshholds than the actual expected reward, and the backlash on forums when this type of trade is even mentioned. The logic of the backlashers is that you have to have reward larger than your potential loss to win in the game of trading.

I wanted to explore the concept a little bit further and just think through the implications of what it means to put on a trade where your potential reward is smaller than your potential risk.

Let’s start with an example… If a stop is 2x the size of reward (e.g., a stop loss would be triggered at a loss of 10% but we’ve set a price target of 5%) then we have to get at least 70% of our trades correct to make money. (66.7% plus slippage and commissions, I’m guessing ~70% if not higher.) To me, this seems like a fairly high hurdle to start with, though it is certainly possible. (more…)

As you both know from the last meeting, I’m launching a quest to better understand sectors. Knowledge of sectors and which sectors are hot or cold is vital to individual stock picking, since analyzing the sector performance and ranking vs. other sectors should be one of the first criteria any trader or short-term (less than 1 yr) investor employs to determine whether a stock is a buy or sell. The strength or weakness of the sector is useful and can be a primary component of buy and sell decisions for individual stocks.

The absolute best sector analysis tool can be found here: BarChart.com. (more…)

No, not the blog (or rather the blog of other blogs).? I mean specifically the alpha that they are seeking.? What is it? (more…)