Gearing Up for a Trade
From the looks of the S&P 500 as well as the Dow, it seems that we may finally be reaching the tail end of the recent bull run. Both charts seem to be setting up for a double top, though the pattern is not quite confirmed just yet. As far as my holdings go, I feel rather comfortable of the strength of J. Crew, Southwest, and China Mobile going into correction as J. Crew has distinguished itself recently as a true market leader, Southwest has seemingly limited downside given how low it is trading and China Mobile is has clear competitive advantages which should sustain continued performance.
The one position which I am worried about, however, is Piper Jaffray. Though the company is on fundamentally solid footing, the financial sector as a whole is not doing well and will likely lead any correction.
I purchased Piper Jaffray as a trade and, to tell the truth, it may have been a mistake to even have held it this long as the the trend predicted by the indicators I typically rely on – RSI, MACD, Price Channel, and 50/90/200 day Moving Averages – never really materialized. After doing more research after jumping into the stock, I realized that the company does have some prospects. As mentioned, it is fundamentally solid – at least for the time being. The company’s sale of its retail brokerage left it cash flush with little to no debt. It’s refocused and now a pure play as a middle market investment bank and should deserve the type of P/E that a company like Jeffries currently has. Granted, Piper has left itself vulnerable to a cyclical downturn in investment banking business. On a final note, given the recent acquisition boom and the company’s position as a pure play with lots of cash on hand, it is ripe for the picking should it be willing to sell.
Part of me might have made the mistake of trying to rationalize the trade as an investment, but with clouds looming in the broader markets, I’m now just hoping we can get a quick rally so that I can sell into it. For now, it’s just wait and see.
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