A Tale of Two Stocks 4/21/12

A tale of two stocks; HOG (Harley Davidson) and SNDK (SanDisk). I am invested in the up direction in HOG and in the down direction in SNDK. This appears somewhat conflicting but it is based entirely on my technicals and it is working well for me.

I own HOG. Not the bike; but the stock. We got a nice pop in the stock Friday as it broke through above $50. I remember driving through Wisconsin on a business trip and driving by the HOG plant. The story went that the union agreed to cut backs and was able to keep the manufacturing jobs in Wisconsin and not lose it to South of the Border. I am glad for them. It looks like there is resurgence in HOG as it climbed all the way from high 30s up to over 50 in stock price. Only a few things drive stock price up. The usual reasons are - increase in revenue, increases in profit and a positive outlook. Looks like older Americans are buying Harleys. I am trading this with my hedge system. That means I buy the stock and hold put options below the stock price as downside protection. When the stock moves up, I move my protection up. When the stock gives me a down signal, I will let go of the stock and use the put options to make a little money. I have to take a look and see if I need to move my put protection up a strike or two.

SNDK or SanDisk on the other hand has taken a beating. My last long signal was a dud and I lost money on that trade. However with the down signal, I sold the stock and held on to my put options. The stock has continued to go down ferociously from $44 to $34 in a few weeks. My put options have gained value nicely. Talk about making money on the down side… my friends from the buy-and-hold camp will ask why it went down. I will say Why-ask-why? Post mortems are for morticians and news commentators, not traders. All I see is that the technicals have guided me in the right direction for each of the two stocks. What else could have done that in a timely manner?

Nothing in life is to be feared. It is only to be understood.

- Marie Curie