Oops!

Learn something new every day

Helen of Troy who, according to myth, had a face that launched a thousand ships, has nearly sunk my trading ship!

HELE had been in a long downtrend and seemed a prime candidate for a short sell. On the first trading day of 2009, HELE reached a high of $17.92 and closed the day down at $17.69. Since then it had lost half its value to a low of $8.55 on 9 March. That afternoon, however, Standard & Poors announced that HELE would be added to the S&P 600 index of small-cap stocks, which gave it a boost over the next three days to just below the 50-day moving average. I attributed that high-volume surge to institutional buyers — mutual funds and the like — taking positions to reflect the S&P 600 index. I shorted HELE, thinking most of the institutional buying was probably over, and HELE would revert back down to the trend line.

Wrong!

HELE 2009 year-to-date HELE 2009 year-to-date

How wrong I had been about that institutional buying! Yesterday, almost 2.8 million shares of HELE — average volume just over 300 thousand shares per day — changed hands, driving the price as high as $12.55 at one point.

Yikes! Market Edge upgraded HELE, saying "Stock shows Strongly Improving Conditions.... If you are Short this stock, consider covering or monitor stock closely. Stock is an Early Entry Buy Candidate if stock closes above 11.09.

So now, folks who rely on Market Edge are doing their early buys, HELE being well above the Market Edge buy point.

What do do

horns of a dilemma

I am on the horns of a dilemma. Do I cover my bet and take a big loss? (I would have doubled-down on 1000 shares instead of 500!!) Or, do I "monitor closely" in hope that this rally is an anomaly and will soon turn into another down-cycle, but also run the sizeable risk of incurring an even larger loss?

Damn!