Shorts are hurting today that is for sure, but the more bullish the crowd is getting the more I want to begin building on the short side. There is a lot of recency bias in this market... as I scan the internets the biggest fear has changed from losing money TO missing this great move.
As always we are incremental in our approach, layering in and out of position so while yesterday's short additions [Apr 1: Bookkeeping - Adding to Shorts] exploded in our face we have had many wins on this side of the ledger and will in the future. They don't always work out right away hence the gradual building and exiting of positions. Again I am still looking for upside to S&P 870 but the higher we go the more we need to become balanced between long and short since the risk/reward changes each stair step higher.
There were 2 names I mentioned yesterday I wanted to see moves up in to add to or begin a position - both are fulfilling this wish.
First, we are starting a new short in SL Green (SLG) which is office REIT exposure, much of it in NYC. As I wrote I did not want to add to it yesterday (it bottomed near $10) and now its over $12... thats how quickly these things can singe you. I only started with a 1.2% stake because this is part of a basket (now of 5 names) in the REIT business and I have a pretty hefty exposure overall.
Prudential (PRU) is like a penny stock nowadays - it moves 15% almost every day. I had wanted to see it pop some to add short exposure so we are now in the $22.50s. If it gets north of $23 and starts to really run, I'll cover a good portion of the position and wait for a better opportunity. This one is very tricky because it keeps popping over and then below its 50 day moving average - hence I am willing to change my mind quickly if it goes against me.
Next are 2 names which have shot the lights out, I added to ProLogis (PLD) yesterday and it still is running - so I am adding yet another layer today. I love this set up on the short side as it has topped out in the $7.60s multiple times this past month, and also has the 50 day moving average around $7.75. So it clearly shows the place to stop out of.
Wynn Resorts (WYNN) is flying due to the strength of some of its lower quality peers - Las Vegas Sands (LVS) and MGM (MGM) - as we said earlier today when the bull gets roaring he runs into the most speculative stuff. And this group tends to trade together... Both LVS and MGM are now sub $5 stocks. Wynn is also a fun set up as it gapped up today and is making a run for its 50 day moving average of $26 which it will probably get to later today as it squeezes shorts in a death grip. (as I type this it jumped from $25 to $26 in a matter of 10 minutes so there ya go) I am adding here ... this is short squeeze 101. I am making Wynn a >3% stake.
I added more short to positions in American Express (AXP), Capital One Financial (COF)
Not necessarily looking for these to work out today since the condition of the indexes are so bullish, but over the next 2-4 days... hopefully I am not squeezed out of them by then.
Short all names mentioned except MGM, LVS in fund; short Wynn Resorts, ProLogis and SL Green in personal account
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