Update on My Trading.

The market continues to power forward and those with heavy short positions in this market are getting grilled. It is easy to fall into the short camp. We discussed the disconnect between the fundamentals of the economy and the stock market technicals in prior blogs. I myself was caught with bearish hysteria over the housing bubble, subprime fallout, and Countrywide (CFC). It was easy to conjure up armageddon in the stock market and even easier to implement because that was the thinking of the "least resistance". But the markets rarely act in concert with the thinking "of least resistance". Market commonly act contrary to popular belief. That was the take home message for me this year.

I discussed in my last blog that the worst might be behind us for this economy and that the data coming out are lagging data. The market however looks forward and is seeing brighter prospects in 6 to 12 months. There is no doubt that we are at high risk levels in terms of bullish action within this market. The February 27th market meltdown is but a blip on the radar now. I still feel that we need a meaningful correction, but I am now beginning to think that the mini-correction in February is all we'll get for a while. But at a certain point, the fundamentals of economy and the technicals of the market has to reach equilibrium. So which do I follow? Recent ISM data indicates that perhaps we may have left the worst part of the economic downturn behind. Unemployment rate continues to remain low. Tomorrow's jobs data will be closely watched but something tells me that the markets will like what they see and continue to push this indices higher. Why not, so far, the only thing that works right now is being on the side of the bullish thesis. Market complacency is no longer high. Everyone is worried about this tremendous market move and everyone is cautious. I do not read any overtly bullish headlines or opinions by the pundits as I speak and I think this is good for the markets. It gives us a wall of worry to climb.

Everytime I argue with the market, I get crushed. So I have to keep conjuring up courage and stay long this market, with the exception of Countrywide Financial (CFC).

I am currently long Crocs Inc (CROX), I hold 80 contracts of June $60 at an average contract price of $3.14. I did some buying into earnings. The short percentage was tremendous and I didn't think the market has correctly priced CROX shares, which at this point still remains undervalued, even with eye popping earnings report and a 2:1 stock split to boot! The company reported Q1 profits jumped 259% to $.61 cents a share, which beat estimates by $.12. Revenue more than tripled to $142 million again blowing out forecast. The demand for the ugly shoes continue to remain strong. This goes in line with the market trend lately. Heavily shorted, high momentum stocks, with high popularity are just killing the market. Look at Buffalo Wild Wings (BWLD), which I consider equal to Crocs in terms of momentum plays. Given this data, the shares of Crocs will be fairly valued at $85 to $92 range. If anyone has any doubt that Crocs can run past post earnings day, then look at Mastercard (MA) who continues to run three days into their stellar earnings report. All I know is that there is high level of liquidity in this market and investors are clamoring to put their money into any stocks showing promise. This is a sharp contrast to the market conditions in early February when good earnings were rewarded with a stock sell off.

Starbucks (SBUX) reported earnings after market today also and reported 18% rise in profits and meeting analyst consensus of $.18 and reaffirming next quarter guidance. I believe that this stock also has some room to run as the doom and gloom scenario is for naught. I plan on selling this stock in the morning tomorrow to book gains. I have 50 contracts of June $32.50 calls at an average price of $.68. I have better uses for this money in the short term.

Cisco Networks (CSCO) is also showing bullish price action. I believe the shares will teeter around $28 to $29 range before it reports earnings next week on Tuesday 5/8/2007. I anticipate that they will continue to show market leadership and dominance. I believe that this stock will be good for $32 to $37 range by options expiration in June 2007. I hold 500 contracts of June $27.50 at an average price of $.75. I plan on adding more from Starbucks proceeds if the current $1.25 per contract price comes down to $.85 to $.95 levels.

Google (GOOG) is showing some signs of life today. It is effectively completing the handle portion of the cup base and I believe some form of acquisition news that the market will cheer is in the works. Some are postulating Monster acquisition? We will see. I still think that the shares of Google can test $500 to $520 level before June options expiration. We will see. Historically, Google does well only in the Fall months.

LHC Group (LHCG) is frustrating and in the same boat as Google as frustrating pick. I believe that once the Medicare CMS reimbursement guidelines are clarified, this stock has the potential to run to $33 to $36 range. In the mean time, I am selling shares to free up what ever is left of this trade. I only hold 30 contracts of June $30 contracts right now at 90% loss.

Watch Lists

1. Johnson and Johnson (JNJ)- a good play on diversified play. Currently, the market favors the DOW component and big cap stocks and this would be a solid company to ride the wave.

2. Smith and Wesson (SWHC)- a long time favorite of mine. I believe that this stock has a seasonality built into it. It has done well during the summer months. technically, the stock is showing support at 50 EDMA and has not broken the uptrend line. It is fairly valued and has a potential to break out.

3. Intel (INTC)- with recent resurgence among semiconductor industries, Intel remains an appealing choice. Technically, the stock is setting up into a nice double bottom weekly base and should be the beneficiary of recent debacles at AMD which might signal that the price war is coming to a close.

4. Talx Corp (Talx)- A provider of payroll related and business process outsourcing services. This stock reports earnings on May 9, 2007. The chart shows good cup with handle in daily and weekly charts but volume on the weekly chart is lacking a bit. It none the less is a key player in the corporate slow down that is anticipated. As companies focus on ways to cut costs, this company stands to benefit. I will keep researching this company but so far, I have not found the fundamentals to be all that great. It is a highly levered company with debt to equity ration of 1.05

Good luck all.