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Don't Let the Bears Faze You

If you find stocks that fit your criteria and long-term thesis, go ahead.
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This market is forcing some tough decisions. Can you maintain the conviction to remain short? Can you possibly chase new highs? Can you sit on the sideline and simply ponder "what if"?

I still believe coal has a good risk/reward here, but I have taken a little Suncoke Energy (SXC) off the table after a 6% run higher. This brings the holding in line with the other coal names I am sitting on right now: Cliffs Natural Resources (CLF), Walter Energy (WLT), Arch Coal (WLT) and Alpha Natural Resources (ANR).

And I still see Tesla Motors (TSLA) and Zillow (Z) as attractive, longer-term, in-the-money put plays. They've been huge winners, but they aren't participating in the recent rally. If you are looking to be a pessimist, then it is a fact which cannot be ignored. However, it is hard to be an overall equity pessimist as the iShares Barclays 20+ Year Treasury (TLT) and SPDR Gold Shares (GLD) continue to retrace lower. The TLT's drop isn't a big surprise, as discussed Friday. The support there currently sits at $115.50, so a close under that level would become fairly significant.

The chorus of bears is out again, telling folks who are buying at the highs that they will be sorry. At some point, those buying at the highs will be sorry. And often, if you are buying at the highs for a very short-term trade, three weeks or less, you are sorry. However, this argument has not worked well since 2009. While buying the highs and holding has not necessarily resulted in a maximum profit on a trade, those buyers haven't been punished over the longer term. Let's face it, bulls have made money while bears have been left struggling. Any bear "alpha" has likely required 5 times as much work and 10 times as much stress.

I'm not screaming to buy here. I believe one need be very selective, but be careful about a selective bias here where you encounter bears, because they back your thesis rather than making a convincing argument. If bears continue to poke fun, insult, taunt and repeat their cautious warnings, eventually they will be right. However, what good will it to be a correct bear if your thesis doesn't come true for another six months or two years or another 10%-15% higher? Maybe that's not the case here, but what about those making the same case one year and 21% lower ago on the S&P 500? 

Unless we see a one-day crash, there will be time to close positions. No, they won't be at the highs when you do, but don't let fear-mongers keep you out of a trade that fits your thesis and criteria. That last part is the most important: "Fits your thesis and your criteria." 

At the time of publication, Collins was long SCX, CLF, WLT, ACI, ANR; short TLT.