Sunday, December 20, 2009

Our Human ManKind

The move I've recently experienced with my beloved MNKD has brought my total gains upward of 800% and the beautiful thing is that it’s just the beginning. I intend to be intimate with MNKD for many years to come. Who knows? Perhaps I'll be nursing this gem in the 80s or even the 120s someday. You never know. However, what I do know is that it will take a near act of God to make me dislike it enough to abandon it. It will never be abandoned. Sold off? Yes, but never abandoned.

The $64,000 Question
The chart above shows how wonderfully steady MNKD's most recent rise has been. This advance is textbook in that there were no sudden drops, or rips upward, just pure unadulterated upside power, like a locomotive. The circles on the chart show my most recent buys, so quite naturally, the question that confronts us now is, "Is it time to lighten the load a bit?" I say “yes,” and here is why.

The weekly chart of MNKD clearly shows that the most recent rally has brought the shares right back toward the "origin" of its most bearish decline. This area is marked off on the chart by two dashed lines and labeled "Top 1/3 Zone of Bear Bar." While the stock did top out before this point, this area represents where the bears really began doing damage to MNKD. These "origin" points often serve as major resistance because it’s where the vast majority of the holders experienced their first-time hurt and pain.

The Accident
If you got hit by a car (God Forbid) and went through months of agony and pain as you healed, the very specific point or location of your accident would be remembered by you for life. Sure, you'd remember the many months of pain, but the origin of that pain, the cause of that pain would have a special place in your memory, even more so then the long period of healing.

So it is with stocks and the markets in general. The "origin" of pain or where the real pain began has a special place in the collective memory of the market participants. That is why I'm always mindful of the top 1/3 part of any major bear bar. I know that those areas tend to bring in extra selling whenever they are revisited. Please note: The same holds true in reverse, mind you. The bottom 1/3 of bull bars tend to serve as major support zones. See chart to see a major bull bar.

My Strategy
With all this being said, I believe its time for me to lighten up on my shares. In fact, I already did on Friday by 1/3. I will increase that early this week to 1/2 my position, especially if additional strength moves MNKD deeper into the Top 1/3 Zone. The rest I will hold on to for a bit. A pullback toward $7 would get me extremely excited again. So stay tuned. You’re watching a master at work.

Beauty Is In The Eye Of The Holder

The Chinese told us many years ago that a picture is worth a thousand words. Today, I'm telling you that a picture can be worth much more than words. In fact, the right pictures can be worth riches. Take this picture, or shall I say chart, of PSEC. The beauty of its recent rally is undeniable. Note how the double bottom, the most powerful bottoming pattern in existence, solidly put in a base from which PSEC could explode. The smooth rising 8 and 20 period moving averages are things of pure beauty and the volume that the stock experienced on Friday is very telling.

What's Next?
Don't be surprised to see PSEC pull back some, as it has certainly gotten somewhat ahead of itself. The most recent jump has caused the shares to separate and move well above their 8ma. As a result, this could bring in some normal profit taking. But hold on tight. This is a wealth play, my friends, not a small insignificant day trading play. PSEC will be a friend for many years to come. So sit back, relax and let the stock work for you.

My Current Strategy
My hard stop is now at $9.50, just under the double bottom formation. I have no real upside target, but hope to earn the steady dividend quarter in and quarter out for years. Normal dips will be used to pick up more of these high-yielding shares. The only two things that would make me itchy to sell are 1) a cut in the dividend which I feel is unlikely and 2) a rally so fast and furious, you just have to take profits. Otherwise, PSEC will be a multi-year keeper.