Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

Importance Of Diversification To Mitigate Risk

|Includes:Apple Inc. (AAPL), ARIA, HALO, RMTI, SPWR, ZIOP

As good a technical indicator as PnF is in predicting stock price movements, the recent implosion of ReneSol (NYSE:SOL) stock offers a good and needed reminder that no charting system is infallible...

A couple of days after piercing through its Bearish Resistance Line back in September, SOL pulled back when the company announced a secondary offering. And even though the terms of the secondary were a little too generous to its buyers, SOL's PnF chart never gave any signal that anything was wrong with the company's business…On every pullback, the stock's PnF supports held ground. Then the company announced earnings this past week and the proverbial s*#t hit the fan, the bottom fell out, and along with it, every single PnF support marker…all fell like dominoes…and I had egg on my face, pure and simple… :-(

So what does one do…

a) Need not win every single bet to make substantial money in the options market…

b) One must never bet the farm on one horse…spread the bets…

As confident as I was in my SOL bet, I noted in a post, before its recent debacle, that my focus has shifted towards biotechnology…a number of stocks mentioned in that post have done quite well for me...even though I am disappointed that my SOL bet did not pan out, my other bets' better performance blunts the pain… :-)

In other words, it's important to diversify…not a whole lot, but enough to help mitigate the pain of bets that could, and will, go awry…too much diversification will only offer moderate growth…however, that's "moderate growth" in the options world…lol…

Since my SOL bet did not translate into a windfall, I switched my allegiance to another company in this sector…that company is GTAT…

Readers following my blog since its inception may recall that I had GTAT in my O2W portfolio when the stock was sub $5, but bailed out early, way too early, and missed the run of the recent past…A significant disappointment to me personally…Thankfully, my O2W still managed to do quite well...However, the company was never off my radar and its recent agreement with Apple and then the subsequent secondary and the inevitable price contraction to accommodate the secondary has created a significant opportunity, imho…Technically, its PnF chart switched trends when the stock pierced through its bearish resistance line…Beware, though…'cause it shares many similarities with SOL…I am, however, confident that it won't pull a SOL on me …Shhh, famous last words…

We shall see… :-)

And as long as SPWR does not print $27 and consolidates in a tight range for another day or two, I am cautiously bullish on its chances to attack its most recent high of $35+...and quite possibly breakout and try and establish a new floor in the $40s range…and all this could happen within the next 4-8 weeks…however, should it print $27, this scenario may get delayed by a few weeks...

Am still bullish on GALE, though have taken some cash off the table and rolled it into GTAT…I believe that $5 is an appropriate target stop for a much needed breather…another biotech I like is RMTI…also have a position in ARIA and am watching it very carefully…should it print $6, it's ride could be a doozy…on the other hand, a print of $3.75, only 23¢ away, will not be good…so extreme caution is advised…also looking to get back in HALO…Watching ZIOP very carefully…in with a small position and have my antennas up for the signal to pile in...

Still bullish on Apple...

All of the above in my humble opinion...

kp

DISCLAIMER: All postings made here are strictly for my personal record keeping and in no way, shape or form, am I even remotely suggesting others to follow my Buy and Sell moves. Trading options is definitely not for the faint of heart as one's portfolio can move up, or down, anywhere between 10%-30% during a single trading day. Feel free to follow my progress here, but PLEASE do not follow my moves. However, if, in spite of all my exhortations, should you decide to do so, be advised that you, and ONLY YOU will be responsible for any losses that you may suffer...In other words, the onus is strictly on you. On the other hand, if the move(s) result in a profit for you, I am open to discussing a split. ;-)

Disclosure: I am long AAPL, ARIA, GALE, GTAT, HALO, RMTI, SPWR, ZIOP.

Stocks: AAPL, ARIA, GALEQ, HALO, RMTI, SPWR, ZIOP