GRPN Breaking Down At Trend Line Resistance

Dec. 04, 2012 12:12 PM ETGRPN
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Long/Short Equity, Contrarian, Technical Analysis, Gold & Precious Metals

Contributor Since 2011

Why “Playing the Ponzi”? I view the entire monetary and financial system as something of a Ponzi scheme. Starting with currency that is created as debt, and running straight through a global economic model that is based on infinite growth in a finite world. This won’t end well. I’d go a step further and suggest that our materialistic value and belief system is another way in which we’re building castles on sand… but I digress. I view our financial markets as a casino, and frankly, I like gambling. I prefer technical analysis to fundamental analysis because I find the “behavioral” side of investing more interesting than longer term projections based on financial/numerical analysis. Pictures make more sense to me than numbers. I'm dumb like that. As for an investing “philosophy”, I believe in small/micro-caps. I believe the market rewards growth above all else, and growth is easiest (to spot, at least) and most explosive when a company is young and small. As a company matures, its growth inevitably slows. Microcap stocks tend to be extremely volatile so I believe strongly in taking profits on the way up (or exiting quickly if the entry point proves poor). I attempt to buy stocks that are pulling back in the midst of a longer term uptrend. I hold anywhere from hours to years, but usually in the 3-6 month range. I am an amateur investment enthusiast, who has committed every investing cardinal sin at some point - and sadly, sometimes still do. Between first entering the markets in 1999, and 2002, I lost 90% of my seed money. Since then, I’ve found an approach that works reasonably well for me. My average return has been about 20% annually since 2003.

On an intuitive level, I've been a Groupon (GRPN) Bear from Day 1. It's not that I don't like the product offering. Heck, I used a Groupon offer to stay in a ritzy Washington D.C. hotel this last weekend, and it was a great value. However, I struggle to see how a Middle-Man re-selling desperately cheap offers can secure long term business success. Plus some have questioned the accounting. So I've been interested in shorting GRPN for awhile, but for whatever reason, E*Trade wouldn't let me short the stock itself. So with GRPN's recent rally (75% in 15 calendar days), I finally got my short on via Put options. The options are still dirt cheap, with in-the-money $5 Dec 22 Puts currently pricing in just .08 of time premium. Leverage for darn near free.

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