Cash McDash is on a roll.  Just don’t give him grief over his new nickname.  There is an art to making money in bear market rallies. Cash explains. Is this China-based pharma company a great buy… a great short… or none of the above?

JL: So, let’s talk about the rally action in stocks. Last week the Dow gained more than 3%, the S&P was up more than 4%, and the Nasdaq picked up almost 5%. And all that came in the context of weak economic news, the worst employment number in years, and a newly slumping dollar. I’ve got my own take on this, but I know you see the world a little differently. Thoughts?

CASH: My friend, we both know that bear markets can be notorious for mauling investors. We also know that some of the strongest and sharpest rallies take place in bear markets, as you and I have both pointed out. So the way I see it, there’s nothing wrong with trading these rallies as long as you keep a clear head. You just have to be careful not to get juked out and to remember the primary trend.

JL: Right. As the bard once sang, “You don’t need a weatherman to know which way the wind blows.” Though it helps to be paying attention. Speaking of getting “juked,” how’s that fancy footwork holding up? Has it been a good week in the trenches for Cash Mcdash?

CASH: Well I must say, despite my modest nature –

JL: <COUGH> Ahem! <COUGH>

CASH: Need a lozenge there, pal? Maybe a bottle of water?

JL: Nah, I’m good.

CASH: Oh good. As I was saying… have to tell you that last week was my best so far this year. LongTop Financial (one of our recommended names) hit a new recovery high, and GFA (another one) was up 10%, finishing Friday on a great note with two times normal volume. The solar stocks we tipped for a comeback, JA Solar (JASO) and LDK Solar (LDK), were up 21% and 25%. And don’t forget my buddies over at Blackstone (BX). That one crossed $17 and finished the week 21% higher.

JL: Man, that’s not a bad week. Not too bad at all.

CASH: No kidding. In fact, you can call me butter ‘cause I’m on a ROLL!

JL: Alrighty then. Calm down there, Butter…

CASH: Hardy har har. You know I’m just messin’ around. But I do get pretty passionate about this. There’s nothing more satisfying than working hard, getting the trades on, and then seeing that hard work pay off. It just feels good to win.

JL: Oh, no doubt. I’m with you all the way there. But tell me, do you think we’re going to see continued strength? Are you hanging onto your positions?

CASH: Actually, I think the easy money for the time being –

JL: Hold on, hold on, hold on. You think those gains were easy? In this market?

CASH: Sure! When you’ve got the patience to wait until the mood is incredibly sour, and you couple that with the discipline to buy quality names that have been beaten down, and then mix in the fortitude to hold them through a rally few believed would happen… then the game really does feel easy!

JL: And playing golf like Tiger Woods is easy, too, I take it. You just line up your club the right way, take a nice swing, hit the ball 400 yards…

CASH: Ha ha, point taken. Yes, I was oversimplifying things a bit there. Every trader has ups and downs. (The great Tiger Woods has ups and downs, too.) But markets have patterns. These newly issued names have highly measurable tendencies. And don’t forget, I’ve been doing this day in and day for out for many years. A longtime student of the market can gain a meaningful edge just by watching, understanding and absorbing the patterns. A wise man once said, “It’s amazing how much you can learn just by paying attention.”

JL: That wasn’t me was it?

CASH: I said a wise man, not a wise guy.

JL: True. Okay then, so what’s next? Are you going to be closing these positions? Getting liquid? Going short?

CASH: No, I still have a bullish bent to my trading; it’s just not as screaming obvious as it was a few weeks ago. I used Friday’s exceptional strength in the solar names to lighten up positions a bit, while still holding partial positions. I’m still constantly trolling for good long-term names that will give us months of good returns, while scaling out of short-term names that offered some nice quick pops.

JL: Sounds good, Butter.

CASH: Are you going to keep calling me that?

JL: Hey, it was your personal request! Are you saying that’s no longer your preferred name? You’re abandoning it already? I can’t believe it’s not butter.

CASH: Ouch! You should be fined for that one. In fact, you may need clinical help. Which reminds me…

JL: You’re reminded you need to go to the clinic?

CASH: No, wise guy. I want to tell you about the latest name on “the calendar.” Remember, the syndicate calendar we talked about last week?

JL: Ah, gotcha. A clinical IPO.

CASH: It’s actually a secondary offering. The name is Wuxi Pharmatech (WX on the NYSE).

JL: Wuxi Pharmatech, huh? That name just rolls right off the tongue.

CASH: And the company continues to roll out new services! Have you heard of contract research organizations, or CROs for short?

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