Day Trading Thoughts For Fri. Apr. 17

Discussion in 'Trading' started by erikrkolodny, Apr 17, 2009.

  1. erikrkolodny

    erikrkolodny ET Sponsor

    One of my favorite phrases to use when applicable – particularly apt on afternoons such as yesterday when the market is in a slow yet very steady ascent- is as such: “It’s a great day to be an investor, but a terrible day to be a trader.” I derived this from going to various social functions over the years with the average person assuming my performance as a day trader was perfectly correlated with the general market’s direction much less the delta of the move. But it of course is not. My performance is based on my adherence to my personal trading rules aka discipline, doing a lot of homework in being prepared for many what-if scenarios, and having as clear a head as possible along with one other factor. That ‘other factor’ is what I want to focus upon because it has become an extremely variable for not only myself, but for almost every other trader I know in recent times- market performance. Typically, volatility in uptrending markets decreases. So, what happens on the big up days is a general placid stair-step motion. Two steps forward, one back, two steps forward, ½ back, one step up, ½ back, two up, one back. And so forth. But particularly after the brutal bear market of 2008, traders are ingrained to look to short dips. But it doesn’t work when the market is uptrending because, well, prices are increasing. Furthermore, getting long is also nervewracking at times as prices don’t typically rally as much as they can decline. Put another way, it can take years to build a monument, but minutes to bring it down. So, what to do? First, go with the tape. All else equal if you are a disciplined momentum day trader and the market is rallying, buy equities thru new highs and if the market is declining, short thru new lows. Second, keep really tight stops particularly whenever doing any contra-trend day trading. One bad trade can destroy a day. Third, ignore the noise around you. Stop worrying about what others are doing, and what you ‘think’ should happen. As for what not to do: First, don’t overtrade. When volatility decreases, it is so tempting to increase frequency of trades. Second, don’t dramatically increase the size of your positions. That can only lead to trouble. And finally, don’t get frustrated when things just don’t go right. The rules have changed in recent weeks with the market; pay attention to the market. Bottom line- when the environment changes, change with circumstance.

    Overnight, the Nikkei was up about 1 ½% although the rest of Asia was quieter. European bourses are up about 1% as well following in Wall Street’s wake. In the U.S., futures are slightly weaker with a tug’o’-war between GOOG and this morning’s earnings darlings of GE and C. With it being options expiration today, the market is likely to remain quiet with this struggle continuing all day; the market will take its cues from the direction of GOOG in techland and the conference calls of C and GE (due to start after this writing). Likely, the overall bias will be slightly weaker particularly for the NASDAQ, but again, C, GE, and GOOG should tell the tale all day for the market.

    Please understand that if the ideas do not get to the hoped for set-ups cited below, more often than not, one should not blindly trade the symbol next to said idea.
    If the whole story is not there -
    If something is good, assume either a short thru unchanged or an A-B-A2 (preferably to the downside in a downside market and the upside in an upside market) based on direction of the market unless specifiedIf something is bad, assume either a buy thru unchanged or an A-B-A2 (preferably to the downside in a downside market and the upside in an upside market) based on direction of the market unless specified-

    Good- The following stocks have good news and/or a strong technical pattern

    TPX – great earnings

    TEL/HRS- TEL selling a division to HRS

    DFR- closed near a high; announced venture with Pegasus Capital for infusion of capital

    MTG- closed near a high

    RF- closed near a high after pre-announcing that they will post a profit for the quarter when the estimate is for a loss

    DRYS- announced completion of its “ATM” equity offering in which it raised $800 million

    EXPD- broke out to new intermediate-term high

    ORCT- rallied sharply; closed on high of day

    HP- closed near high of day

    JAH- after posting great earnings, closed near high of day

    KKD- rallied sharply after earnings report; closed near high

    BBT- terrific earnings

    C- beat earnings solidly; did not issue anything negative whatsoever so shorts continue to cover…best trades likely to be well before 8AM ET as earnings issued 6:30AM ET

    GE- beat earnings, but missed revenue guidance slightly

    Bad-The following stocks have bad news and/or a weak technical pattern

    GOOG- beat on quarter, but issued cautious comments and top sales executive took a new role within company; watch big cap tech (AAPL, RIMM, AMZN, IBM) to potentially move with it

    BIIB- beat on quarter, but said they see “$4 or more” for year with estimate of $4.05…very weird way of stating outlook

    AMLN- in-line earnings

    CYT- atrocious earnings

    PBCT- missed quarterly estimate

    MGM- Icahn pushing for bankruptcy filing; LVS/WYNN may move in sympathy

    WRI- offering 25.5 million shares; warned very slightly for the year earnings-wise

    ISRG- suspended earnings guidance; company’s visibility is ‘not good’

    CHK- cut natural gas production

    AEM, GG, NEM- among gold producers which were in the group of biggest losers yesterday; all closed near lows

    DDS, JCP, M- debt cut to “junk” by Standard & Poors

    NCTY- confirmed it lost ‘War of Worldcraft’ licensure yesterday morning; closed on its low

    AOS- poor earnings guidance






    Good luck today.

    Erik R. Kolodny