Day Trading Thoughts For Fri. Jan. 16

Discussion in 'Trading' started by erikrkolodny, Jan 16, 2009.

  1. erikrkolodny

    erikrkolodny ET Sponsor

    In the midst of another downdraft for the markets, the worst performing sector in this young year has been the financials- specifically the banking stocks. So, what exactly is going on? Four little letters: TARP. Lawrence Summers, arguably Pres.-Elect Obama’s top economic adviser penned a note on Monday to Congressional leaders. In the letter, he intimated that any participant using TARP monies would not be allowed to acquire other entities, outlaw precious funds for dividends, severely corporate stock buybacks, and face limits on executive pay. Thus, it is difficult to hire top brains when there is no distinct pay incentive to delve out. Furthermore, it is much more difficult to invest in a bank stock when it is paring back or quitting its dividend. In the new administration, it’d appears that homeowners seem to be the priority over the shareholders in that the government is trying to stem foreclosures. It is not for me to discuss whether this is just; rather, it is important to note that ideas such as Summers’s line of thinking is what has helped to the widespread decline in the price of bank stocks. The two things to take from this are as follows: first, the government is participating as never before in the daily machinations of American corporations. Day-to-day policies can and will change in this very fluid environment. Second, don’t become incredulous at the performance of some of these stocks. When one day trades, it does not matter if a stock is at 4 or 40; what matters is whether one can make money in the next few minutes. So, just because C traded at 4 yesterday, it did not stop a short seller from making money below 4. Thus, please- keep up with the headlines as the news today was seemingly OK for example, but use the headlines to your advantage rather than staring at your screen muttering “I cannot believe this is happening.”

    Markets in Asia were generally higher overnight with Tokyo up 3%. European bourses are up 2% or so across the board, but off their highs. State-side, futures are up on the Intel news and a sense –maybe ephemeral and misguided?- that the worst is over for now in the banking sector. Look for a stronger open and some selling into it, but likely a bounce from there on what should be a relatively quiet options expiration session. Use BAC, C, and INTC as benchmarks.

    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 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

    INTC- good earnings

    RMBS- closed near a high; looking at A-B-A2 thru Thurs 9.10 high

    PALM- continues its breathtaking rise; looking for A-B-A2 to upside and/or a short thru unch if it opens higher and weakens to below Thurs close of 7.14

    COCO, ESI- up sharply amidst reports that funding for education would increase in this new batch of the stimulus plan approved by the Senate late yesterday afternoon. If it opens higher and fails to hold unch, short thru Thurs 17.12 close; ESI if it opens higher, it’d be nice to short thru unch

    OZRK- pre-announced decent earnings

    CYMI- preannounced decent earnings

    DLM, CELG- on “Mad Money” last night

    CVTX- closed near a high; looking for A-B-A2 thru 11.16 Thurs high

    CMI- solid reversal yesterday; looking for momentum thru Thurs 26.19 high

    HRS- broke out yesterday; looking for buy thru Thurs. 41.25 high

    TRA- being acquired by TRA for .4235 shares CF stock

    BAC/C- both missed earnings; C restructuring…BAC getting TARP money…but stocks up in pre-open so news may be factored in on a day trading basis anyway. A short of BAC in particular thru unch, particularly pre-open with stagnation, may well be day trade of day

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

    DNA- poor outlook and no comment on takeover which would indicate a higher bid may be forthcoming

    ZZ- missed earnings

    MA, V- MA traded down almost 4 after-hours last night, but no major news on the wires

    MFB- warned on earnings

    MI- closed near low; looking to short thru Thurs 7.74 low if it gets there

    AGU- announced a series of charges

    ZION, USB- among smaller banks closing near their lows

    BDC- warned on earnings outlook

    JCI- missed earnings and warned

    LZ- warned

    EL- warned




    Good luck today.

    Erik R. Kolodny
  2. More proof that the usefulness of a post is often inversely related to the length. Just rambling about nothing.
  3. erikrkolodny

    erikrkolodny ET Sponsor

    The only way I know how to respond is with facts. What I'd do if I were you is to spend some time self-analyzing your trading rather than talking down to me. Goodness knows I self-analyze every single day- as a trader and as a human being. In any case, I learned a long time ago that the best way to combat ignorance is with facts. I took a few minutes and compiled everything you've posted to my posts in which you made a prognostication. Below is what you typed in regular font and my very brief factual response to each post (starting with an ">>>." In the interim, I genuinely hope you have not lost too much money trading your style this year and wish you good luck:

    Dec 11: just buy MA V GOOG AAPL now and nothing for the next 15 months. You will make more money that way than scalping for pennies. JMHO

    >>>MA 145 123.25 15%
    V 53.16 45.50 14%
    GOOG 308.82 301 2%
    AAPL 98.21 81.25 17%

    Down 12% overall since that time although it has not been 15 months to be sure

    Dec. 12
    12-12-08 02:43 PM
    Maddoff scandal is a non-story. Market will surge till close.

    >>>Dow fell 20 points from 2:43 PM ET to close; still seeing residual selling pressure from hedge funds from Madoff with a massive lost of confidence in the general investor base

    12-15-08 01:55 PM
    buy buy buy market set 2 surge

    >>>Dow 8564 close, now 8125

    12-16-08 01:55 PM
    Just go long. You cant fail buying all dips. Market set to surge much higer because all bad new priced in and the recession is fake. The core CPI is unchanged. I know almost everything.

    >>>Dow closed that day 8959. now 8125.

    12-17-08 11:58 AM

    please stop rambling. I suggest you learn how to post more succinctly.

    just buy all dips

    buy goog, ewz, ma bidu

    ???Dec 16 close
    GOOG 316.50 301 5%
    EWZ 39.18 now 35 11%
    MA 148.10, 123.25 now 17%
    BIDU 132 , now 112 15%

    Avg 12% loss

    01-05-09 12:35 PM
    buy everythign you can\

    buy oil, uso, fxi, ewz, fslr, bidu, goog, rimm, aapl, ma, v, pot, mot

    short the dollar, go long the Euro

    >>>Jan 5 Dow 9035; won’t waste my time with everything else in detail except to note you were wrong across the board

    01-07-09 02:00 PM

    Obama optimism may be priced in, but recession fears by the doom and gloom media are overdone The recession is very shallow according the economic numbers.

    >>>Recession is worst since 1973 already, using GDP growth as a measure

    01-12-09 09:08 AM
    go long at the open

    >>>Dow open: 8599, Dow close 8474

    01-13-09 09:21 AM
    Go long. Don;t fight the fed. More stimulus, more bailouts. Buying up bad debt. Obama won't raise any taxes for the next 4 years atleast.

    >>>Market continues lower; hope you’re right re taxes, but don’t trust your track record

  4. Erik,

    Just a question. Once you create a focus list of stocks that look like good longs, how do you trade (or do you) in down markets?

    (intraday traind I am refering to.)

    One thing I have been confused about is how to time the setups to market behavior.

    To me" buying strong stocks when the market is up" its too late, the stock has already made its move for the day..

    Can anyone elaborate?

    I ask b/c many times I have had a great chart setup with a stock, only to have the market turn down and ruin it.
  5. erikrkolodny

    erikrkolodny ET Sponsor

    Well, first, keep in mind that my avergae hold time last year was about 2 minutes 40 seconds per trade (and oftentimes much less). So, I do one of two things...say XYZ opens at 7.50, up 2 on great earnings, goes to 7.25, and goes back to 7.50...I am a buyer at 7.51 thru the new high (unless it is superliquid in which case I buy 7.50's) on the hypothesis that you get momentum buying in there.

    Conversely, on the same news, the stock opens at 5.65, up 15 cents. I short the stock at 5.49 when/if the stock gets negative because it couldn't rally on the news unless it has a lot of liquidity in which I short at unchanged (5.50).

    For instance, today, I shorted BAC pre-open at 8.32 at 8:11:10(unch from yesterday) after it initially traded up over a dollar. I covered 1/2 of it 26 seconds later at 8.22 and the balance shortly thereafter at 8.30.

    An A-B-A2 to the upside was PALM. It traded 7.65 at 9:48AM, fell sharply, and then came went from 7.65 at 13;47 to 7.75 in seconds when it went thru the new high. I bought 7.66 at 1;47:29PM and sold 7.68 1;47:39PM as it went too fast for me and I greedily did not have an offer out to sell at least half of it.

    All of this said, the best answer as a general rule is to forget the long set-ups if the market is down (and vice versa). I'd much rather be a zero than a loser. instead, use whatever set-ups you have to your benefit. For instance, I shorted the MA and V this morning from my list when it opened just above unchanged and got negative (after trading down last night).

    Next, I always intra-day trade with the market...if I am in something for a short period of time, I need market direction on my side.

    Finally, re "To me, buying strong stocks when the market is up" its too late, the stock has already made its move for the day." This is where the PALM type trade comes into play; just because a stock is up 3 with the DOw 200 does not mean that it cnanot be up 4 (and vice versa).

    I hope this helps?

  6. gotcha. thanks for the reply.

    What is an A-B, A2 setup?
  7. erikrkolodny

    erikrkolodny ET Sponsor

    Sorry for the old example, but this is just a passage I cut and example today is PALM from 7.65 down to below 7 to above 7.65

    Frequently, a pattern occurs which has been referred to in this space as an “A-B-A2” action. As this blog gains a bit of a following, this pattern- particularly in this market- should be explained further. Many times, a stock which has major news whether it be earnings, the resignation of an officer, or anything else, a stock will gap significantly higher or lower from the previous day’s close. For instance, Costco (COST) opened up about 60 cents from the close at 73.83 on the day it reported earnings (Thursday May 29). This open would be point A. The stock fell to a low of 73.28 shortly thereafter (point B). When the market began rallying that morning, the stock went back to 73.83 (second time at point A, i.e. A2). Within a couple of minutes, the stock rallied 80 cents. Many many times, this pattern works. The reasoning for this is as such- continuing to use COST as an example- the stock opened higher on respectable earnings, fell as some people got rid of their shares, but immediately turned on a decent up day for the market. When it got to its opening level, many people who were short got nervous and covered as they did not want to hold through the previous high of the day. Thus, the stock spiked back through its opening level. About an hour or so before the market opens, it certainly is not a precise science to figure out the exact numbers at which this type of action will occur; however, it does occur a lot. So, hereafter, make this A-B-A2 pattern your friend; it is one of the major tools used in effective day trading.

  8. cf0532


    explained ABA2 pattern so clearly. It is useful ,I believe. Thank you !
  9. THanks for your explanation and example.. I have heard of others describing that phenomenon refering to it as "red to green" (bar colors) with the open as a trigger when dealing with "hot momentum" stocks

    sounds kind of like an Opening range breakout strategy with a directional bias. (gap direction)
  10. cf0532


    Yes, RMBS fits the ABA2 so greatly.
    #10     Jan 16, 2009