Day Trading Thoughts For Fri. Mar. 27

Discussion in 'Trading' started by erikrkolodny, Mar 27, 2009.

  1. erikrkolodny

    erikrkolodny ET Sponsor

    When one enters into a trade, one naturally hopes that the trade will immediately go into his/her favor. Naturally, the market does not care what anyone thinks because it is a non-living entity. And of course, stocks do not always go in one’s favor. I bring this up because so many times, I and others around me get on a great run (I’ve had runs where I’ve made money 43 days in a row) followed by a period of a couple or three days of losing in which, say, ¼-1/2 the gains of the previous stretch are given back. Even more specifically, intra-day, there are many times where one is ahead tremendous money and gives back a chunk of it rapidly. The reason for this is simple and something I went through 10 years ago: “chip on a shoulder/overconfidence syndrome.” The thought that creeps into the head of a lot of traders after a few winning traders is this: I made decent money trading 1000 shares of JP Morgan (JPM) in and out rapidly…can’t I get make a lot more if I do it with 10,000 shares? The answer inevitably is a resounding “no” to tat question. Whether it be trading too much size for one’s wallet, eating too much cake for one’s girth, or drinking one too many martinis, too much of anything is bad. The logic goes like this: I buy 1,000 JPM at 26. It fails to go through. I get out at 25.99 and take my quick loss. Conversely, it goes to 26.05 and stops, I take half of the position off. And then let the rest go. However, when in the past- thankfully many many years ago- I for one have gotten to big for my britches and decided instead of doing my normal 2000-3000 JPM that it’d be a good idea to go big and buy, say, 10000 at 26, it inevitably ended badly. Why? Because it gets stuck at 26, goes to 25.99…I now thought, “Well, it’s only $100, let’s see what happens.” Before I knew it, was 25.90 and I’d lost a major piece of my trading day. Ergo, instead of selling 2,500 at 25.99 and eating my $25 loss plus ticket charges, I was down $1,000 and frozen. I bring this up for two reasons: first, I’ve seen this phenomenon a lot recently. I’ve personally watched traders undergo that same horrible realization that I did- the irrefutable force of the market has a stronger will than us mere humans ever will. These are bright people who just felt the action coming yet became undisciplined ergo, major loss time. Second, the price of many stocks has fallen although the beta really hasn’t much less the nominal moves these things make. A stock like the aforementioned JPM can still hop around in a three point intra-day range- which was even more than it’d typically do merely several months ago. Thus, because the stock price is cheaper, traders feel they need more share to capture the move. Well, the move is still there, but suddenly one is paralyzed by trade size. Moral of the story: know yourself, know what you can truly handle emotionally and financially, and you’ll be infinitely better off as a person and a human being.

    Markets in Asia were quiet; the exchanges opened higher but came in amid negative Japanese economic numbers. In Europe, markets were steady, but have given way as the morning progressed with most bourses down around 1% or so. Oil is down a bit as is gold with the other major markets stable. State-side, the futures are indicating a give-back of much of yesterday’s rally. IBM is helping to lead the way following the negative report from Accenture plus the financials are following through on yesterday’s relative weakness. Look for profit-taking/downside action all day today, but choppy and quieter as the day progresses as it is supposed to be 60 degrees in Manhattan thus many people are going to begin filing out a little early. There will likely be one attempt to have a mild rally with the strength of the week, but just no major follow through. One general rule will be off of the open- if the market opens on its lows of the morning based on futures, anything slightly unchanged or better will likely be the first to rally (very hard) in any shot covering intra-day rally. The other note of interest is to keep an eye on the meeting between Obama and the bank CEO’s; there will likely be no major news coming out of it, but on a thin Friday afternoon trade, any headline can move the financials.

    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

    STP, LDK, SOLF, YGE, TSL, JASO- stocks in the solar sector rallied sharply; notably, SOLF/JASO closed near high

    SOL- closed near a high

    EVK- closed near high of day after posting great earnings

    DPS- closed near a high after posting great earnings

    CAG- closed near a high after posting great earnings

    USB- in a generally mixed to lower banking sector, it oddly closed near a high

    HUBG- continued its recent run in closing near a high

    WGOV- short covering powered this thing up about 20% yesterday

    MIPI- shot higher; closed near a high

    MHP- the staid publisher has seen an explosive run in its stock the last few days; closed near a high yesterday

    BNI- the king of a strong railroad sector amidst one of the biggest percentage gains in the history of the Dow Jones Transportation Index yesterday

    WRC- closed near a high

    HTZ- closed near a high

    WNC- among smaller banks closing near a high

    QCOM, JNJ, BK, STT- all mentioned positively on “Mad Money” last night

    KBH- beat on quarter, said outlook poor yet had an increase in business for the quarter with improving gross margins

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

    A.CN- bad earnings; beat on quarter, but warned on guidance

    LULU- reduced guidance, but expectations low as is so news may well be in the stock

    TIBX- poor earnings

    IBM- down in sympathy with A.CN, it’d appear…cannot find any other major news

    DHT- doing a stock offering

    MGM- its City Center project may file for bankruptcy on Monday if not before according to various newswires

    OSIR- discontinued enrollment of trial for Crohn’s disease




    Good luck today.

    Erik R. Kolodny