Day Trading Thoughts For Mon. Apr. 6

Discussion in 'Trading' started by erikrkolodny, Apr 6, 2009.

  1. erikrkolodny

    erikrkolodny ET Sponsor

    A tenet that I’ve come to believe in day trading over the years is as follows: ‘trade entries that look the safest usually aren’t.’ Most day traders, besides getting trading confused with investing, tend to want to get in/out of things that are very high in liquidity. In my head, if Monsanto (MON) beat their earnings as they did Thursday morning, opens higher, and begins to trend lower, it makes all the sense in the world to short thru lows via an A-B-A2 pattern. Better yet, short thru unchanged. Here’s the deal: if a company has positive corporate news (and vice versa) yet the stock cannot rally, do not ask questions as to why it is not rallying. It could be any of a myriad of reasons. There could be news from a conference call, it could be that the stock had a huge move ahead of the news so people are reacting to the news by taking profits, it could be that the market is moving hard, or anything else that sounds plausible. The bottom line is that I do not ask questions; I go with what I see. I know that if I am long MON because the earnings are good and the stock goes negative on the day, right or wrong, I get rapidly nervous and get out as fast as I can…but so do throngs of other day traders which causes a mini-panic. This is why stocks like MON can fall 3 ½ points in three minutes as occurred around 9:40AM Thursday morning. Yet, most people are afraid to pull the trigger on these type of trades because of the delta of the move. Instead, it is so much easier to intra-day trade things like Wells Fargo (WFC), or General Electric (GE) because they just don’t move as fast. Don’t get me wrong; in this day and age, anything can move. But one thinks if they buy, say, 2000 shares of GE thru a high, he/she can make 15-25 cents rapidly. But, it is GE. Inevitably, it does not work because it is so liquid and the average trader will take a 1-2 cent loss. If it does work, GE typically will notch from 10.50 to 10.53, fall back a little (at which point the typical trader panics out of anywhere between half to all of it) and then oozes higher. Thus, if one is looking for the very fast buck and is not willing to hold positions for a long(er) duration of time, these ‘safe’ situations simply prevent one from winning at trading. The solution to this is to be open-minded about the universe of stocks you are willing to play and do a little bit of homework each day to understand why said stocks may be in play. You’ll save yourself the pain of 1,000 tiny losses and allow yourself the opportunity to truly earn a real living day trading.

    Markets overseas were higher overnight; Tokyo was up 1% with the Hang Seng in Hong Kong up 3%. The gains extended to Europe with markets there up between 1% and 2%. Commodities and currencies are quiet. Futures were way up overnight, but an initiation of financials with an underperform rating by influential analyst Mike Mayo, now of research boutique CLSA has dameped the futures dramatically. Combined with the collapse of what would have been IBM’s largest acquisition in its corporate history along with the massive run-up in the markets recently, it seems as if a bit of a dip is in order today. Volumes will be relatively light amidst a slow news docket, but look for a bit of a weaker environment today- nothing dramatic. Use financials as a benchmark, however- if they can shake off the Mayo call, the market will resume the rally…I just don’t think it’ll happen due to his critical report.

    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

    PFG- closed on its high

    ZLC- major short covering rally on Friday; closed near a high

    CBST- closed near a high on takeover chatter

    SAH- short covering spike in this auto parts supplier; closed on a high

    KIM- closed near a high after a very successful share offering

    AGO- small insurer closed near a high

    RHIE- continued a short covering rally Friday; closed near a high

    MAA- closed near a high

    ICE- among the exchange stocks strong on Friday; closed on a high

    CRM- massive run-up all week; closed near a high

    ARE, HME, REG, SPG, BXP, CLI, VNO, AMB- REIT’s were the strongest sector in the market Friday; all of these closed at or near their highs

    MGM- Colony Capital, LLC is in initial talks with the company to provide capital infusion

    PEP- mentioned positively on “Mad Money” on Friday

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

    CYOU- closed near an all-time low in its brief existence as a public entity

    JPM, BK, WFC, USB, PNC, STT, MS, GS- wave of buying late Friday afternoon propelled most financials to close at or near their highs of the day, but there was a negative research report issued on the big financials this morning

    JAVA- talks with IBM collapsed in its buyout attempt






    Good luck today.

    Erik R. Kolodny
  2. Thanks for the sound trades my man, I am going to short some of these companies I will let you know how it goes.
  3. erikrkolodny

    erikrkolodny ET Sponsor

    As I've stated repeatedly on this messageboard, my average time horizon for a trade is right around two minutes. So, please do not take anything on my suggested watch/idea list as a 'hold.'

    Good luck.
  4. Believe me I would never follow anyone's advice blindly on a message board. For the record, I shorted a few shares of ZLC @ 4.80 or so, going to ride it out with buy stops.
  5. erikrkolodny

    erikrkolodny ET Sponsor

    Good re not following anything blindly. Very wise. All I am doing is presenting an idea list with the way the news/technicals indicate...above that, I note how i plan on trading it,but I am in and out fast whether right or wrong.

    Not exactly sure why you are short ZLC, but again, my time horizon is immediate-term.

  6. If you look at the level 2 lineups, you can see that once someone decides to get rid of a fair portion of shares, the bid will be run down sub 4. But as you said, this was a short-cover rally, and the fundamentals of this company are piss poor.
  7. erikrkolodny

    erikrkolodny ET Sponsor

    The issue here, however, is to decide if you are trading it or investing in it (well, holding the short longer-term)...just because you (or I for that matter) see no reason for the rally, it does not mean that it cannot go to 5 or north.

  8. I have buy stop @ 5.33, I understand what you're saying.
  9. erikrkolodny

    erikrkolodny ET Sponsor

    It may well work...I just trade for the immediate-term, i.e. I am the ultimate risk-averse day trader. But I see what you're going for here.

  10. Hey man I feel you on that--pretty risk averse myself, but I'm simply not working with enough capital to produce profitable trades off a few pennies, I'd get destroyed by commission.
    #10     Apr 6, 2009