Day Trading Thoughts For Mon. Mar. 30

Discussion in 'Trading' started by erikrkolodny, Mar 30, 2009.

  1. erikrkolodny

    erikrkolodny ET Sponsor

    For those that really know me and have seen me trade, all of you know that I have a disciplined methodology as to when I enter a trade – something I’ve discussed in detail in this space. But, whereas I try to have entry of trades to as close a science as I can make it, exiting a trade is very much an art. I have two distinct ways I exit a position. If wrong, I do not want to be a part of it. For instance, let’s say XYZ is trading 49.98 to 49.99. The high of the day is 49.99 and the low is 49. All other parameters (had an upgrade for news, market rallying, and so forth) are in place. I buy the stock at 50 at the new high. At that point, the market downticks and there are two distinct reloading sellers (i.e. entities who are not moving on the offer). I exit the whole thing as quietly and efficiently as I can. If I am now afraid the stock will fall to 49.75 and more importantly, it did not pop right thru 50 immediately, isn’t it in my best interest to just get out and evaluate? So, I sell it all typically between 49.95 and 49.99, take my small loss, and move on. For instance, I lost one cent in stocks like WFC and MS on Friday simply because they did not pop through the entries I attained. Now, using the same aforementioned example, I reevaluate as it falls a bit after I sell it, but 49.85 holds and the market hits a new high. I decide to re-enter the position at 50.01 (above the reloaders, i.e. I am not going to make the same mistake twice in case the sellers at 50 have a lot more stock to sell). I get in at 50.01. It goes to 50.10 in four seconds. Well, now I am right. When it gets to 50.10, there is a seller there also reloading on the offer. I immediately take half of my position off at 50.09 as the 50.10 seller won’t budge. Now, I know that the stock should not get below 50 again since the old resistance should now be support so I decide to hold the rest unless it got to 49.99 in which case I’d sell the balance as the 50 number should hold- and still be ahead net-net. The 50.10 moves and it goes to 50.20 and gets stuck. I then sell ¼ more at 50.19. And I play the same game…because it got stuck at 50.10, I now use 50.09 as an out on the balance because this is where it got stuck before. This time, the stock dwindles down and sure enough 50.10 (mini-support) gives way, so I sell the remaining balance at 50.09. What this means is that on the first batch, I paid 50 and sold 49.97 for a three cent loss. When I bought it the 2nd time, I sold half for an eight cent profit, ¼ for an 18 cent profit, and the other ¼ also at a eight cent profit resulting in a 13 cent profit per share average. Thus, while I can never be as efficient or precise as I’d like when exiting a position, I am very disciplined about it and allow myself the opportunity to let my positions run (at least on part of the position) while minimizing risk. And while no methodology is perfect, isn’t it every trader’s goal to maximize reward as much as possible while minimizing risk?

    Markets were crushed overseas with the Asian markets down over 5% on average and the European bourses down 3% plus. The two pieces of negative news spurring this activity are: a) the auto task force working for the government decided that neither GM nor Chrysler had viable restructuring plans- this led to the ouster of GM CEO Rick Wagoner and is fueling fears of nationalization of the auto industry. Furthermore, b) the Spanish central bank took over the operations of a savings bank, the Bank of England noted it was transferring assets of a building society, and comments were made by government leaders over the weekend (including Treasury Secretary Geithner) that the banking system may need more liquidity pumped in. This poisonous mixture is leading the futures down sharply in the early-hours. After an expected heavy down open, look for a little rally as the market is suddenly down a lot from Thursday’s close. Thereafter, prices will settle into a choppy downtrending motion in all likelihood with a little better action than that of Friday as worries about the reasons for the bounce begin to take hold. The corollary here is that GM begins rallying if the news is factored in; this would lead a mid to late afternoon rally, but I just don’t see it happening. Use GM and the financials as your benchmarks today.

    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

    WFR- mentioned on “Fast Money”

    SLAB, CLX- mentioned on “Mad Money”

    VTNC- continued massive recent run-up on Friday; closed near high of day

    CWCO- huge end of quarter window dressing as no other news readily obvious; may well reverse today

    ARNA- announced positive phase III results from the first trial of its Lorcaserin drug; could not be more emphatic when I say it is a ‘short thru unch’ particularly pre-open if it trades higher

    FOLD- positive phase II data

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

    KHD- missed earnings and won’t give guidance

    PNC- among the banks closing near their lows on Friday

    ESRX- closed near a new trend low

    CALM- missed earnings estimates for quarter

    GS, MS, JPM, WFC, BAC- among big banks hammered over government comments that the Fed may need to pump more liquidity into the banking system

    LLY- negative phase II data

    DRYS- in its form 20-F, company raised doubts about its ability to continue






    Good luck today.

    Erik R. Kolodny
  2. You know Erik, if you don't have one already, you ought to consider blogging these posts. I just like to read what other people think, and your writing style is well suited to blogging. I'd join and follow your blog.
  3. aradiel


    Same here.
  4. Thanagar