Day Trading Thoughts For Mon. May 11

Discussion in 'Trading' started by erikrkolodny, May 11, 2009.

  1. erikrkolodny

    erikrkolodny ET Sponsor

    Friday was a pretty startling day for many traders. The most common phrase (or variation thereof) heard throughout day trading houses all over the world was “How can WFC and MS be this strong; it doesn’t make any sense?!” Well, um, yes, it does make sense. Plans have been in the works for weeks since this whole concept of stress tests came into vogue to save the banks. And indeed loan activity increasing, housing inventories dropping, the LIBOR rate falling to its lowest point in quite some time, and a myriad of other factors are quite bullish for banking stocks. But more to the point, the worst kept Wall Street secret of these last few weeks is that the banks as a general group would need to raise capital. In order to do that, private investors were needed to be buyers. And the only way that private investors would do it is if- oh I dunno- they could make money on their investments?! Thus, the only way that a private investor would buy part of the 341 million share WFC offering at 22 or the 146 million MS offering at 24 would be if the stocks were going to go one way- up- and up fast at that. And this is what we saw on Friday. I can go all conspiracy theory on you as to why- was the government buying? Were the private investors buying more to prop prices of their investments so as to get ‘wise’ economists noting how strong the banks closed after the offering? Was it the retail investor? Was it institutions plowing back in? I don’t know. I can’t guess; it is beyond my limited intelligence. What I do know is that we must pay attention to the tape- for all I know, WFC could go to 33 or 23 from here…but in the immediate-term, it was going to go higher. As day traders, we don’t ask questions- we do things like buy MS in size when it goes net positive on the day for the first time. Do not try to overthink things- trade your screens and understand that reality is not in thinking that these things cannot possibly rally; rather, reality is accepting that they can and going with the trend to earn a living.

    Overnight, the tone shifted a bit with Asian markets relatively flat, but European bourses are down 1% to 1.5% across the board. Oil and bonds also reversed a bit from their respective trends with oil retreating from a multi-month high and bonds up slightly. State-side, futures are a bit weaker following the tremendous gains of the last two months. There is no real catalyst for the profit taking other than the realization that the flood of bank share offerings is genuinely real, but again- nothing obvious. Look for a much slower day today with a lot of the energy of last week seemingly absent this morning as the stress test chaos and earnings season is largely behind us. Overall, the trend should remain all day but look for pockets of strength in selected stocks and random sharp short covering rallies if the selling pressure is relatively light both for individualized stocks as well as the overall 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

    WFC, JPM, BAC, MS, GS, FITB, PNC, STT, STI, AXP, BK, RF- all closed at or near their highs after stress test results

    HEB- closed near a high

    GOK- closed near a high

    CAAS- among the small Chinese entities closing near their highs

    LDSH- closed near a high

    CATY- closed near a high

    QELP- closed near a high

    TMK- closed near a high

    TEX_ closed near a high

    PVA- closed near a high

    ESC- closed near a high

    PCR- closed near a high

    SGY- closed near a high

    GRA- closed near a high

    ALY- closed on a high

    TVL- closed on a high

    GHM- closed near a high

    MI- closed on a high

    STAR, PBCT, FSYS- mentioned on “Mad Money” on Friday

    PRU, AFL- among the strong insurers closing near their highs

    CF- offer increased by AGU to 40 cash plus 1 shares of AGU

    DISH- decent earnings

    WCG- decent earnings

    GSI- good earnings

    CNO- good earnings

    PCLN- decent earnings

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

    LFT- closed near a low

    ENR- doing 9.5 million share offering

    USB, COF, BBT, PFG- all doing share offerings

    CPSL- bad earnings















    Good luck today.

    Erik R. Kolodny
  2. ts866


    erik, thank you for the time and effort that you put forth everyday. I read over your list and blog each morning and find it very interesting.
  3. I read it too, every morning, thanks for posting.