A few days ago, I was having a dialogue with a fellow trader about General Electric (GE). We were discussing the stock mid-morning as GE had steadily weakened the entire morning in defiance of the general small uptick in the market. When he asked me what I thought of it, I noted that the stock may keep going down, but I was nervous about establishing a decent position in the stock as I tend to get shaken out of the superliquid stocks if they go against me. If I were short, say, 7500 shares of the stock from 15.16 with it in a 15.15 to 15.18 range and it ticked merely to 15.19, Iâd cover based on my line of thinking in taking a quick out thus rapidly taking a three cent hit. As I told him, I was lost in the trees in the forest and would definitely have lost at least a penny average on the 7500 shares when the stock broke to a new low, but came right back up through the 15.15 resistance which was the old support. That is a $100 knick or so plus ticketsâ¦well, this adds up. What I told him that it was entirely plausible that the stock would trade below 15 at some point during the day (which it did), but that I did not have the psychological ability to put it away and forget it. I further noted it was one of my biggest weaknesses as a trader. In this time of relatively low intra-day volatility (well, compared to the latter half of last year), let me please make three points. First, there are many ways to day trade. One of them indeed is to hold things for longer than the two minutes average I tend to hold my positions. There is obviously a much greater risk-reward ratio for holding positions for longer durations of time, but GE sure did look weakâ¦yet Iâd have lost money trading it the way I normally trade. Second, we all know our strengths, but it is equally important to know our weaknesses. I know one of mine is that I am very antsy when it comes to trading so I try not to play to that weakness because all it can do is work against me. Finally, be aware of alternatives to fight the weaknesses. In my case, I preach after years of analyzing my trades on a daily basis, I tend not to make money net-net if I do not see a path to make at least 20 cents per share easily in a trade. I daily see people calling out ideas in which this is difficult to do; if they can make money scalping, more power to them. I cannot. Thus, it is safer to me to trade a stock like a DRYS or a GS if versus a GE if I can clearly see the possibility of making at least 20 cents per share on the trade whereas people with more patience yet people who will take more risk can see that. The big conclusion: know yourself and you will be much a better trader for it AND know your stocks and you will be a much trader for that too. Overnight, stocks were up nicely in Asia; prices up 1.5% in Tokyo and 4.5% in Hong Kong after their market was closed for three days for the Chinese New Year. However, European bourses were slammed 1% to 2% across the board after Shell posted terrible earnings, terrible unemployment numbers in Germany, and a resumed slide in banking shares. State-side, futures are taking their cue from Europe with futures down. Look for the trend to continue into the open. After that, on what is the busiest earnings morning of the quarter, things should be amazingly quiet. With three days of gains under our belt, there will likely be some short covering, but the banks/financials will lead the way today so look for a shallow down day unless the financial sector totally reverses. Reiterating- 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 SEPR- great earnings SYMC- good earnings WDC- good earnings CAI- good earnings HBI- good earnings CVD- good earnings WHI- closed near a high; looking for momentum thru Wed 12.20 high if it gets there SBAC- closed near a high NTRS- closed near a high TROW- closed near a high IBOC, PRSP- among regional banks closing near a high SUN- closed near a high AMB- closed near a high LNC- closed near a high CMA-closed near a high BNE- closed near a high MTG- closed at a high MKC, NUE- on âMad Moneyâ last night LLY- decent earnings RTN- good earnings Bad-The following stocks have bad news and/or a weak technical pattern QCOM- bad earnings SBUX- bad earnings RYL- bad earnings ALL- atrocious miss on earnings; PRU and MET could move in sympathy RHI- beat slightly, but stock was down after-hours CTXS- terrible earnings NTY- bad earnings ISIL- bad earnings AVCT- bad earnings DRYS- announced $500 million share offering ALD, CNB- debt at both banks downgraded yesterday morning; both stocks demolished NEM- pricing 30 million shares at 37 in secondary offering CENX- pricing 24.5 million shares at 4.50 in secondary offering ABFS- bad earnings BDK- bad earnings CSH- bad earnings EQT- bad earnings FO- bad earnings PII- bad earnings SII- bad earnings TROW- bad earnings TKR- bad earnings TXT- bad earnings ZMH- atrocious earnings ALK- bad earnings KMT- bad eanrings Earnings: THURS JAN 29 BEFORE ABFS AEP ALK ALV AMB AN BC BCR BDK BLL CA CAL CELG CL CSH D EK EQT ETH F FCS FNFG FO GFI GNTX HOT HP HSC IP ITW JBLU KMT LCC LLL LLY MMM MO NCX NPBC NWL ODFL OSK OXPS OXY PCZ PFS PII RCL RTN SBIB SII TROW TKR TXT UA UMPQ WCC XEL ZMH THURS JAN 29 AFTER ACF ACS AMZN BRCM CB CMO CX CYBS CYT DRIV EMN GBCI HUBG INFN JNPR KLAC MCHP MWW MXIM PKI RMBS SPWRA VAR VSEA WMS YRCW Good luck today. Erik R. Kolodny
Totally my fault. I started working on this last night and got TROW from my technical research. Saw it had bad earnings this morning and forgot to delete because the news supercedes. My 100% apologies. Will have A-B-A2 out when it gets slower later in day
Great posts. I've been reading these before trading a few days now. Just curious - what are your thoughts on MO?
MO in 17 cent range as of this writing...for day trading purposes, it is not tradable for me. I do not do something unless I see a path to make at least 20 cents easier per the commentary I wrote today.
here is something I wrote up awhile ago: Frequently, a pattern occurs which has been referred to in this space as an âA-B-A2â 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 dayâs 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.
Thanks for taking the time to reply. I guess I should have asked my question in more detail. I'm long MO currently (bought it yesterday). It's up $0.40 and is hovering around that point. My question is considering the approaching earnings announcement is it a good idea to hold it until tomorrow or is it better to get out now with $0.40 profit? I know it's not a day trading question. I apologize if this is something stupid or inapporpriate to ask - I'm new.
a) When it comes to trading, there are (almost) no stupid questions. The only way I learn is by listening and asking and asking some more. b) MO already reported: http://finance.yahoo.com/news/Altria-Reports-2008-Full-Year-bw-14191799.html Best advice I for one can give is to check this free website (Yahoo Finance) for a calendar of earnings and you'll know here on out whether something is coming out morning or afternoon (plus, you can enter a symbol and get the date if it does not happen to report on the current day): http://biz.yahoo.com/research/earncal/today.html c) I for one do not feel qualified to answer your question re what to do re MO. I exclusively day trade stocks for lightening quick moves. My average time horizon for a trade is about two minutes. I will say this though if you'll let me: if you are nervous enough to ask anonymous strangers on a chatroom about your position, take at least half of it off. I have found whenever I am pretty clueless about what to do in a trade that the best thing i can do is take (at least) half of it off and reassess. Good luck.