Day Trading Thoughts For Tues. May 12

Discussion in 'Trading' started by erikrkolodny, May 12, 2009.

  1. erikrkolodny

    erikrkolodny ET Sponsor

    Marking the close. Surely in 2009 that is not done anymore, is it? For those unfamiliar with the term, ‘marking the close’ means painting the tape in a way that you want others to think that a stock is stronger than it looks if one is long and vice versa. As I wrote about yesterday, many of the banks with share offering had a nice rise in their shares prices on Friday. What I did not note is something I noticed yesterday: many of these stocks closed on their exact highs (WFC and MS- two stocks with massive offerings- to name but a couple of examples). Why is this done? Let’s say one had 10 million shares of the WFC offering; it is in one’s best interest from every vantage point possible to have the stock close as high as possible. First, the higher it is, the more the profit obviously. Second, the higher the stock, the more that people will talk about it. It sounds quite different for a commentator on CNBC to say “MS closed at 28 today after doing a share offering at 22” as opposed to “MS closed at 22 ½ today after doing a share offering at 22.” How is it done? Let’s say you own 10 million shares at 22. The stock is trading at 27. You want out on a chunk of it. Thus, you need volume and up action…so you place an order to buy 500,000 on the close…and others do it…thus the stock rallies a dollar plus into the bell. And Monday morning, you come in and there is a relatively ready market for your shares at 26 ½- 27 because it is down from 28.20 so people think it is ‘down enough’ when in reality the stock is exactly where it was Friday afternoon! Mind you, I’ve never done this, but it is a practice which typically marks immediate-term highs and lows in stocks/markets and indeed, this is likely the real reason the market was ‘down’ yesterday. Really, the market traded much of the yesterday in territory where it was Friday morning; the difference is that there was liquidity there to sell stock because the market was ‘down’ rather than ‘unchanged’ much of the session yesterday.

    Overnight, markets in Asia were mixed with Tokyo down slightly but Hong Kong up slightly. European bourses are hanging out just above the flat line. All else is quiet with the notable exception that oil is up again…and now approaching $60/barrel. Futures are rebounding after yesterday’s light volume sell-off, but it seems more like a lack of selling pressure rather than distinct new buying. For today, look for another relatively low volatility day with a bit of an upside bias, but no real direction…a fairly tricky day to day trade.

    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

    FLR- good earnings

    MBI- good earnings

    STEC- great earnings

    WINN- great earnings

    CT- closed near a high

    CPE- good earnings

    PGNX- good earnings

    GEOY- mentioned on “Mad Money” when referencing an upcoming IPO this week (DGI)

    PSOF- closed near a high of the day after signing a solution provider agreement with MSFT

    FCL- being bought out by ANR for 1.083 ANR shares per FCL share

    FOSL- good earnings

    NNI- good earnings

    AGM- great earnings

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

    RST- bad earnings

    NFP- bad earnings

    APC- doing a share offering

    BK- doing a share offering

    COF, BAC, WFC, JPM, USB, BBT, PFG- among the financials closing at or near their lows of the day; USB doing share offering at 18

    SCG- slashing its dividend

    RCL- mentioned on “Mad Money,” but recommended as a ‘buy’ only under 12

    F- doing a massive share offering







    Good luck today.

    Erik R. Kolodny