WED. MAR. 3- Mini Merger Mania Several months ago (May 13, 2009), I noted this about the mechanics of trading mergers: http://epiphanytrading.blogspot.com/search?q=takeover+talk Well, what is downright interesting in here is how the pace of merger activity has picked up in recent days. In the last few days, weâve seen acquisition attempts made on Bowne (BNE), OSI Pharmaceuticals (OSIP), Millipore (MIL) and then yesterday Terra Industries (TRA). A few years ago, the mergers and acquisition business was all the rage. There was a race to consolidate and slice and dice companies to make them more âcohesiveâ and âearnings accretiveâ for the acquirer. Historically, these manias come and go. Many of us Old Schoolers are familiar with the binge of the 1980âs when deals like RCA were all the rage and punctuated by the âFriday the 13thâ mini-crash on October 13, 1989 when the United Airlines leveraged buyout fell through. Things slowed in the early â90s and then picked up again big-time in the latter half culminating with the massive AOL-Time Warner as the market soon crashed thereafter. There were little waves here and there in the last few years, but the pace of merger activity has earnestly been increasing this year. And for once, hopefully maybe, itâs a good one because it shows a little confidence by firms in, well, business. In this fragile economic recovery, any sing of confidence from a macro standpoint is good. Well, why else would CF Industries (CF) raise their bid significantly for Terra (TRA) yesterday if they didnât think itâd make for a good acquisition? Plus, by offering stock and cash, it shows that funding options do exist. Now this is not a macro column so I cannot begin to guess âwho is next.â But I circle back to the original May 13, 2009; as merger activity increases, we will begin hearing rumors of things like âtake overs,â âacquisitions,â âsectors in play,â and other key buzz words. So, pay rapt attention to the pick-up in this activity and know how to play the deals day-trading wise via understanding each individual deal and by being quickly in and out of a situation. Markets in Asia were lightly mixed overnight with Tokyo up 0.3% and Hong Kong down -0.1%. Those numbers are volatile compared to Europe where every index is showing a net change in the single digits. Everything else is quiet as well. The ADP report came in as expected with the January numbers revised down. Futures are marginally higher. Itâs Groundhogâs Day all over again for you Bill Murray fans. The upside bias is continued (particularly when several people have noted to me how the S&P has a series of upside days), thereâs hope for the Greek austerity measures with the Greek-German 10 year spread at its lowest in three weeks, and itâs snowing once again in Gotham which will keep activity low. Keep your focus on the stocks in the news and avoid all momentum trading until/unless the market perks up. Reiterating- 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 specified. If 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 HGSI- decent earnings MATK- decent earnings SNIC- closed near a high after announcing that its Roxio CinemaNow entertainment platform will support digital movie delivery to the Windows Mobile platform PCX- closed near a high on takeover rumors OSIP- continued to move above its 52 takeout price in closing near a high NOVL- Elliot Associates offered to buy out NOVL for $5.75 in cash MDR- closed near a high after posting good earnings MXB- closed near a high after an upgrade AMCF- good earnings JDSU, APC- on âMad Moneyâ last night DIN- decent earnings MFB- good earnings Bad-The following stocks have bad news and/or a weak technical pattern PAY- poor earnings APSG- poor earnings NTRI- closed near a low after issuing terrible earnings TSTC- closed near a low on continued fall-out from a share offering BRK/B- closed near a low AZO- closed near a low after posting earnings CTRP- announced 5.7 million share secondary offering ARD- closed near a low after posting terrible earnings UNFI- closed near a low after posting terrible earnings CPNO- share offering VISN- terrible earnings BIG- poor earnings COST- poor earnings CSIQ- poor earnings MDVN- closed near a high, but announced this morning that its Dimebon does not meet primary nor secondary endpoint in phase III trial Earnings: WED MAR 3 BEFORE BIG BJ COST CSIQ JOYG WED MAR 3 AFTER AUY CWTR FL FNSR HMIN PETM SINA SQNM TTWO Good luck today. Epiphany Trading, LLC www.epiphanytrading.com Erik R. Kolodny- Chief Markets Strategist Brendan P. Byrne- President Joseph R. McCandless- Managing Partner D. Timothy Seaquist- Managing Partner
THURS. MAR. 4- It's So Quiet In this very placid market, there are two basic motifs for individual stocks these days: stagnant action and exaggerated action. Earlier in the week, I discussed the calm environment in which we are trading with some degree of detail, but I left out a little color on individual plays. As I see it, most stocks are simply trading so slowly intra-day in the present that ennui creeps in. During these (unfortunately many) times, the best thing to do is simply stay away. Why expect something to suddenly move one way or another at any given time given that most stocks are so quiet? Conversely, for the most part, when a stock does move, it does one of two things. It does what DVN did yesterday when Jim Cramer mentioned it during his daily afternoon 2:40PMish segment in spiking unencumbered 55 cents. Most of the time, when he talks, whatever he says during that time frame simply does not causes exaggerated moves all that much. Conversely, there are stocks such as Costco (COST) which trended higher much of yesterday morning despite posting poor earnings, breaks the immediate-term trendâ¦and then springs a point suddenly to a new high. All of this blather leads to two main points. First, moves just arenât coming particularly smoothly. The general choppiness and dearth of volatility (and volume) just arenât setting the stage for really quick and relatively easy moves as the S&P consistently finishes within a whisker of unchanged at the end of the day. And second, what to do, what to do? If youâre not independently wealthy (which unfortunately for me, I certainly am not), I still have to make a living. So, one basic thing: do what it is youâre supposed to do and nothing else. By that, I mean stick to your method religiously and trade only within the confines of it. For me, this requires precise entries, immediate exits if wrong, and doing the ½ ¼ ¼ exit Iâve discussed here many times in faster than normal speeds to capture whatever gains you can get. Yes, occasionally you will enter something that has one of those near-random spikes the way DVN kept on truckinâ yesterday. But much more often than not, the nature of the beast right now is that youâre going to get chopped up if you donât take what the market gives you so accept that for what it is. In the interim, continue to trade less frequently and in smaller size at that until things perk back up else if youâre a trend-following minute-to-minute day trader all youâll do is leave at the end of any given day of work frustratedâ¦and poorerâ¦than when you walked into the office in the morning. Markets in Asia were down overnight with Tokyo falling 1.1% with Hong Kong off 1.4%. In Europe, markets are off more modestly, but across the board to the tune of about ¼% on average. As for everything else, I pretty much feel like I can cut and paste most of what I wrote yesterdayâ¦and Tuesdayâ¦the dollar, commodities, and bonds are all quiet. Futures are muted as well albeit with a slight downside bias. Look for a day similar to the last couple except for a small down environment rather than a small up environment. Financials are showing small relative gains, but otherwise, it should be quiet. Focus on the plays in the news with no momentum trades in stocks/sectors based solely on price action alone as, well, there just isnât a lot of clear-cut price action right now. Reiterating- 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 specified. If 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 BRK/B- closed near a high APOL- closed near a high ETH- closed near a high after posting great earnings NZ- closed near a high after posting great earnings SLXP- continued momentum in closing near a high TM- closed near a high PETM- great earnings TTWO- good earnings SIGM- great earnings CWTR- decent earnings JAZZ- decent earnings HMIN- decent earnings AUY- decent earnings NKTR- closed near a high after posting good earnings UFPT- closed near a high after posting great earnings DIVX- good earnings DNDN- announced positive Provenge results late last night; they will be presented the data at a ASCO symposium in San Francisco on Friday at 4:45PM ET WES, DECK- featured on âMad Moneyâ last night FSYS- good earnings STP- good earnings URBN- good earnings ARO- decent same store sales data MED- decent earnings Bad-The following stocks have bad news and/or a weak technical pattern MDVN- no bounce in closing near a low after its phase III failure yesterday ARD- closed near a low amid continued weakness from its poor earnings earlier in the week VISN- closed near a low after posting terrible earnings ALTR- warned slightly on revenue guidance SINA- poor earnings SOMX- closed on a low CIEN- terrible earnings Earnings: THURS MAR 4 BEFORE CIEN CNQ FSYS MED STP TK URBN WEN THURS MAR 4 AFTER COO MRVL Good luck today. Epiphany Trading, LLC www.epiphanytrading.com Erik R. Kolodny- Chief Markets Strategist Brendan P. Byrne- President Joseph R. McCandless- Managing Partner D. Timothy Seaquist- Managing Partner More on what I mean when I say a stock is "in the news": http://www.elitetrader.com/vb/showthread.php?s=&threadid=192859
Welcome Back Eric! I am new to your chat room and appreciate your work. I also signed up on epiphany's page for more info. and access but haven't heard anything for past few days. Is anyone "home" in that area?? Thanks for your blogs! Stox
I'll private IM you on this one because I don't want to do anything commercial per se on this forum as I just want this thread to be dedicated to the journal out of deference to any readers much less the spirit of Elite Trader.
Appreciated, but I actually respectfully but vehemently disagree. I don't like making people scroll down to find columns much less having to read any dialogue I have with people if all they want to do is read the daily musings. But if the goal is to put daily postings out versus responding to "where should this be," well, it's not worth losing site of the goal.
FRI. MAR. 5- Don't Fight A Tidal Wave When I was in a senior in college in January 1996, I was an Honors student, a n officer in three clubs, was fortunate enough to have a pretty good social lifeâ¦and I was doing this trading thing on the side. At the time, I was doing more swing trading than considering that, well, I had things like classes and finals and want to enjoy my life before I had to worry about such things like bills. By that time, I had been trading for nine years (not full-time obviously), but had a pretty good amount of experience for a kid barely old enough to drink alcohol legally. What I also had was a chip on my shoulder. A few friends had been watching me trade (a couple of whom had given me some very minor money to throw into my account to trade for them) and I had managed to turn an original base of $15,000 into just over $100,000 in the space of two years or so. Symantec (SYMC) had traded to 28.75 on December 6, 1995. It closed at 21.19 on January 3, 1996. On Friday the 4th, it got down to 17.75 before closing at 19.37. I knew everything at this point of course after I had managed to buy some shares just over 18. Monday morning the 8th, SYMC gapped lower in opening at 18.25, fell to 16.37, and closed at 16.87 with me buying more stock that day making my average 17.63. At that point, I was almost fully margined because, you know, the volume on that Friday was the heaviest it had ever been to that time and the big volume just meant I was going to be right. Then on Monday afternoon the 8th following an early close for the stock market due to a massive snowstorm, SYMC warned. Badly. The stock closed five points lower on the 9th on 2 ½ times the volume from the previous heaviest day a couple of business days prior. And my two years of gainsâ¦wiped out almost to the penny. Let me type that again: what took me two plus years to build was wiped out in two trading sessions. I was not fun to be around for a few days, but I learned three very important lessons at the ripe old age of 21. First, the saying âthe trend is your friendâ does mean something. Secondly, trying to pick a top or a bottom on a rapidly fluid situation when the move is going against you tends to be detrimental to a traderâs finances. Finally, when a stock is halted and/or news comes out overnight and youâre trapped in something, there are few worse feelings business-wise than youâll ever experience. When youâre in a position (particularly when it is against you and youâre fighting the trend), the trade tends not to yield such a happy result. Such was the case last Friday Feb. 26 in shares of Nuvasive (NUVA) when the stock exploded double digit points intra-dayâ¦then got halted, and then opened up two more points after the halt. Daily, I tend to look for new highs and new lowsâ¦but I only seek to buy new highs and sell new lows. Things that are going higher tend to keep going higher and vice versa. So, to me, particularly after learning the hard way, it is mind-boggling to me when I voice this sentiment over and over again when the situation presents itself yet tend to get ignored much less angry sentiment when I express it. I understand the contrarian strategy; really, I do. But it is so much easier for a fluid strong trend to keep going rather than randomly reverse. So why guess? I *hate* when someone does something like short a stock just âcause it is âup too much.â Well, thereâs a reason for that. It usually doesnât work. Go with what works, donât get involved in stocks that can be halted at any given moment, and donât get trapped. I learned the very hard way and never did it again; I donât want anyone else who hasnât suffered that fate to have to learn the lesson the way I did. Markets were sharply higher throughout the world in Asia overnight with Hong Kong up 1% and Tokyo 2.2%. Europe followed in lock-step with the bourses up just shy of 1%. Commodities are nicely higher as well. And of course- stunner based on all of this- equity futures are nicely higher. There is continued optimism regarding the Greek situation, the jobs report came out strong, and AAPL is trading sharply higher. All of this leads to what will likely be another quiet but positive day overall. The action will likely be a bit more today with the focus in biotechs, techs, financials, and the relative strength plays. Reiterating- 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 specified. If 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 ZANE- incredible move yesterday after getting some orders; still closed near a high CNAM- closed near a high after announcing a supply deal MIDD- closed near a high after announcing great earnings ANF- closed near a high after announcing positive same-store sales data GS- very strong in relative terms all day yesterday; closed near a high JAZZ- closed near a high after posting earnings RMBS- closed near a high after winning a patent lawsuit over NVDA AIG- closed near a high after rumors of a settlement with the IRS TIVO- closed near a high after winning a lawsuit against DISH TTWO- closed near a high after posting great earnings AMZN- closed near a high AAPL- featured on âMad Moneyâ last night VOLC- closed near a high after posting decent earnings ITMN- announced the FDA has posted briefing documents for a March 9 meeting to review the companyâs new drug application for its pirfenidone drug candidate Bad-The following stocks have bad news and/or a weak technical pattern SWM- closed near a low MRVL- bad earnings COO- bad earnings ARST- bad earnings BOOM- bad earnings RIG- featured on âSell Blockâ on âMad Moneyâ last night ZUMZ- island reversal in closing near a low despite posting good data SOLF- poor earnings Earnings: FRI MAR 5 BEFORE SOLF Good luck today. Epiphany Trading, LLC www.epiphanytrading.com Erik R. Kolodny- Chief Markets Strategist Brendan P. Byrne- President Joseph R. McCandless- Managing Partner D. Timothy Seaquist- Managing Partner
MON. MAR. 8 - Focusing On The Best A couple of mornings ago, somebody noted a potential trade a few minutes after the 9:30AM open of a Dow Jones Industrial Average stock. The previous day, the stock had traded in a range of 32 cents, had no news in it, the market was quiet, it had failed to get thru daily resistance many times over the previous several days, and it had closed in the middle of the narrow range. With that in mind, if one is looking out in a time horizon of 1-4 minutes to do a trade (which is what this blog is geared toward), most Dow stocks are not going to race higher or lower particularly when there is no news. Did I mention that it failed that that particular trade failed 51 times in the previous six days (I went back and counted)? This leads to my point. Trading can be as easy or as simple as you make it. The goal particularly in the early going when things are moving is to get as many trades off as possible while taking quick 20-50 cent per share profits in each. In the 15 minutes after the open, I literally captured 47 cents- in 2 ½ minutes- in BRK/B, 14 cents in 26 seconds in NUVA, 21 cents again in 23 seconds in NUVA, and 13 cents in FCX in 37 seconds. So, when things are relatively quiet, it is pivotal for day traders to pick spots and focus on things that can move rather than ploddy entities which tend to have low success rates. Iâve hammered home the âpreparationâ theme until I am blue in the face; that is not what this post is about (although it still applies- it still boggles my mind when people miss out on point plus trades 10 minutes after the bell because they not only havenât studied earnings, but they canât even be bothered to study their own trades for that particular day). The take-away is this- when you are seeking to find gold, you donât go for the hardest tiniest nuggets buried deep in a mine at random. Rather, you should seek to pick up the biggest nuggets with the least effort in a timely manner after studying the survey maps. Itâs the same thing with trading. Donât go for the things that have low profit potential much less likelihood of reward; go aggressively for the lowest hanging fruit. There are only so many opportunities. The way to succeed is to go for the best ones. Markets were very strong in Asia with Tokyo and Hong Kong both up in excess of 2% following Wall Streetâs strong Friday rally. Things are much quieter in the rest of the world, however, with the European bourses straddling the unchanged line and every major commodity/currency not straying far from where they closed on Friday as well. Futures are marginally higher. There are a lot of moves in individual stocks/stories this morning, however, to the upside with the likes of AIG, MET, SEED, XRTX, RIMM, and commodities stocks like X up a point or more as of this relatively writing. With the strong bid seemingly in place, donât look for much if any giveback today with the likelihood of the upside bias maintaining itself quite good. Focus on the aforementioned movers, commodity plays, and stocks in the news. Volume will likely remain low so look for illiquidityâ¦but use it to your advantage particularly if short covering creeps in. Reiterating- 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 specified. If 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 PCX- closed near a high on continued takeover speculation CIEN- closed near a high after a brokerage upgrade following its earnings Thursday morning GMO- closed near a high after posting good earnings PUDA- closed near a high after releasing earnings estimates intra-day on Friday AAPL- closed at a new high amid positive buzz following Cramerâs recommendation on âMad Moneyâ on Thursday night JOYG- closed near a high X- closed near a high LLEN- closed near a high after posting good earnings on Thursday UBSI- closed near a high DMND- closed near a high GNTX, DWA- featured on âMad Moneyâ on Friday night AIG, MET- AIG to sell ALICO to MetLife for $15.5 billion XRTX- pre-announced good earnings X- upgraded by Goldman Sachs RIMM- upgraded by BMO YGE- decent earnings SEED- developed strategic business unit for pesticide products Bad-The following stocks have bad news and/or a weak technical pattern HPQ- lowered reported first quarter earnings due to EDS litigation charge MDVN- closed near a new low following Thursdayâs horrific news about its drug failure RIMM- closed near a low OSG- closed near a low after announcing a share offering PPD- closed near a low AKS- downgraded by Goldman Sachs Earnings: MON MAR 8 BEFORE DGW YGE MON MAR 8 AFTER ARNA CFSG FRPT HRB TIVO VVUS Good luck today. Epiphany Trading, LLC www.epiphanytrading.com Erik R. Kolodny- Chief Markets Strategist Brendan P. Byrne- President Joseph R. McCandless- Managing Partner D. Timothy Seaquist- Managing Partner
Will you set up another account for your traders, fund it with 10k and have your top guy trade it while splitting the profits with your traders? All when the trader has NO downside risk on the 10k? If you are so confident in your method, why not? BRIGHT does this... what is your edge over this program?
Please post an actual trade with a chart. Saying I made this or that means nothing unless you are just trying to prove something so you can sell us something.