TUES. AUG. 31- Things Could Be Worse... Sometimes, in the dreariness of January chill and clouds, there are sudden bursts of warmth. Expectations are for cold, cold, cold particularly in the northern half of the United States. So when the temperature in a place like Chicago warms to a balmy 38 degrees Fahrenheit after a string of days whereby the temperatures ranged from 0 to 25 degrees for two weeks, the temperature feels pretty good even if it is still very cold. Such an analogy is what is apt when discussing Friday's market. First, the GDP data came in at a revised 1.6% growth rate, above estimates of 1.3%. This is like lowering the limbo bar to make a number easier to beat when realizes that the growth rate is notably slowing. Second, Fed Chair Bernanke noted that the Fed stood ready to take action if necessary to fight whatever ails the economy. Because the perception was there that the Fed was acting in a hapless manner, traders zoned in on definitive chatter rather than the fact the Fed is still very worried about the economic outlook. Finally, Intel (INTC) warned on their revenue outlook. Yet there had been rumblings that this would happen thus when the estimates weren't as bad ad what could have been, another sigh of relief was exhaled. Realize that in trading, perception matters more than almost anything on an intra-day basis. A trading session such as Fridayâs is one of the finest example of this core truism. Markets in Asia were pummeled overnight as the effect of the Japanese intervention was extraordinarily short-lived as many experts feel not enough was done. The Nikkei was down 3.6% with Hong Kong off 1%. The story is the same in Europe with all of the bourses down around 1%. The dollar is quiet, bonds are slightly ahead, gold is up slightly, and oil is down slightly. Futures continued their descent from yesterday. Itâs the end of the month so trading tends to be unusually volatile if not a bit more random particularly in such a lightly-staffed week as this one. Look for a chop all day long with an eye on the relationship between the dollar-yen and the 10-year bond. Chicago PMI is out at 9:45AM with 57.5 expected and consumer confidence at 10Am with a 51.3 expected reading. Focus on the relative strength plays very early on, the myriad of stocks in the news due to mergers or merger rumors, and all big cap techs/financials as a tell for any trade particularly as the day progresses. 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 REE- closed near a high COGT- closed near a high, above its 10.50 target acquisition price ENER- decent earnings BNVID- FDA OKâed BNVIDâs plan for phase III clinical testing of Menerba SKS- an article from U.K.âs âDaily Mailâ implied a consortium of private equity companies is considering an $11/share bid for SKS MON- lowered earnings guidance for the year; sees $2.40-$2.45/share vs estimate of $2.49 Bad-The following stocks have bad news and/or a weak technical pattern CHBT- closed near a low DGIT- closed near a low after warning on earnings LULU- closed near a low AMZN- closed near a low CRM- closed near a low WYNN- closed near a low X- closed near a low BIDU- closed near a low GS- closed near a low OSK- closed near a low SEED- poor earnings Earnings: TUES AUG 31 BEFORE DG DSW ENER ISLE TUES AUG 31 AFTER APSG 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
WED. SEP. 1- My Name Is Earl The only two dates applicable to this piece-at least applicable to the NYSE website- are August 9, 1976 and September 27, 1985. Anyone know (or remember) those dates off-hand? The are the dates with which two names were spoken by the populace of the Northeast region of the country- Belle and Gloria. Hurricane Belle caused over $100 million in damage when it passed from eastern North Carolina through New England. Hurricane Gloria was even more powerful when it made landfall on western Long Island before rocketing up to Maine in causing $900 million in damage. Yet, the NYSE only closed early (or not at all in Gloriaâs case) twice in its history (again, according to the NYSE.Com website)! I bring this up because of a name that will be in the news a lot in coming days- Earl. Hurricane Earl is on a perilous path which would take it just east of Cape Cod at this time but a slow moving cold front would allow the storm to make a much more dangerous trajectory for residents of coastal towns from North Carolina up to the eastern shore of Canada. For trading, this could have an impact from nothing to the government delaying the jobs report on Friday to even lower volumes to a complete shutdown of the exchange. This is very important because itâll make the action that much more prescient today and tomorrow as we are potentially looking at a dearth of data and participants to a possible albeit highly unlikely four-day closure for the markets. Furthermore, many traders are not paying attention to the storm track and may well be caught off-guard. While it remains fairly likely that the strongest part of Hurricane Earl will stay offshore, be well aware of history as well as the possibility of the impact this storm may have on trading later this week. Markets throughout the world rallied sharply overnight after manufacturing data and economic information out of Australia came in stronger than expected. So, everyone piled o the âbullishâ side of the see-saw for the day at least with Tokyo up 1.6%, Hong Kong 0.4%, Frankfurt 1.1%, and London 1.4%. Bonds are down slightly, the dollar is notably weaker (which may prove to be a negative later today if that gets exacerbated) and gold and oil are both higher. ADP jobs data came in this morning at a loss of 10,000 jobs- worse than the 13,000 created estimate. Construction spending (a drop of 0.4%) and the August ISM index due to come in at 53.3 will be issued at 10AM with crude inventories to follow at 10:30AM and auto sales out at 2PM. Futures were strong as is- and rallied more after the ADP data came out as itâs the same story as last Friday- not as bad as it could have been. For the day, the 10Am numbers may well prove pivotal but look for the gains to hold. Trading volume will remain low with corporate newsflow also subdued. Focus on the earnings plays, the merger stocks, A-B-A2âs to the upside after 10AM ET and relative weakness plays early on. 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 QDEL- received FDA 510k clearance for RapidVue hCG test CHBT- closed near a high CF- closed near a high GIII- great earnings SLRY- received 4.07/share cash buyout bid from KNXA CASY- received raised 38.50/share takeover bid JOSB- decent earnings HNZ- decent earnings JOYG- good earnings Bad-The following stocks have bad news and/or a weak technical pattern APSG- poor earnings FORM- poor earnings RIMM- closed near a low SNDK- closed near a low SKS- island reversal in closing near a low after vague takeover rumors published earlier in the day CREE- closed near a low WINN- closed near a low after posting earnings Earnings: WED SEP 1 BEFORE HNZ JOYG WED SEP 1 AFTER CGA HOV MATK PSS SAI 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. SEP. 2- Not Taking The Bet So youâre standing 4th in line at a grocery store. Three people ahead of you, you notice the cashier ask the customer if theyâd like to play double or nothing meaning if the coin lands on tails, she gets free groceries; however, if the coin lands on heads, the customer has to pay 2.5 times as much. The two other people in front of you are posed the same question. Thus, when you get to the front of the line, you are ready for the question and know how to answer. For fun, you may do itâ¦totally depends on how much of a gambler you are. Now, letâs say youâre standing line with a five or even six figure check deposit at your local bank. Youâre fourth in line. You notice the three people in front of you are offered the (almost) 50-50 split with of course the bank getting the 50% juice. I think itâs a pretty good bet that most day traders reading this would turn down this option. With those parameters in mind, it will likely puzzle me until the end of time why people take those bets time and again which is what led me to write this two weeks ago (after having learned the very hard myself quite some time ago): http://www.capitalmarketforum.org/entry.php?130-FRI.-AUG.-20-It-s-Not-Always-Sunny-In-Philadelphia These days, every economic number is followed and seized upon by the markets- oftentimes dramatically. Going into an economic number with a position is a recipe for a net losing position. As a colleague and good friend pointed out yesterday, if the move goes your way, typically youâre happy to take the profit quickly. If it goes against you, many people hold on hoping for the best and of course usually get demolished thus the first double or lose it all and more analogy above. Furthermore, if a number comes out and the market is in a strong trend with the economic number only piling on to the trend, donât fight it. It is these types of situations in which the second analogy comes into play. On a day like yesterday, if the market is strongâ¦and getting much stronger after twisting every piece of news- good or bad- into something positive, itâs a force not to be reckoned with. So, this is as basic as it gets (to me) but Iâve lost more than the GDP of a small country in my first 8-10 years of trading: do not gamble by going into an economic number holding a position particularly these days and do not add to short positions in a sharply rising market (and vice versa). Markets throughout Asia rallied overnight with Tokyo up 1.5% and Hong Kong up 1.2%. In Europe, prices are generally flat equity-wise. Oil is slightly weaker with gold slightly stronger. The dollar is a tinge weaker against the yen while itâs flat against the euro. Bonds are a little weaker with the 10-year yield back at 2.60%. Jobless claims data and factory productivity came in about as expected. A drop of 1.2% in factory orders and a decline of 2.6% in pending home sales are expected at 10AM. Futures are a little higher. Ahead of the jobs report tomorrow, look for stocks to trade higher this morning with the 10AM numbers shaping things thereafter although the bias likely remains positive for the day after yesterdayâs short squeeze. The focus will be on the merger stocks, the smallcaps in the news, and A-B-A2 plays to the upside. 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 CRME- received marketing OK in Europe for Brinavess SAI- decent earnings AAPL- closed near a high NFLX- closed near a high AMZN- closed near a high CEPH- closed near a high on takeover rumors CRM- closed near a high FCX- closed near a high SRZ- closed near a high after announcing a restructuring and settlement agreement with HCP JOYG- closed near a high after posting earnings BUCY- closed near a high DNDN- closed near a high APC- closed near a high PNC- closed near a high WHR- closed near a high OXY- closed near a high HES- closed near a high OREX- entered into a partnership with Takeda to commercialize Contrave in North America SCMR- decent earnings UTIW- decent earnings BKC- rumored to be bought out for 24/share Bad-The following stocks have bad news and/or a weak technical pattern HOV- poor earnings PSS- poor earnings POT- closed near a low Earnings: THURS SEP 2 BEFORE DLM UTIW THURS SEP 2 AFTER ARST COO FNSR TTWO ZQK 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
FRI. SEP. 3- Some Facts and Fiction Re Day Trading There was an article in the âNew York Timesâ a few weekends ago about day trading: http://www.nytimes.com/2010/03/28/business/28trader.html?hpw One can have any opinion of the article that one wants to have (and I encourage all day traders) to read it, but as someone who has been trading for almost 25 years now (going on 15 full-time) and as someone who is lucky enough to be affiliated with a firm at the forefront of a lot of day trading technology/routes, I want to go over a few things which I agree and disagree with. Myth: âAnd perhaps you assumed that the twin calamities of the Internet crash and the Great Recession had doomed the day-trader species in the unruly jungle of American capitalism.â Two of my best trading years happened to be in 2001 and 2008. Where most day traders get into trouble is trying to create profits in a non-moving environment and suffering little knicks or fading markets such as being long throughout most days intra-day in 2001 or 2008 or short throughout most trading days intra-day in years like 2009. Myth: Most day traders are âSurrounded by the playthings of his daughter â a toy oven, a doll house.â Every successful trader Iâve known as had to be secluded in a home office or in an office away from home. Trading is hard enough without being distracted by (admitted much more pleasurable) things like making lunch for oneâs kids. Fact: Re- âToday Traderâ¦a two-year-old Internet venture that is âabout helping traders find success through virtual technology,â as it says on the companyâs Web site. The company charges aspiring traders $199 a month for a live, real-time view of Mr. Lindloffâs computer screen, along with the running banter, commentary and advice that he and Mr. Gomez provide through the morning.â This type of thing indeed can and indeed does help. The free chatroom (audio, video, and old school typewritten) Iâve been honored to help anchor has helped many people based on feedback and certainly has kept me sharp in evaluating all kinds of ideas Iâd never see without it. Fact: âIt might read like a teenagerâs idea of a haiku, but this is the new frontier in do-it-yourself trading. Today Trader and its rivals are tiny operations, and they have modest followings. But they are harnessing all the crowd-sourcing features of the Internet circa 2010.â It is true. There are all kinds of interesting utilities such as chatrooms and amid the Facebook Era of social networking, trading can be made seemless locale-wise as well as allow people to help each other like never before. Both Facts: âAbout the most we know is that the day traders skew male, and the number of trades per $100,000 in client dollars is a little less than half what it was back in 2000, according to the Charles Schwab brokerage firm.â It is indeed a male-dominated business and trading volume is not what it used to be as volumes have fallen overall. Stocks like C can skew things electronically volume-wise, but the overall pace of activity is not nearly as frenetic as it once was. Myth: âMr. Gomez and Mr. Lindloff are among the few who started day trading in the late â90s and never stopped. At a late breakfast, just after that $60 morning, the two are sitting at a sidewalk cafe. You expect them to be revved up and antsy. Instead, look like members of a mellow Southern California rock band that split up 15 years ago. The most agitated either gets while trading online is the occasional âgoddangit,â Mr. Lindloffâs idea of an outburst.â Overall, most successful day traders are not quite as relaxed as these two gentlemen which may stem from the fact that they have a side business. Most of the time, if traders take time off to do things like have breakfast routinely- particularly in the early part of the trading day at, say, 9:45AM when it is most active- they tend not to be successful over the long-run. Fact: âIt is, to be sure, an odds-defying performance. The great mass of studies point to the same conclusion: trading is hazardous to your wealth, as an academic paper memorably put it. The losers far outnumber the winners.â Very true. Depending on the numbers one looks at, over 90% and as high has 99% of day traders donât make it. Usually, this Is due to things like lack of discipline or too much fear in oneâs trading. Myth: So why do people persist in this line of work? âThe technical term is thrill-seeking,â says Hersh Shefrin, a professor of behavioral finance at Santa Clara University in California and author of âBeyond Greed and Fear,â an exploration of investorsâ mindscapes. âThereâs an adrenaline rush. And the thing about day trading is that it gives you pretty quick feedback. If you buy and hold, a lot of things need to happen before you see a result, and much of what happens relates to external factors that are beyond your control. With day trading, youâre in charge.â Much of this is not true. People persist in this line of work because they think they can beat the markets. People (like myself) want and need to earn a living. I donât trade for thrills. I trade because I happen to be decent at numbers and need to do something to pay the bills. Next, day trading does give quick feedback but a lot of things need to happen as well in day trading. Itâs not a crapshoot. Furthermore, one is in charge only if one can control oneâs emotions and if one does not take positions over and above what one should. Then, one loses control. Myth/Fact: âAsked about the Today Trader method of buying and selling, both men seem momentarily stumped, as if they never saw the question coming. Then they talk about the search for âset-ups,â which seems to translate roughly as âgolden opportunities,â but they struggle to put a finger on what set-ups are, or how to spot them. It has something to do with tracking trading volumes of stocks and buying heavily traded stocks as they rise in price. But how to know a stock will keep rising? Intuition, they say. It tells them whether theyâve arrived at the party too late (in which case they wonât buy), at the right time (in which case they buy), or just before it ends (time to sell). â I do not know if this is journalistic license, a misunderstanding by the reporter, or the fault of the gentlemen in explaining what they do. However, many services offer ostensibly nonsense in their forums whereas many others actually have something of value. It is up to the trader to determine what makes sense. If something is clearly amiss and the anchors of said chatroom constantly change their story and methodology, itâs a warning sign otherwise if definable with criteria laid out in black and white, the information usually tends to be fairly good overall. Myth: âSome of those forces are hard for the Today Trader duo to fathom, too. Mr. Gomez says that day trading has become far trickier in recent years because of the rise of robo trading â the use of computers to automatically buy and sell huge numbers of shares in superfast bursts, based on algorithms. â It is true that many of the moves arenât as smooth as they used to be, but there are other factors at stake too such as the decline of the VIX in recent months as well as decimalization which has created more ânoiseâ amidst a move. However, if one does oneâs homework, there are always moves to be had. Fact: âAbout the most Mr. Bettinger will say about day trading is that itâs a âtough gig.â âYouâre competing against mega-institutions that are trading in hundredths of a second.â The competition one goes up against is among the wealthiest and most intelligent on the planet. Fact: âThe only thing you can control is your attitude,â Mr. Gomez replies into his microphone, moments after the question is posted. âNot looking back, not kicking yourself for not catching the whole move. Youâre never going to be perfect. Nobody is going to be perfect.â Attitude is what it is about. Psychology. Control emotions. Discipline. So, itâs interesting to see weâve made it back into the âNew York Times,â but as with anything, the articles are always worth parsing and dissecting. In Asia, markets were up 0.5% in Hong Kong and 0.6% in Tokyo. The gains have only been magnified in Europe with prices up 1% to 1.5% across the board. Oil is up slightly, gold is down 1%, and the dollar is broadly ahead with bonds lower. The main impetus has been a stronger-than-expected jobs report which gives credence to a good Ism report on Wednesday. Futures are sharply higher and still going. ISM Services of about 53 is due out at 10AM. For the day, the bulk of the action is likely to occur in the first portion of the session as traders head out for their long weekend. Look for the gains to hold pending a poor ISM report at 10AM. Focus on not overtrading in a narrow band as the move for today has likely already occurred, staying out of trouble overall, and relative weakness plays particularly post 10AM ET. Good- The following stocks have good news and/or a strong technical pattern TTWO- good earnings FNSR- good earnings COO- good earnings HRB- good earnings ULTA- good earnings NFLX- closed near a high AAPL- closed near a high AMZN- closed near a high TIN- closed near a high HWD- closed near a high DNDN- closed near a high SPRD- closed near a high DIN- closed near a high BORN- closed near a high CML- closed near a high on takeover speculation Bad-The following stocks have bad news and/or a weak technical pattern ARST- poor earnings SEAC- poor earnings WLT- poor earnings guidance CLDX- PFE pulled out of drug development deal Earnings: FRI SEP 3 BEFORE CPB 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
TUES. SEP. 7- Welcome to Autumn? So itâs unofficially autumn. Even though we lose the beach with its warm days, at least we get football! However, although the rush of everyone coming back is still there as it has been in past years, one ingredient is not likely to return this week specifically: volume. In August, volume was down 30% year-over-year. Iâve discussed the effect that high frequency trading among other things has had to total trading volume. Thereâs also been a seismic shift in the mindset of the small investor who is now no longer pre-conditioned to âbuy the dip.â Specifically this week, the economic data out is not vast in quantity much less quality along with a dearth of companies to report their earnings. Yesterday was Labor Day. Today is the first day of school for many kids- particularly in the New York area. Thursday and Friday happened to be the days for the two-day Rosh Hashanah holiday. Saturday is the 9th anniversary of one of the more devastating days in our nationâs history. The bottom line: for this week at least, donât look for much of a change from August. Volatility has been there in spates; the nominal moves many days have been big but there have also been many quiet pockets. Ergo, the low volume illiquid conditions will likely continue; trade accordingly. Markets overnight were higher across the board on Monday, but came back in overnight with Tokyo down 0.8%. In Europe, markets are down either side of 1% (after rallying the same 1% or so on Monday). Oil is sharply lower to the tune of 2.5%. Gold is up almost 1%. The dollar is down slightly against the yen but up sharply against the euro. The news du jour is the focus back on the European debt situation. 10-year spreads between the German bund and the Greek 10-year bond as an example are now almost as wide as they were as back in May. Particularly after last weekâs run-up, futures are down on worries that the European debt situation will re-intensify. With no major economic news and no earnings flow, look for a quiet day with a downside bias. Focus on the deal stocks, the materials and commodities sectors, and anything with relative strength (particularly in the first half hour post 9:30AM ET open). 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 GS- closed near a high ULTA- closed near a high VHC- closed near a high TBI- closed near a high FNSR- closed near a high after posting good earnings AAPL- closed near a high REE- closed near a high ESL- closed near a high after posting good earnings OCLR- closed near a high ORCL- Former HPQ CEO Mark Hurd joined ORCL as President RSCR- Onex to buy outstanding shares for $13.25 share in cash CASY- received a higher takeover bid for $40/share Bad-The following stocks have bad news and/or a weak technical pattern CSKI- warned on earnings guidance and CFO resigned SEAC- closed near a low after posting poor earnings CASC- closed near a low after posting earnings IDIX- verbally notified by the U.S. FDA that IDIXâs drug programs used to treat the virus that causes hepatitis C are on hold Earnings: TUES SEP 7 BEFORE CASY TUES SEP 7 AFTER NAV PBY PVH 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
WED. SEP. 8- Back To Watching Europe After a mammoth stock run-up last week, perhaps a bit of a reversal was to be expected yesterday. But the attributed reason for the downdraft was quite sinister. The euro suffered its biggest drop in several weeks against the dollar and notched a new record low against the Swiss franc. The selling was sparked by a story in yesterdayâs âWall Street Journalâ about issues with the July stress tests of European banks. Also, the euro was weighed down on comments from Germanyâs banking association that the countryâs 10 largest banks may need a significant capital contribution. Furthermore, the yen rallied after a Bank of Japan Governor intimated publicly that the Bank of Japan was not planning on massive attempting to stop the rise of the Japanese yen. All of this in turn let the yen to a multi-year high against the dollar and caused the spreads between bonds of countries such as Greece to widen against 10 year yields in Germany to levels not seen since the height of the European debt worries earlier this year. Over the next lightly traded few days, keep an eye on this entire situation as any exacerbation in any direction in the bond and currency markets can very easily have an exaggerated impact on stock prices. Markets in Asia were lower overnight with Tokyo down 2%. In Europe, prices originally trended lower as bond spreads in Ireland widened out, but then Portugal had a successful bond offering so that provided a floor to the bourses with most of them up ¼% to ½%. Oil and gold are both modestly with the dollar steady. The Beige Book is out at 2PM. Overall, it looks to be very slow once again with many participants leaving a bit early. Trading will likely have a slight upside bias but the key word there is âslight.â Focus on the limited earnings plays, merger plays, the fertilizers, and relative weakness plays (particularly early in the day). 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 X- closed near a high MCP- closed near a high after JP Morgan initiated coverage on the stock CASY- closed near a high after getting a higher takeover bid MIND- decent earnings PVH- decent earnings ALTR- decent earnings guidance GORO- closed near a high CHNG- closed near a high JKS- closed near a high VRX, BVF- closed near highs amid positive buzz over cost synergies expected from their pending merger ZGEN- agreed to be acquired by BMY for $9.75/share in cash VRTX- positive data announced on the companyâs hepatitis C drug POT- rumors out there of a higher bid from Sinochem ONXX- entered agreement with Ono Pharma for development and commercialization of Carfilzomib Bad-The following stocks have bad news and/or a weak technical pattern CREE- closed near a low CSKI- closed near a low after issuing a poor earnings outlook CHBT- closed near a low IDIX- closed near a low after the FDA ordered the company to halt its hepatitis drug MA- closed near a low NI- share offering FMCN- share offering CNST- closed near a low UDR- share offering ANGO- poor earnings guidance CPII- announced termination of merger agreement with CMTL TLB- poor earnings SLAB- poor earnings Earnings: WED SEP 8 BEFORE CIEN SFD TLB WED SEP 8 AFTER GAME MW 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
In the first portion of the typical blog post, I try to go over something that I hear discussed i the trading room and/or not understood by many traders (including myself). So, I do some homework and try to write it in terms that I and hopefully any reader can understand. The market section denotes what happened overnight along with economic numbers. I find that many traders go in blindly without knowing the night's history nor do they know exactly what big numbers are out thus they can hurt. The final section are the things I am watching and why I am watching them along with the battle plan. So, as someone who spends upwards of two hours a day at times preparing it, I know I benefit from my own research and hope others do as well if for nothing else than education and trade ideas.
THURS. SEP. 9- Using ECN's As a Guide At Times As day traders, we must seek an edge- any edge. Well, among the continuing battle of the ECNâs versus the NYSE routes, there are two definitive and important nuances one should know over and above having the basic understanding of the âflash crashâ along with the reversal pattern of spikes/plunges discussed in a blog post several weeks ago. First, there is occasionally a âflashâ or even an âerrantâ trade in a stock far away from the prevailing market. Recently, a trade took place in Goldman Sachs (GS) on the Boston Exchange (NQBX) at 10:10:30AM ET at 139.52 with the stock trading around 138 with an NYSE high of 138.55 at that time. Over the course of the next few minutes, I had four people ask me in some fashion what the high in GS was. This led to the trade. There was enough uncertainty over that out-of-whack trade in an ephemeral few moments when the market was upticking nicely that the tick became self-serving. Namely, people were looking at the stock trading significantly below where the charts and data indicated the true high to be. When the stock took out the true NYSE high of 138.55, it rallied to 139.64 in less than five minutes. This point plus move was perfect for day traders as there was a huge bid at 138.50 immediately upon entry so risk was limited from the get-go while the reward potential was relatively enormous. The second type of ECN vs NYSE battleground trade tends to take place just after the NYSE open. Oftentimes just before a stock opens on the NYSE, a few trades take place on an ECN. When the stock does open the band on the stock may show a high or a low intra-day that is away from the NYSE market. It is truly when the NYSE opens that a listed stock can pick up volume so this can be very important. For instance, the last time NCR reported earnings, it traded in a narrow NYSE band of an open of 12.41 down to 12.19 before going back to 12.40ish. Yet, the charts showed a 12.49 high due to an ECN trade just after 9:30AM ET. The stock for those that remember the story traded to 13.25 the previous session on news of an investment in the company by a major fund manager. When the market rallied early, I bought the stock through the NYSE high of 12.40 knowing that 12.49 would act as gravity for it particularly with the positive news the night before. I therefore saved myself several hundred dollars on the shares I bought by not waiting until the (ECN) tippy-top instead acting on the NYSE market. The moral here is to be aware particularly early in the day of what the range of a stock is on the NYSE and on the ECNâs; it can be the difference in your day at times. Overnight, markets were stronger worldwide with gains of 0.5% to 1% throughout Asia and ½% gains found across the European continent. Gold, oil, and the currency markets are all quiet on the Rosh Hashanah holiday. A deficit of $47 billion for the trade balance is expected at 8:30AM and the weekly crude report is out at 11AM today. Donât look for much today due to a dearth of earnings, news, economic reports, and participants. Stocks will likely meander in positive ground much of the session. 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 JOYG, BUCY- closed near dayâs high NZ- closed near a high amid renewed takeover chatter PVH- closed near a high after posting good earnings MAPP- closed near a high after releasing positive safety data for Levadex CMTL- closed near a high after receiving a military contract ASTI- closed near a high after announcing a new product line NRGY- featured on âMad Moneyâ last night GERN- announced a paper in which successful lengthening of telomeres to extend human lifespan is featured Bad-The following stocks have bad news and/or a weak technical pattern CAGC- closed near a low after a brokerage downgrade and an earnings pre-release VECO- closed near a low after a brokerage downgrade CREE- closed near a low in sympathy with VECO V, MA- closed near lows after V was cut at Bank of America AVAV- poor earnings QCOR- FDA needs more time to review Acthar ARST- closed near a low on rumors that it would not be bought out FUQI- being probed by the SEC for failure to disclosure regulatory documents Earnings: THURS SEP 9 BEFORE SNDA STEI THURS SEP 9 AFTER NSM 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
FRI. SEP. 10- Testing An Adage One of the oldest adages in the stock market is to âsell on Rosh Hashanah and buy on Yom Kippur.â For those not familiar with Jewish custom (disclosure: I am Jewish) , Rosh Hashanah marks the start of the Jewish New Year while Yom Kippur is a Day of Atonement for all of oneâs sins. Thus, it is actually a very serious period. The time between the two holidays are called the High Holy Days because this is the period in which G-d is supposed to review what one has done the last year, to decide whether one will live or die in the next year, and so forth. So, the folk adage is that the mood is much more serious thus stocks tend to not do really well during this time. Furthermore, there was a belief of some Jewish traders many years ago that they should focus their attention on their religion rather than the markets during this time thus theyâd theoretically sell all of their stocks. This notion doesnât really make a great deal of sense as itâs not a requirement to spend every minute on religion during the days between the two major holidays. Furthermore, many Jews have become quite assimilated over the generations in America. I did a little homework to see how true this actually is. A reporter from Seeking Alpha (Cleve Rueckart) did a 91-year study of the performance of the Dow Jones Industrial Average during the period of the last close before Rosh Hashanah to the last close before Yom Kippur and then did a comparison of the performance of the Dow until the end of the Gregorian calendar year (December 31). Actually, the Dow gained 0.62% from Rosh Hashanah to Yom Kippur while gaining 1.99% from Yom Kippur to the end of the year! Last year, the Dow fell 1.6% during the High Holy Days while the Dow gained 7.89% through new Yearâs Eve. In 2008, the numbers were a drop of 8.93% during the High Holy Days while the drop was 5.38% thereafter through New Yearâs Eve. So, the bottom line is that there definitely seems there is something to all of this after all but I certainly wouldnât use it as a guide if youâre trading day-to-day as obviously many other factors will be coming into play on any given day during this âholyâ upcoming periodâ¦much less the rest of the year. Markets in Asia were generally higher overnight with Tokyo up 1.5% and Hong Kong ahead 0.4%. In Europe, the trend is a tinge lower with London down 0.2% and Frankfurt off 0.5%. Gold, currencies, and bonds are quiet but oil is notably ahead by 1.5%. Futures are modestly higher in a continuation of the recent rally. Wholesale inventories are the only number on the economic docket- due out at 10AM. Look for another very quiet session today with a continual bias to the upside. The focus will be on big-cap techs, selected microcaps, the financials to see if there is follow-through from yesterday, and the shoe sector after yesterdayâs downdraft. 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 SOHU- closed near a high MCD- notable island reversal in closing near dayâs high after reporting disappointing same-store sales data ADBE- closed near a high after AAPL loosened its policies about the development of applications on its products VHC- closed near intra-day high LULU- decent earnings Bad-The following stocks have bad news and/or a weak technical pattern GFC- closed near a low SCOK- closed near a low after filing some regulatory data UCTT- closed near a low GFRE- closed near a low CROX, SKX- closed near a low after a negative report on sector out of Susquehana SWHC- poor earnings NSM- poor earnings TXN- slightly disappointing earnings outlook AAPL- reversed in closing near dayâs low JKS- closed near low of day CAGC- closed near low of day CHBT- closed near low of day MA- closed near low of day Earnings: FRI SEP 10 BEFORE LULU 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