FRI. DEC. 3- Mistakes...In Context Yesterday morning, I had a fairly good trade monetarily yet my focus was on the fact that I made two pretty big mistakes and what I could take from it as well as exactly how âbigâ the mistakes were. First, the trade. With Netflix (NFLX) trading in the low 196âs after Jim Cramer on âMad Moneyâ noting the night before to sell half of oneâs position after the massive run-up, I placed orders to short the stock 2 ½ to 3 points above prevailing market price at 7:59AM ET. At just after 8AM in a span of 2-3 seconds, I got filled at 198.50 and then more at 198.99. Within a second, it actually traded to 199.80ish. Shortly thereafter, the stock went halfway between where it was and where it went at 8AM. I covered it in several different pieces between 197.45 and 197.75 over the course of the next five minutes, netting well over a point (1.20ish) on the trade. A few minutes later, it was 195 (on its way to its eventual low of 191.34- a difference of five figure money for me). In the interim, I had just written in the blog that I looked for strength to hold in the markets for the day yet negative comments at that time from Trichet actually hammered the market. I have gone over and over both of these mistakes in my head. I could go on here and note that NFLX was in the low 196âs because of negative media attention and I should have held it. I could also go on to note how I beat myself up for a couple of hours on NFLX. I also could have stubbornly gotten long the market and gotten drubbed. You know what it nets out to? I donât either, but it wouldnât have been big money. Thatâs my point. Trading the way I do (i.e. a time horizon of 1-2 minutes), I do not truly know with 100% certainty if NFLX would have gone back to 195 or 191 or 203 if somebody came out and upgraded it. When I made the market call and posted it (although I was eventually right), I was totally incorrect in the immediate-term but by not being stubborn, I saved myself the pain of losing. But what I did right among all these mistakes was sticking to my game. I learned some time ago besides trying to be disciplined and well-studied a little nugget along the way- if I earn a little bit of a move but do a lot of times, Iâll be OK. Thus, yes, I did truly think about why NFLX did what it did while getting frustrated that I didnât foresee the down blip nor capture the subsequent rally the way I wanted to. But I also realized something yesterday that has rattled in my head a little, but this is the first time Iâve written about it in this space- itâs OK within the context of my style of trading that I made those mistakes. If my goal was to make 3-5 points in NFLX, itâs not OK. If my goal was to close my heads and totally stick to my guns in staying long no matter what today, itâs not OK. But I am the kid who if given a choice between a penny and a million dollars on the flip of a coin or a sure $500,000- I wonât even consider the gamble. Wonât even register in my mind. Iâd take the $500,000 and not care (too much) how the flip would have turned out. Same here. So the moral of this is piece is as follows: within whatever style of trading you do, youâre going to make mistakes. You should learn from them in making your trading better. But definitely understand the context through which the mistake is made. My game is not to guess whether NFLX will go up or down 3 more- itâs to take what is given to me in front of my face. Psychologically, understanding context allows one to clear oneâs head fairly rapidly particularly when realizing that if the mistake is caused by something you donât focus upon as part of your trading yet youâre earning a living. Well, guess whatâ¦learn from the mistake but a lot of times, it may not be a mistake that is completely fixable within the way you trade. Markets in Asia were quiet overnight with Tokyo up 0.1% and Hong Kong down 0.6%. European bourses were flat until the jobs report came out which has sparked a downside move there to the tune of about 0.5% on average. The dollar is getting pummeled with bonds down 12 basis points from the intra-morning high on the 10-year. Gold has breached $1,400, up 1%. The main culprit this morning is a terrible jobs number which came in well below even the lower band of the range of estimates; this puts the economic recovery back in doubt. Factory orders (-1.2%) and ISM Services (54.5) are due out at 10AM. Futures are down but not getting thrashed. Look for a very volatile morning with a mild attempt at a rally early on. If the rally fails, the markets will give way to a slow bleed otherwise itâll likely simply remain choppy. The focus will be on retailers, relative strength plays in the early going, the casinos on LVSâs news yesterday, and small caps in the news such as YGE and OREX. 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 AAPL- closed near a high FCX- closed near a high RIG- closed near a high PUDA- closed near a high FSLR- closed near a high KUTV- closed near a high CEDC- closed near a high LOCM- closed near a high WHR- closed near a high AOSL- closed near a high HSII- closed near a high SXCI- closed near a high ANF- closed near a high after posting good earnings FNSR- closed near a high after posting good earnings TGT- closed near a high after posting good earnings KKD- closed near a high after posting good earnings ARG- closed near a high after being featured on âMad Moneyâ last night PAY- decent earnings CISG- approved $100 million stock buyback program and announced aggressive CEO and CFO purchases Bad-The following stocks have bad news and/or a weak technical pattern ARO- closed near a low after posting bad earnings POT, MOS- closed near their lows PVH- poor earnings AVGO- poor earnings GDOT- share offering TOO- share offering WLT- announced acquisition of Western Coal; itâs a combination stock/cash deal BIG- poor earnings OREX- FDA briefing documents seemed to be negative on Contrave ahead of next weekâs meeting Earnings: FRI DEC 3 BEFORE BIG Epiphany Trading, LLC www.epiphanytrading.com Erik R. Kolodny- Chief Markets Strategist Brendan P. Byrne- President
MON. DEC. 6- Trying To Figure Out The Figure One of the most common questions posed to me is as such: if a stock has an offer at a whole number (say 90) with its high of the day being that number, how do you know when youâre wrong and when youâre right in buying a stock at that price? Iâm going to set some parameters here as well to try to get as many as possible on the same page. Letâs also say that itâs a near perfect set-up in my eyes. The high is 90, the low is 89, and the high is 90. 90 is the same price where the stock closed the previous day. The companyâs CEO has resigned so the stock has shaken it off. There is significant liquidity at 90 with a refreshing bid at 89.97. The market is rallying. Finally, the stock is in a narrow range of consolidation between 89.90 and 89.98 for a few minutes. What I will do in this situation for a 1-2 time minute horizon-type trade is look to buy ½ of my desired position at 90 and then more just above 90 (say 90.03-90.05 limit) if I am right. However, if I am wrong in that 90 refreshes, I will look to sell ½ to the refreshing 89.97 bid and the rest if 89.97 went away. If it rallied back towards 90 a 2nd time, this time I would not buy a share at 90; rather Iâd wait until it breached that level because odds are that the 90 seller is still there. The bottom line is that whole numbers such as the example described herein are important and can work against you, but they can also work for you. By testing it lightly, you wonât lose too much if wrong yet have a piece of the stock if right and it streaks with you unable to attain more shares. Furthermore, if wrong, by being patient for a breach of the figure on a 2nd attempt, itâll keep you from repeating a mistake and give you that much more confidence to buy the thing as long as the proper set-up is there. Markets were generally quiet overnight worldwide with Tokyo down 0.1% and Hong Kong off 0.6% but London and Frankfurt are both up 0.2%. The dollar is notably stronger with it up a full euro. Oil is down slightly but gold continues its ascendancy above $1,400/ounce. Futures are down slightly after an interview by Bernanke on â60 Minutesâ and some European debt worries. For the day, look for the market to remain in a relatively tight range but with a lot of noise within that range. The focus will likely be on the merger stocks in the news (RDWR, et al), the myriad of stocks from a major hematology conference over the weekend (such as MITI), bigger biotechs on various news stories (HGSI, AGN for example), and the small cap momentum plays from Friday. 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 WLT- closed near a high after announcing a buyout bid for Western Coal ITW- closed near a high after raising earnings guidance GNTX- closed near a high on a U.S. proposal by the DOT to require back-up cameras for automobiles SHZ- closed near a high after raising its 2010 and 2011 sales outlook PAY- closed near a high after posting great earnings DEXO- closed near a high after a brokerage âBuyâ initiation rating AGN- FDA backed wider use of AGNâs lab band to treat obesity ARG- closed near a high KIRK- closed near a high SODA- closed near a high DNDN- closed near a high MOS- closed near a high BIDU- closed near a high LMLP- closed near a high HRC- closed near a high DECK-closed near a high OCLR- closed near a high KSS- featured on âMad Moneyâ last night VRGY- received unsolicited $12.15/share cash offer from Advantest VVUS- positive phase III Avanafil results GERN- positive Telomerase clinical data CYCC- positive CYC065 data SGEN- positive Brentuximab clicical data CBRX- positive phase III Prochieve data NVMI- Foundry to adopt NVMIâs CMP solution BKS- hedge fund manager Ackman ready to finance Broders acquisition of BKS RDWR- rumored to be in acquisition talks with RVBD RMBS- renewed patent license agreement with Elpida GOOG- GroupOn acquisition bid rejected MITI- positive phase II Blinatumomab results MEE- CEO to retire; company now rumored to be in play as an acquisition target Bad-The following stocks have bad news and/or a weak technical pattern HGSI- announced FDA will extend Benlysta PDUFA date to March 10, 2011 NFLX- closed near a low amid a variety of negative commentators regarding the stock on CNBC CISG- reversed early strength in closing near a low despite publicly announcing purchases of the stock by the CEO and CFO MOTR- closed near a low AVGO- closed near a low after posting poor earnings CMG- closed near a low after a brokerage downgrade Earnings: MON DEC 6 BEFORE None today MON DEC 6 AFTER PBY Epiphany Trading, LLC www.epiphanytrading.com Erik R. Kolodny- Chief Markets Strategist Brendan P. Byrne- President
TUES. DEC. 7- Don't Drive Too Fast... I love driving. Once upon a time a long long time ago, I'd take miscellaneous car trips by myself or with friends if for no other reason that I enjoy travel much less being on the open road. Well, I like most people have driven enough to know that a large majority of the time, I know what to expect from the drive. Maybe a little traffic, hopefully a lot of the open road, and some good music. However, I know if it rains, I must change the way I drive. If it is snowing, I'll drive even more conservatively and know that I better know a different set of rules (such as what to do if my car starts to spin out). Well, this same principle definitely applies to stock trading. Whether trading a market (say futures or SPY or DIA or QQQQ), general stocks within a market, or a specific handful of stocks, the rules can change. For instance, major news will likely cause a stock to move much faster than normal; if this is the case, slice down on your trading size. If the stock is moving seemingly randomly, simply try to get a feel for it. If the volume tends to be one-sided with a stock trending opposite of what one feels the news flow would dictate, assume that the one sided move can continue much less become exaggerated. Thus if the behavior of a market or stock you're trading suddenly changes particularly in an increase in velocity and volume, view it as an opportunity rather than a burden all the awhile adjusting your normal trading style. Markets were mixed in Asia with Tokyo down 0.3% but Hong Kong up 0.8%. However, there was a major development last night in tax policy development when President Obama seemed to form a deal with top Republican lawmakers in extending the President Bush (II)-era tax rates yet tinkering with payroll tax policy in an effort to stimulate improvement. This is being viewed very positively and has sparked 1% to 1 ¼% gains in London and Frankfurt. Gold and oil continue to rally with the dollar a bit weaker against the yen and euro. The only economic number of note is Consumer Credit (-$ 2.3 billion) due out at 3PM. The only other development to watch will be how the vote in Ireland goes toward approving their austerity budget. Assuming there is no surprise out of Ireland, the rally will likely sustain itself all day in a narrow trading band but on decent turnover with a good bit of action in between. The focus will likely be on the earnings plays, the myriad of stocks with share offerings, the litmus of Citicorp now that the weight of the government is off of it shoulders, relative weakness plays particularly in the first and last hours of NYSE session trading, the many small cap biotechs out with news, and stocks in play in the merger realm such as GAS. 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 MCP, REE- closed near highs in the rare earth sector WLT- closed near a high amid continuing positive buzz regarding its Western Coal acquisition VRGY- closed near a high on thinking that it may receive a raised takeover bid RDWR- closed near a high on rumors of an imminent buyout PPO- closed near a high after an upgrade CCME- closed near a high after an upgrade SPPI- positive Zevalin phase II monotherapy data for Non-Hodgkinâs Lymphoma HWAY- raised earnings guidance PLAB- decent earnings PBY- decent earnings NFLX- closed near a high X- closed near a high SHZ- closed near a high FSLR- closed near a high AMZN- closed near a high MGN- closed near a high ONCY- closed near a high AFOP- closed near a high SURG- closed near a high CTCT- closed near a high GKK- closed near a high after selling some assets to SLG in raising significant cash JBL, WY, NBL, GR. WLP- mentioned positively on âMad Moneyâ last night AZO- decent earnings MMM- decent earnings guidance CYTX- entered equity deal with Astellas Ph. To sell $10 million in equity at $7/share GAS- merging with AGL for $21.20/share in cash and .08382 shares of AGL Bad-The following stocks have bad news and/or a weak technical pattern BKS- island reversal in closing near a low despite speculation hedge fund manager Ackman may be readying takeover bid CELG- closed near a low amid negative reports about its Revlimid product DG- closed near a low after announcing a share offering FSYS- guided revenue guidance lower and doing share offering GERN- share offering SWS- convertible notes offering ABMD- ended Protect II study early due to some unanticipated confounding variables in the results RLD- share offering of 7.82 million shares at 27.75 Earnings: TUES DEC 7 BEFORE AZO MTN TLB TUES DEC 7 AFTER CASY COO HRB MW Epiphany Trading, LLC www.epiphanytrading.com Erik R. Kolodny- Chief Markets Strategist Brendan P. Byrne- President
WED. DEC. 8- The Great Equalizer Last night, the U.S. Treasury announced its intention to sell the rest of its Citicorp shares at 4.35. The final offering was titanic- about 2.4 billion shares. There are lots of things to be taken from this, but I want to touch upon the impact this had on yesterdayâs broader market action. C rallied from very early in the session; in fact it got positive by 7:55AM ET and never ticked back into negative ground. The main reason seemed to be that now that the stock was out from under government control, it makes it a more viable investment vehicle for many people who viewed C as not suitable for trading or investing. The same for many funds. So, C traded well in excess of three billion shares yesterday as money flowed there. But thatâs just it. As it turned out, index managers were also forced to buy it with the share float increasing. That turned the thing into a vortex which sucked up liquidity. Well, if indexers had to buy C as well as many smaller investors feeling the time was now OK to enter, this takes money away from ostensibly everything else. Ergo, there were all kinds of rumors yesterday from takeovers to widening of probes to SEC fines to commodities selling off whatever, but the bottom line is that stocks were almost forced to give back a little. Letâs put it this way- letâs say youâre an index fund manager and own $1 billion of stock of which $10 million was C. Letâs also say because of the increased share count, you now have to own $12 million C. Well, this means that youâd own $2 million less of, well, everything else. Ergo if you ever see a day whereby thereâs a massive share shift in a stock, be well aware of the implications it can have for the broader tape. Markets in Asia were mixed overnight with Tokyo advancing 0.9% but Hong Kong declining 1.4% as the Hang Seng index had rallied the day before on the positive tax developments in the U.S. In Europe, prices are very slightly higher. Oil is down slightly after topping $90/barrel yesterday, metals are getting hit to the tune of about 1% plus, the dollar is strong, and bonds continue an extensive sell-off with the 10-year yield challenging 3.20%. Stocks are honed in on Taxville with futures marginally higher. The bias still seems to be up as everything was shaken off yesterday overall with stocks equalizing out the C move. For today, the bias is once again higher despite some of the other broader markets spreading out so look for the strength to hold barring headlines coming out of Washington regarding the ongoing tax cut saga. The focus will be on small cap biotechs (OREX,VVUS). big caps in the news (NFLX), earnings plays, the myriad of share offerings, and relative strength A-B-A2 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 COO- great earnings QLTI- received orphan drug status for QLT091001 OREX- FDA backed usage of Contrave; VVUS and ARNA may move with it CML- closed near a high on takeover rumors CRZO- reversed in closing near a low after providing an operations update RP- closed near a high despite a huge share offering GMCR- closed near a high after a brokerage upgrade MIND- decent earnings JNPR, CRM- featured on âMad Moneyâ last night DANG- doing 17 million share IPO at 16/share, up from expected range of 13-15 FO- splitting itself up into three businesses Bad-The following stocks have bad news and/or a weak technical pattern MW- terrible earnings NFLX- CFO resigned TXN- lukewarm earnings guidance ABMD- closed near a low after stopping a drug trial early WTFC- closed near a low after doing a public offering at 30/share GST- closed near a low after announcing a 12 million share offering CEU- closed near a low amid worries over the companyâs internal controls FSLR- closed near a low MMM- closed near a low after posting earnings guidance WYNN, LVS- closed near a low GS- closed near a low RIG- closed near a low AAPL- closed near a low TLB- closed near a low after posting awful earnings FSYS- closed near a low after posting awful earnings WLT- closed near a low RDWR- closed near a low POT- closed near a low MA- closed near a low PUDA- closed near a low; announced share offering VIT- closed near a low SWC- closed near a low; doing share offering priced at 19.50 TGA- closed near a low ROSE- closed near a low VITC- indicated financial statements cannot be relied upon GDOT- 4.2 million share offering at 61 UPI- dealt setback in Medicare carrierâs coverage denial MNTA- 4 million share offering at 14.35 Earnings: WED DEC 8 BEFORE COST UNFI WED DEC 8 AFTER CMTL MATK SWHC Epiphany Trading, LLC www.epiphanytrading.com Erik R. Kolodny- Chief Markets Strategist Brendan P. Byrne- President
THURS. DEC. 9- Monitoring The Tax Policy Debate If you have a choice of selling a stock youâve owned for a very long time and paying 15 cents on the dollar or 20 cents on the dollar, what would you do? If youâre near death and have an estate for $50 million and want to leave a nest egg to your heirs, would you have them pay 50% on most of the estate value or nothing? If youâre an average taxpayer, would you rather try to max out unemployment this year for tax reasons or would you rather get a job? Well, the answers to all of these questions- while seemingly obvious- are being debated in Washington. Furthermore, as the year progresses, these are the types of issues the market will focus upon. As of a week ago, nobody had any true idea of tax policy. Now, President Obama has made a proposal which takes in some Republican ideas and some Democrat ideas in trying to form a cohesive policy- no matter your political persuasion, there is certainly no debating that the proposal is a blend of ideas. The implications can be widespread; for instance, it will further blow a bigger hole in the budget deficit if it passes in its proposed form. But for the market, what happens if nobody knows? Will people and/or funds who have nice gains on long-term positions want to hold them if their tax rates goes up next year to the new rate? Questions like this must be answered with some certainty. So, particularly as the end of the year approaches, keep a watchful eye to all political banter and the likelihood of passage of tax legislation. It is very highly probable that there will be a compromise soon, but the longer this takes, the higher the likelihood of some selling pressure coming into the market due to uncertainty as people lock in gains for tax reasons on winning positions. Markets were generally higher worldwide overnight with Tokyo up 0.5%, Hong Kong 0.3%, and London 0.5%. Gold and oil are up slightly with the dollar marginally stronger against the euro. Bonds are flat. Futures after once again shaking everything off yesterday are trading nicely ahead this morning. Jobless claims came in slightly better than expectations with wholesale inventories (0.8%) due out at 10AM. For the day, the strength will likely hold with the market in a narrow range. There should be lots of action under the surface with a focus on small cap momentum plays, earnings plays, big cap tech, and relative weakness plays (particularly 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 SOLR- closed near a high amid receiving a couple of big orders KFY- closed near a high after posting good earnings OCR- closed near a high after naming a new CEO BNVI- announced publication of data describing its estrogen receptor beta cancer prevention product AAPL- closed near a high GS- closed near a high CRM- closed near a high PPO- closed near a high RDWR- closed near a high ALTID- closed near a high after indicating it had been selected by Inversiones Energeticas to provide a turn-key 10 Megawatt ALTI-ESS advanced battery system for frequency control IDCC- closed near a high AVAV- closed near a high after posting great earnings NFLX- near island reversal in closing near a high after its CFO resigned KMP- featured on âMad Moneyâ last night LEDS- 5.25 million share offering at 17 above expected range of 14.50-16.50 LULU- great earnings TEVA- successful phase III study of oral Laquinimod for MS FCX 2-1 stock split SFD- decent earnings ONP- good earnings guidance Bad-The following stocks have bad news and/or a weak technical pattern IVN- closed near a low on a decline in commodities prices despite Rio Tinto providing financing to the company MW- closed near a low after posting awful earnings SWHC- poor earnings MATK- poor earnings OXM- poor earnings CMTL- poor earnings WTI- closed near a low after losing out to BP in Royal Dutch Shell interest RTI- closed near a low after announcing a convertible notes offering GDOT- closed near a low after announcing a share offering LINE- share offering XNPT- share offering CXO- 2.5 million share offering at 82.50 CML- DELL in talks to acquire company for 27.50 CAG- poor earnings guidance Earnings: THURS DEC 9 BEFORE CIEN LULU SFD THURS DEC 9 AFTER GMCR NSM PLL Epiphany Trading, LLC www.epiphanytrading.com Erik R. Kolodny- Chief Markets Strategist Brendan P. Byrne- President
FRI. DEC. 10- The Media Mention While trading in the late 1990âs in particular, my best trading month of the year was December with my premier specific trading days between the days around major holidays (such as Christmas Eve) to large swaths of time such as the last two trading weeks of the year. The reason for that is in those heady years, there was a very high level of interest in the stock market. Some would call it a âspeculative fervor,â but I just happened to think of it as âpeople staying home playing âstock marketâ because they had nothing better to do.â Furthermore, there are many junior traders anchoring trading desks this time of year as senior traders rotate their vacations. Finally, college kids and many people considering career changes in the first part of the new year use December as a litmus test to see if they want to day trade full-time. Thus, some truly âcommon senseâ type of trades become frighteningly easy and applicable. One of my favorite happens to be what I call the âmedia mentionâ trade particularly in smaller capitalization stocks. What happens is astoundingly obvious- all of these (usually) smaller players who tend not to be as experienced in the day trading realm as others hear an analyst mention a stock and drive the price up in a scramble to get in at once- even if the prediction for the stock is based on a 12-24 month outlook! For instance, CNBC did a segment with a focus on stocks under $5/share on last Friday around 10:50AM. The two stocks mentioned were Journal Register (JRN) and Smith & Wesson (SWHC). SWHC rallied from 4 to 4.15 over the course of a few minutes- a pretty impressive near 4% pop. But the total volume on relatively illiquid JRN was about 13,000 shares before analyst Brent Wilsey recommended buying JRN. In the next 10 minutes, JRN rallied 50 cents on 425,000 shares. Why? Because things were relatively slow on Friday morning and people have relatively little fear right now so many traders want âthe next big thingâ here and now. Thus, as we wind the year up, pay specific attention to the words of analysts when they mention particularly somewhat illiquid equities to a national TV audience. Most of the time, the words ring hollow in the immediate-run by TV pundits, but not in a rampant bull market as a ready and willing crew of people are eager right now to build on the yearâs performanceâ¦and hopefully make some nice quick money for themselves- which can lead to quick profits for us day traders simply by keeping an ear out for the television set and an eye out for the news ticker. Markets remained quiet worldwide overnight with Tokyo down 0.7%, Hong Kong flat, London down .1%, and Frankfurt up 0.3%. Everything else is muted with the dollar and all commodities trading very close to unchanged. The Irish approved their austerity measure program while China once again raised its reserve requirements. But has been so often the case recently, everything has been shaken off. The October trade balance and export/import prices came in in-line this morning with Michigan Sentiment (72.5) due out at 9:55AM and Treasury budget ($134 billion) at 2PM. Look for what will likely be a quiet day with a modest upside bias. There is a tremendous amount going on underneath the surface though with a focus today on the earnings plays (such as GMCR), the merger/takeover plays (BEC, THC, et al), the ARG/APD saga, and relative weakness plays particularly in the first few minutes of trading. 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 ESL- great earnings PLL- good earnings AIG- closed near a high after announcing its controlled exit plan; also, Fairholme Capital announced it had increased its stake in the company CIEN- closed near a high after posting great earnings SFD- closed near a high after posting great earnings FRC- closed near a high on the day of its IPO ONP- closed near a high after posting great earnings ZQK- closed near a high amid takeover rumors GT- closed near a high amid takeover rumors ARB- closed near a high after J.P. Morgan upgraded the stock after a major contract renewal NFLX, FFIV, NFX, CVC- to join the S&P 500 on the close on December 17 THC- reportedly received $6/share takeover offer from CYH NAK- closed near a high OCZ- closed near a high after receiving an OEM mass production order SINA- closed near a high DMND- closed near a high after posting great earnings; featured on âMad Moneyâ last night as well CYDE- closed near a high after saying it doesnât expect to have restate earnings and it will keep its Nasdaq listing NVLS, LULU- featured on âMad Moneyâ last night EPCT- positive results of a new analysis for its Ceplene OXY- divesting Argentine assets to Sinopec and buying Shell gas fields in south Texas BEC- put itself up for sale according to âWSJâ MCP- agreed to $130 equity and debt investment from Sumitomo VRSN- declared special $3/share dividend Bad-The following stocks have bad news and/or a weak technical pattern GMCR- terrible earnings NSM- poor earnings ASTM- share offering CRZO- share offering BONA- closed near a low on the day of its IPO SDTH- closed near a low after announcing a convertible notes offering OXM- closed near a low after posting awful earnings MATK- closed near a low after posting awful earnings UTX- poor earnings HTWR- closed near a low after announcing a share and notes offering Earnings: None today Epiphany Trading, LLC www.epiphanytrading.com Erik R. Kolodny- Chief Markets Strategist Brendan P. Byrne- President
You clearly have no idea what you are posting. EXAS is not developing a DRUG! They are developing a cancer screening TEST for colorectal cancer. They ran a Validation Study and the results were released on Oct. 28th and beat the Company's guidance ( 85% detection for cancer and 64% detection of pre-cancers ). The stock was sold on the "news" given the huge run-up from late August and got hit hard because the brokerage community was setting itself up for an 11.5 million share secondary at $6.00 An FDA clinical trial for their non-invasive colorectal cancer screening TEST will commence in Q2/Q3 of next year. The clinical trial is said to cost $15-$20 million. The Company has nearly $100 million in cash. http://www.exactsciences.com/ Get your facts straight!
I certainly apologize. I typically start my day at 5AM and the combination of copious work preperation and raising two beautiful little daughters in not going to bed until 2AM on average can sometimes take its toll on my shorthand- particularly when I am busier than normal. Thus, although I admittedly very much resent being told I don't know what I am talking about when I made a simple albeit bad mistake, my shorthand that day was certainly incorrect in this case and again- I apologize to you. Do understand that my time horizon for a trade is typically around 1 1/2 to 2 minutes and I don't profess to be an expert in any of the businesses of the stocks I trade (nor do I claim to be). I simply make a list of things I am looking at, type a very short snippet of the story/reason I am honed in on it, and trade from there. Indeed, despite the fact I incorrectly typed "poor drug results" rather than "poor results from its recent validation study," the stock did have a set-up in the daily parameters I described in that it opened higher on Mon Nov 1 but was a short through unchanged on the session as a number of day traders did quite well in shorting the stock through unchanged that day following EXAS's Thurs Oct 28 study results. Furthermore, I am sure you know more about the situation (by a large margin than I do), but the stock sale of which you speak was not announced until Wednesday afternoon. Thus, as I have a good degree of experience in the "brokerage community," I can tell you that companies despise pricing offerings just after a decline. Typically, a company (particularly a small cap biotech) will announce a stock sale only after an immediate-term stock rise rather than immediate-term decline. So, it not go down because of that. Why did it? Well, infinitely more important than a stock sale, be aware that I speak as someone who has a history of colon and kidney problems in his family. A non-invasive colorectal cancer test which detects 64% of samples from patients with pre-cancer polyps and 85% of cancers in stool samples sounds good. However, despite the intense pain of a colonoscopy, I know with the problems in my family that any issues I have are much more likely to be found with the 'old fashioned' method. Finally, it's also worth noting that many investors and fund managers (including one notable one I know quite well) think the same way. Despite your assertion that the 64/85 numbers are better than the company's expectations (they may be; I do not know enough to agree or disagree), many investors and institutions were disappointed that the numbers weren't higher because they know EXAS's business will be inhibited/limited should the study advance to the stage where a test is marketed due to people like myself not willing to trust a test that is at best right 17/20 times via stool samples and only 13/20 in patients with pre-cancerous polyps. A traditional colonoscopy- as you know probably better than I- has a substantially higher success rate in both categories (like darn close to 100%). Speaking for me, I (and most other people) would rather take a painful test with a near 100% success rate than a less invasive test with a lower success rate if it is a matter of life and death- which, well, it is. I hope the stock has not been too large of a portiion of your portfolio the last month as it is down 32% or so since the results were announced (and notably underneath the stock offering price from early November). Regardless, if you are a shareholder, I wish you (and the company) all the luck in the world as it is a fantastic thing EXAS is trying to do. Again, good luck to you and a happy holiday season. Erik
MON. DEC. 13- The Middle Of The Day In The Middle Of December Every Wednesday, the supermarket circulars arrive in either the local newspaper and/or the mail in my area. On Wednesday nights, typically the last thing before bedtime I do is a grocery list of whatâs on sale in line of course with what I need. I go through the circulars of the two stores where I do my main shopping to do this. I mean, why should I pay $16.99 for a box of diapers at store 1 if there are on sale for $7.99 at store 2? I typically save myself $50-$75 per week for this 15-20 minutes of extra effort a week (including the couple of minutes between the two stores) with the shopping typically done on Fridays so it is one less thing to worry about for the weekend. This comes out to $2,500 to $3,500 a year which of course pays for a lot of things. I actually tell my wife every so often that our cable/Internet/phone bill is more than covered by this with money left over to comfortably do things like buy a new computer if need be. What does boggle my mind though as I undertake this weekly task is to form the list, go over said list with my wife, make sure we need nothing, go to cook something on a Sunday evening for the kids, and what we need is not there because she didnât contribute the item to the list. And yes, I hope youâre reading this, Robyn, because itâs true! After bantering for a bit about how she cannot make a corn-based soup if we have no corn, I sigh loudly, grab one or both kids, and go buy some corn. Unfortunately, that is not how the stock market works. If there is nothing there, one cannot create something out of nothing if thereâs little to no movement in the markets. I make this point because we now theoretically if not practically approach a relatively slow time for the markets. Traders tend to think August is slow, but the period between Thanksgiving and New Yearâs Day is usually very slow in the middle of the day. The one major difference is that the momentum stocks of the year and small caps with news can tend to whip around a great deal but usually only at select times of the day. So, whenever we encounter pockets of static prices, donât use your boredom to try to make corn soup when you have no corn, er, uh, make trades when there are none to make else youâll find yourself frustrated, impatient, and poorer much less merely frustrated. Markets overnight were higher worldwide after China failed to take significant action to halt its economic growth. Tokyo was up 0.8% with Hong Kong ahead 0.7%. In Europe, Frankfurt is up 0.5% with London up over 1%. Gold is up almost 1% with oil up 1.5%. Bonds are down again with the 10-year yield surging toward 3.40% now. Futures are one again stronger as well. Look for a relatively slow session ahead of tomorrowâs FOMC meeting much less a slew of economic and corporate news. The bias will likely remain to the upside with a focus on big cap tech, small caps in the news, the takeover/merger stocks (such as NSTC and DNEX), commodities plays on the strength of metals and oil, and relative weakness plays off of the opening bell. 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 IDT- closed near a high after posting great earnings LULU- closed near a high on continued momentum from its earnings report and a positive mention on âMad Moneyâ CISG- closed near a high SPMD- closed near a high GS- closed near a high FCX- closed near a high FFIV- closed near a high after the announcement that itâd be added to the S&P 500 on Friday MA- closed near a high PZG- closed near a high LOCM- closed near a high BJRI- mentioned on âMad Moneyâ on Friday night DNEX- to be acquired by TMO for $118.50/share in cash NSTC- rumored to be in acquisition talks FONR- wins jury verdict in anti-trust lawsuit VICL- Vaxfectrin demonstrated potential as universal adjuvant according to company AAPL- initiated as a âbuyâ at Goldman Sachs with a 430 price target Bad-The following stocks have bad news and/or a weak technical pattern YOKU- closed near a low in an ugly reversal HBAN- stock offering MGLN- poor earnings guidance CML- to be acquired for $27.75/share in cash by DELL Earnings: None today Epiphany Trading, LLC www.epiphanytrading.com Erik R. Kolodny- Chief Markets Strategist Brendan P. Byrne- President
TUES. DEC. 14- Dealing With Comebacks and Givebacks Before the time I became an adult (but then did I ever become an adult?) and had truly lazy time, Iâd occasionally watch a college basketball game- particularly one in which the team of my alma matter (Indiana University) was a part of. I also would watch the press conferences thereafter just to watch the body language of the team. One thought thatâd go through my 20-25 year-old mind was how different the body language could be even if raw numbers were the same regarding the outcome of the game. For instance, if Indiana was down by 20 and lost by 3 albeit to a team they should have beat, theyâd at least feel like they were doing something right based on what they were saying and how they looked (âtheyâ being the coaching staff and the players). Conversely, if they were winning by 15 against the same team and ended up losing by 3, the reactions, verbiage, and performance the next game were often different. Now, donât get me wrong- I understand that having a win taken away causes different emotions than almost coming back and winning a game. But after a little time has passed before the next game, itâs important to realize that the history books will read that they lost by three points in both situations. It is the exact same in trading. In the last two losing days I had, I finished down a nearly identical amount of money. Yet I had been down a lot more before coming back in one of them whereas I had a good day going in the other and gave it up and more. I couldnât have felt differently emotionally. But by the beginning of the next trading day, the emotions of the previous session- in both cases- were forgotten. It took me many years to learn that while one should always learn from oneâs trades- good and bad- numbers are numbers so there was/is no need to let anything fester that I shouldnât. It allowed me to focus solely on the next dayâs action- and both times, I had very good days following the downers. So, I hope everyone out there can realize in less time than it took me- the ultimate journey for most traders is to earn enough money so you donât have to work anymore. Along the way, there are going to be great days and bad days. The trick is to not let the emotion of a comeback â or a giveback- to overwhelm you to the point of not properly focusing on future trades. Markets were slightly higher in Asia overnight with Tokyo up 0.2% and Hong Kong ahead 0.5%. Europe is quiet with London up 0.3% and Frankfurt down 0.1%. Gold is back above the $1,400 level in trading ahead almost 1% with oil flat. The dollar is a bit weaker across the board. PPI came in as expected with retail sales ex auto stronger than expected (1.2% vs 0.6% expected). The FOMC rate decision is expected at 2:15PM today. News flow for industries has been varied this morning with BBY posting awful earnings yet things like the banks were talked up a bit last night on âMad Money.â Look for a quiet day through the FOMC meeting with a slight positive bias; it is highly likely there will not be any surprises so things likely remain quiet after 2:15PM as well. The focus should be on the retailers with the awful BBY news out, biotechs with news from big caps like AMGN to small caps like INHX, volatile China plays, and the myriad of companies with share offerings to see if they can shake off an increased amount of stock coming to market. 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 AMGN- positive Xgeva news GXDX- said to seek sale of company; has hired Barclayâs ONVI- closed near a high MELI- closed near a high EW- closed near a high after announcing positive earnings guidance MGIC- closed near a high TMO- closed near a high after announcing an acquisition AGU- in talks to sell AWB Commodity Management businesses CGEN- positive CGEN-15001 rheumatoid arthritis results in animal model trial LIWA- received new copper anode orders MTXX- to be acquired by H.I.G. for $8/share ISS- priced IPO at high end of rangeâ¦10.8 million shares at 13 SAFM- great earnings Bad-The following stocks have bad news and/or a weak technical pattern INHX- negative phase II trial results of FV-100 DANG, YOKU- closed near their lows AMSC- closed near a low on a negative âBarronâsâ story FFIV- closed near a low RIMM- closed near a low NFLX- closed near a low LNDC- share offering LCI- share offering ICO- share offering HMIN- convertible notes offering YMI- share offering MILL- closed near a low MOS- closed near a low DORM- closed near a low BBY- terrible earnings Earnings: TUES DEC 14 BEFORE BBY FDS SAFM TUES DEC 14 AFTER None today Epiphany Trading, LLC www.epiphanytrading.com Erik R. Kolodny- Chief Markets Strategist Brendan P. Byrne- President