Whenever preparing meat for consumption, one does their best to cut out as much fat as possible before digesting it. In Corporate America, the analogy is the same. For a company which is trying to buffer itself in bad times, the first thing it does is to try to cut expenses. For instance, if every employee flew first class on a business trip, maybe the company will have them fly coach. In worse cases, some of those same employees are let go with the remaining employees picking up the slack at the company. The problem comes when a company cannot cut any more âfatâ to enhance profitability. At that point, since gross margins are maximized, the only thing that a company can do to enhance profitability is to grow revenues. It is ostensibly at this juxtaposition that we happen to find ourselves at in Corporate America at the present time. With the S&P 500 up 70% from its March 2009 nadir, the expectation is now widely in place that the global economy is recovering. Thus, for earnings to grow, it is time for revenues to start expanding. In one of the young earnings seasonâs first examples, AA met earnings expectations on Monday night, but they missed revenue guidance. The stock traded down around 2% throughout the next day. A couple of quarters ago, merely meeting estimates of earnings would have been awesome because of the palpable fear out there but with higher prices comes higher expectations. So, as we look to our friends at earnings services such as First Call, realize that we cannot just look at whether a company is beating earnings guidance this quarter but also whether it is besting revenue guidance as well as raising future revenue guidance when day trading based on a companyâs earnings report. Markets were up slightly in Asia overnight with Hong Kong up 0.2% and Tokyo ahead 0.6%. In Europe, the bourses are flat. The dollar is stronger across the board with commodities generally slightly weaker. There have been numerous negative events overnight. The Thai stock market fell substantially after a crackdown by the military. The spreads on the Greek bonds widened out. Chinaâs economic growth for last quarter was substantially higher than expected leading to speculation that the yuan will be revalued. Yet, UPS and FDX are sharply higher after UPS raised guidance, there is more merger activity, and a number of microcaps are higher. This is all leading to a small downtick in the market overall. For the day, look for a lot of choppiness with muted movements in between the choppiness. Keep an eye on the euro. Focus on the microcaps and any relative strength plays particularly early in 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 UPS, FDX, AMZN- UPS pre-announced earnings to the upside; FDX and AMZN may move with it AAPL- closed near a high RDN- closed near a high BCSI- closed near a high AUXL- closed near a high VECO- closed near a high ENTG- closed near a high HXM- closed near a high EOG- closed near a high JOYG- closed near a high LSTR- good earnings JBHT- decent earnings CCRT- announced Dutch auction plan to purchase stock at 7 INTC, CSCO, BALT- mentioned on âMad Moneyâ last night DVAX- hepatitis B Vaccine showed promise in kidney disease in a phase II study RMBS- closed near a high amid rumors of a deal with AAPL CLF- closed near a high CSX- closed near a high after posting good earnings FSLR- closed near a high PNX- closed near a high ME- being acquired by APA for 7.80 in cash plus 0.17043 APA shares CXDC- good earnings guidance IDIX- positive results with IDX184 from interim analysis of phase IIa Hepatitis C study IOC- signed preliminary works joint venture agreement with Mitsui ANDS- positive phase II study of Hepatitis C treatment IMGN- announced favorable update provided by Roche related to its Trastuzumab-DM1 regulatory plans MDVN- reported positive results from phase 1-2 trial of MDV3100 Bad-The following stocks have bad news and/or a weak technical pattern MGM, LVS, WYNN- MGM warned on earnings and announced a notes offering SNTS- announced timing of launch of its generic Zegerid is now uncertain due to a patent lawsuit loss MAC- share offering KRC- share offering WHI- closed near a low FCS- poor earnings Earnings: THURS APR 15 BEFORE BTU FCS FUQI PPG SCHW THURS APR 15 AFTER AMD CBST GOOG ISRG PBCT 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
Fri. Apr. 16- Three Factors To Watch Yesterday, I made passing reference to three distinct events which bear watching. First, the Greek bond situation continues to worsen. As of this morning, the difference between the 10-year Greek bonds and the 10-year German bund is at its highest point since the crisis started despite what seem to be fruitless efforts by the Greek government to sell bonds to investors with the backing of the EU and IMF in the ready. Second, the Chinese economy had an enormous 11.9% rate of growth from a year earlier in the first quarter of 2010â¦but it actually did so with a slowdown in inflation. Their CPI rose less than was expected- only up 2.4% in March. Yet, the government announced measures such as investors being required to put down at least half of the value of a 2nd home to speculate in real estate as the Chinese housing market had a record increase in March. About 2/3 of the economists asked by Bloomberg news indicated they thought that interest rates would rise in China by June. Finally, there have been numerous clashes between the Thai army and anti-government protesters which have resulted in about 25 deaths thus far and are destroying economic growth of Thailand. There have been Thai security forces in place throughout Bangkok for a month which has resulted in once-in-a-generation violence. While none of these geopolitical and economic events have had any impact on world markets, they all bear watching as we head into a very busy earnings season at a perilous point for all three aforementioned situations. Donât get me wrong: earnings should be the driver for the markets these next few weeks, but any of these extraneous events can add an exciting element of chaos to the mix. Markets in Asia were down about 1.4% on average after the Chinese measures on real estate. In Europe, markets are straddling unchanged. Commodities are lower with oil and gold notably weaker. Futures are weaker on the GOOG news as well as some comments coming out of the GE conference call. Look for a downside bias all day today. The benchmarks will be GE, BAC, and GOOG. Focus on big cap tech, big cap financials, the microcaps, and relative strength/weakness 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 BSX- resuming U.S. sales of key defibrillators LGF- Carl Icahn boosted his bid for company and Mark Cuban purchased a stake as well XNPT- received favorable patent ruling from European Patent Office SIMO- good earnings guidance CELM- mentioned positively in a newsletter ATR- decent earnings guidance IMGN- mentioned positively on âMad Moneyâ last night CKEC- mentioned on âFast Moneyâ last night BAC- good earnings GE- good earnings MAT- good earnings PFWD- bought out by ORCL for 17 GCI- good earnings Bad-The following stocks have bad news and/or a weak technical pattern GOOG- good earnings, but the CEO bizarrely announced he would not be on the conference calls anymore AMD- poor earnings guidance MEE- closed near a low IOC- near island reversal in closing near a low despite announcing a deal yesterday morning X- closed near a low ISRG- poor earnings data from conference call PSUN- mentioned negatively on âMad Moneyâ last night IMAX- traded down after-hours despite announcing press release about its showings of âAvatarâ NPSP- share offering CBST- poor earnings PBCT- poor earnings VMI- poor earnings CF- 11.23 million share offering priced at 89 Earnings: FRI APR 16 BEFORE BAC FHN GCI GE GPC MAT 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 APR. 19 - Trouble At Goldman So what exactly happened in the middle of the morning on Friday? Well, first, we have to back up. During our morning call, I noted that not only was GOOG down on earnings, BAC and GE despite their wonderful earnings had slipped into negative territory. That was a warning sign and there was pressure all morning long on stocks. Then, Goldman Sachs (GS) announced it was being sued by U.S. regulators for fraud tied to collateralized debt obligations (CDOâs). It is alleged that GS created and sold CDOâs tied to subprime mortgages in 2007 without disclosing that hedge fund Paulson & Co. helped to actually select underlying instruments used to bet against the CDOâs. Thus, GS supposedly allowed a client that was betting against the mortgage market to decide which mortgage securities to include in an investment basket while telling other investors that the financial conduits were actually selected by an independent third party. For its part in the soap opera, GS actually said that it lost almost $100 million because it had in investment in the deal which was substantially more than the $15 million it made in fees. From all of this comes a few thoughts: a)I donât know exactly how this will turn out, b)Washington wants regulation right now so the timing of this announcement is rather prescient, c)faith in all firms will be undermined a bit as people wonder if there is anybody ânext,â and d)what matters in the long-run to the stock market is earnings. So, for day traders, tenets b and c above are what are going to matter. Not only will a few more firms get hit with news like this, there will be many rumors over the next few days and weeks as to who could be next. What is important to monitor is how the stock of GS reacts over the next few days with its vehement denials and to realize that combined with earnings season in full force these next few weeks, we day traders should see a notable pick-up in volatility (which notably began early last week). This is what we want. Itâs time to really go to work as it is periods like these which provide chunks of annual income for prepared and diligent traders. Markets in Asia were down sharply overnight with most markets down about 2%. The European markets are down about ¾% on average. Gold is down slightly, but oil is down 3%. The euro is also slightly weaker. Futures are correspondingly weaker as well. For the day, look for a continuation of the choppiness from Friday with a notable downside bias. Keep your eyes on every GS development, the performance of C and pay particular attention to the stocks with earnings as well as anything performing relatively strong to the market for potential rapid day trades. Also, if things get fast like they were on Friday, be ready to compress your time horizon for your trades. 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 RDCM- closed near a high MBHIP- closed near a high IMGN- closed near a high after being mentioned on âMad Moneyâ last night YMI- announced preclinical efficacy data for JAK ½ inhibitor MEE- FBR Capital says MEE worth about 58 in a takeover CRN- being acquired for 1.3 shares of GEO or a share of GEO plus 6 in cash HAS- decent earnings IDSA- decent earnings Bad-The following stocks have bad news and/or a weak technical pattern AIG- closed near a low HSP- got warning letter from FDA for two facilities GOOG- closed near a low after posting earnings GPC- closed near a low after posting earnings FCX, TCK- closed near lows in a weak copper group ISRG- closed near a low after posting earnings CLF- closed near a low EOG- closed near a low HGSI- announced withdrawal of marketing application of hepatitis C treatment in Europe LLY- poor earnings HAL- poor earnings ACI- poor earnings Earnings: MON APR 19 BEFORE ACI AMLN C HAL HAS LLY MMR SPF MON APR 19 AFTER ATHR CCK CR IBM LNCR PKG STLD VLTR WERN ZION 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
TUES. APR. 20- Taking It All In For those who have not been actively watching the story, the volcano in southern Iceland's Eyjafjallajokull glacier has continually sent ash into the air for several days. The eruption under the Eyjafjallajokull glacier in Iceland has thrown up a several mile high plume of ash which has ebbed and flowed yet not totally abated after more than two weeks of volcanic activity. It is located under Iceland's fifth largest glacier and has erupted only five times since the area was settled in the 9th century. Eyjafjallajokull has a 2.5 km-wide volcanic crater which is completely covered in ice. Quoting from a Reuters story, "Fissure-fed lava flows occur on its eastern and western flanks of the so-called stratovolcano, which is built up from alternating layers of ash, lava and rocks ejected by earlier eruptions. When the volcano began erupting in late March it opened a 500-m fissure producing lava fountains along the vent. The ash cloud has been formed through a process called fragmentation which occurs in several stages. First, magma travelling under pressure through underground conduits is broken up into pieces by expanding gases. As pressure decreases closer to the surface, the magma turns into fine volcanic ash which breaks into even smaller particles when it makes contact with glacial ice on the surface of the crater. The fine dust melds with steam rising from the crater to form a dark, billowing plume. "It's like a soda bottle when you take the top off," said Icelandic vulcanologist Armann Hoskuldsson, describing what happens to magma as it travels to the surface." Now, there are two main over and above the fact that this type of thing is fascinating that I bring up this matter much less quote the process for exactly what is occurring scientifically at the present time. First, many potential business stories don't actually appear in the business section of the newspaper. Instead, stories such as this tend to be buried on page C12 of many newspapers (or not in the top 50 stories in the news on Google News) when they first happen or hopefully get a mention in the Science section of some of the major papers. Yet, what has occurred has been a complete halt in air travel for northern Europe for many days now. After a few highly publicized plane interactions with ash plumes in the 1980s, airlines have generally agreed that the most prescient course of action regarding ash plumes is to stay far away from them. For instance, all four engines of a British Airways flight shut down when flying though the ash of an Indonesian eruption in 1982. In 1989, a KLM jet flew through a cloud of ash in Alaska and suffered the same fate. Both flights were able to restart their engines, but only after losing more than 10,000 feet of altitude else many people would have perished. Well, the wind patterns have taken the ash high into the sky throughout northern Europe resulting in a stream of almost invisible particles and rocks which has hated air travel. The estimated cost is over $200 million a day according to many news outlets and this could go on for awhile. This type of action is not factored in to broader markets so this and other types of events can cause issues for the equity markets. Second, day traders have a way of finding stocks to trade on based on disasters. For instance, many avian flu companies became very active stocks during the avian flu scare as did the stocks of companies which made anthrax anecdotes several years back. So, while this is not a domestic issue, if it was, shares of environmental-based businesses as well as clean-up stocks much less airlines would be active. Thus, as you skim through the news report (or newspaper), don't just check the score of the Yankees game as well as the business news...read the whole paper/news site because you just may find something that can help your trading. Markets in Asia were generally higher overnight with Hong Kong up 1%. European bourses also had a nice bounce after Wall Streetâs rally with most indexes up about 1%. Commodities are coming back too with oil and gold notching nice gains. Currencies are quiet. Futures are nicely higher state-side on the heels of a good report from GS. For today, look for the strength to maintain itself as GS continues to shake the cobwebs off. Focus on the myriad of earnings play as well as relative strength/weakness 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 ZION- decent earnings ARRY- joint project announced with NVS UNIS, WYNN- featured on âMad Moneyâ last night ATHR- good earnings STLD- decent earnings MEE- closed near a high after a brokerage upgrade MON- closed near a high after accelerating its share buyback CADX- closed near a high PRK- closed near a high UNH- decent earnings COH- decent earnings GS- good earnings HOG- good earnings OMC- good earnings ETN- good earnings APH- decent earnings ITW- decent earnings Bad-The following stocks have bad news and/or a weak technical pattern IBM- poor earnings PKG- poor earnings WERN- poor earnings ICUI- poor earnings MMR- closed near a low after posting earnings IOC- closed near a low EAT- poor earnings KO- poor earnings NTRS- poor earnings JNJ- poor earnings MTG- earnings and shelf offering FRX- poor earnings SVU- poor earnings HGSI- poor phase 3 trial results of Benlysta Earnings: TUES APR 20 BEFORE AKS AMTD APH BIIB BJS BK COH DAL EAT EDU ETN FRX GS HOG ITW JEF JNJ KCI KO LAB LXK MI MTB NTRS OMC PCAR PH RF STT SVU UAUA UNH USB USG WFT TUES APR 20 AFTER AAPL ALTR CREE EW GILD JNPR NBR NUVA OFG SNV STX SYK TPX TSS TUP VMW YHOO 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
WED. APR. 21- Probing For those people who despise buying a car, one of the only enjoyable parts for those individuals tends to be test driving. I mean, most people tend to know what they want when they go into a dealership car-wise. They may not know if they want a Honda or a Ford or a Toyota, but they do know if they want a smaller car like a Honda Civic or a minivan like the Toyota Sienna. Thus, people will go from place to place in trying out the cars because how else will they know if they actually like the piece of machinery theyâll be spending way too much of their lives in for the next several years? So what happens is that before even commencing serious negotiations, most individuals at least will know what it is they want to target. I mean, why spend time negotiating seriously if you have no intention of buying a particular car because you didnât like the interior, how it drove, or any of many other factors that go in to the test drive phase? I rattled on a bit on this on purpose because I am trying to subliminally hammer home the idea that this same principle applies to trading. There is very rarely ânothingâ going on in the markets. Most of the time, in fact, the only way to try to figure out a move is to play with it very small. For instance, all last weekend I tracked the estimates of iPads. I heard estimates as high as 700,000 units. With the stock trading slightly higher about half an hour after I got to work, I decided to test my hypothesis: 04/05/10 07:02:10 AAPL BOT 400 236.6 EPIPHANY18 ARCA 04/05/10 07:02:38 AAPL SLD 131 236.49 EPIPHANY18 ARCA 04/05/10 07:02:52 AAPL SLD 50 236.2 EPIPHANY18 ARCA 04/05/10 07:02:52 AAPL SLD 219 236.18 EPIPHANY18 ARCA That didnât go so well. It indicated to me there was some weakness in the stock because it just wasnât acting as I internalized it would. I tested that too: 04/05/10 07:04:04 AAPL SLD SHRT 125 235.5 EPIPHANY18 ARCA 04/05/10 07:04:44 AAPL BOT 125 234.9 EPIPHANY18 NSDQSTGY So now I knew that my bias on the news was to be to the sell side because the stock was acting a lot worse than I thought it wouldâ¦and Iâd lost small money being long and made small money being right. I knew thereâd be an 8:30AM press release and was totally ready for it after the stock had rallied a bit on people coming into the door trying to play the same game I tried 1 1./2 hours prior. When the headline came out that they had âover 300,000â units sold, those early trades combined with the news enabled me to be highly confident in being as aggressive as possible about it (I wanted 2500 shares, but despite trying to hit a bid 25 cents below prevailing market, the stock was going so fast that I couldnât get it all unfortunately): 04/05/10 08:30:38 AAPL SLD SHRT 1200 236.25 EPIPHANY18 NSDQSTGY 04/05/10 08:30:57 AAPL BOT 200 236 EPIPHANY18 NSDQSTGY 04/05/10 08:30:57 AAPL BOT 250 236 EPIPHANY18 NSDQSTGY 04/05/10 08:30:57 AAPL BOT 150 236 EPIPHANY18 NSDQSTGY 04/05/10 08:31:13 AAPL BOT 200 235.9 EPIPHANY18 NSDQSTGY 04/05/10 08:32:22 AAPL BOT 200 234.3 EPIPHANY18 NSDQSTGY 04/05/10 08:33:15 AAPL BOT 180 234.2 EPIPHANY18 NSDQSTGY 04/05/10 08:33:15 AAPL BOT 20 234.2 EPIPHANY18 NSDQSTGY The point here is that the only way to test my original hypothesis (proven incorrect) was to go to the trading lab. Then I tested it anew the opposite it way and confirmed my original hypothesis was incorrect by making money in doing the opposite of what I thought I should do on my drive into the office. So, when the real trade came, I was as ready as I could be. During the day, I âprobeâ all the time in trying to figure things out because if I donât test drive a major idea as I would a car, how can I know with as much confidence as possible that something will work? Markets overnight were mixed. Very mixed. Tokyo was up 1.7% on the heel of AAPL gains yet Hong Kong was down 1.2% on Chinese currency rumors. London is down 1%% on worries about the economic impact from the volcano while Frankfurt is about flat. Commodities are slightly higher. The euro is weaker as the Greek bond-German bund spread continues to widen. Stateside, S&Pâs are flat while the techs are higher. All of this leads to a very jagged picture for Wall Street today. Look for choppiness and rumor driven trading with no real direction- unless the euro weakens in which case the selling pressure will increase overall. Focus on big cap techs and financials with relative strength/weakness plays at the forefront along with the huge amount of entities releasing earnings today. 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 AAPL- great earnings VMW- decent earnings PVH- decent earnings projections, but planning stock offering SYK- decent earnings PNRA- decent earnings guidance DEAR- great earnings STX- good earnings ALTR- great earnings TPX- great earnings TCK- good earnings TSS- good earnings TUP- good earnings CIEN, PIR- on âMad Moneyâ last night AIG- closed near a high BIDU- closed on a high V- closed near a high CPY- closed near a high after posting great earnings SCL- closed near a high after posting great earnings HGSI- good reversal in closing near a high after posting poor drug data BNVI- announced that the US Patent and Trademark Office has issued a patent covering a method of using BNVI's proprietary drug candidate Bezielle for the treatment of metastatic breast cancer CUR- closed near a high CAGC- closed near a high WYNN- closed near a high ZION- closed near a high after posting earnings HBAN- decent earnings KEY- decent earnings ZLC- selling minority stake to Golden Gate Capital MS- good earnings ECA- decent earnings MAN- decent earnings STJ- decent earnings GS- SEC has testimony that seems to contradict facts of case Bad-The following stocks have bad news and/or a weak technical pattern CREE- poor earnings GILD- poor earnings JNPR- terrible earnings YHOO- poor earnings EW- poor earnings CSIQ- terrible unit guidance NUVA- poor earnings SNV- poor earnings DRYS- share offering TSFG- poor earnings and announced need for capital ACUR- reversed massive intra-day gain in closing near a low after indicating the FDA needs additional data on one of its drugs GMCR- closed near a low JEF- closed near a low on poor earnings FCX- closed near a low ALGT- closed near a low after posting poor earnings ETN- closed near a low after posting earnings NTRS- closed near a low after posting earnings COV- poor earnings DGX- poor earnings LH- poor earnings ABT- poor earnings V- acquiring CYBS WFC- poor earnings FCX- poor earnings CHRW- poor earnings CMA- poor earnings UTX- poor earnings Earnings: WED APR 21 BEFORE AAI ABT AMB BA BPOP CMA COV DGX ECA ELN EMC GENZ HBAN KEY LH LMT MAN MCD MCO MO MS NITE NYB R STI STJ T TIN UTX WFC WED APR 21 AFTER ACF ADS AMGN CMG CTXS CYH EBAY EQIX FFIV FNF HCBK ISIL KMP LEG LRCX MEE NE NFLX NVLS PLCM PTV QCOM SBUX SLM SNDK TER TEX TSCO VRTX 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. APR. 22- Index Trading A few months ago, the stock of Roper Industries (ROP) went into the S&P 500. On the day of the announcement, the stock rallied about 4% and bounced around for the next few days. Two days before entering the esteemed index, the company announced it was going to undertake a share offering to coincide with the influx of demand from index fund managers. Going into the close on the day the stock went into the index (Tuesday December 22), there was a net imbalance of about a million shares to buy as index managers placed their orders to have proper weightings in their various funds. Yet, the stock plunged on the closing bell. Nobody is allowed to add to the side that the imbalance is published upon with market on close orders, i.e. after 3:45PM, nobody could place a market on close buy order in ROP, but people were still allowed to place sell on close orders. So, what likely happened is that someone (maybe the underwriters for the offering?) placed an order to sell the stock a couple of minutes before the 4PM ET NYSE close. This shifted the situation to a net sell imbalance with no notice. The stock plunged over a dollar on the close with the move resulting in a very profitable trade for many traders. The takeaway is quite important. First, be aware of which stocks and which days that stocks are going into and out of the indexes. I typically publish the list a few minutes before the close, but the information is readily available days to weeks in advance. Second, when playing index moves, always place buy and sell orders on the close well away from the last prevailing price because anything can happen at any time- and often does. As we all know, trading is hard. Thus, one must always be on guard for any potential opportunities- they can and do exist and can occur at any time. Markets in Asia were down overnight with Tokyo leading the way down 1.3%. In Europe, the bourses are down ¾% to 1% across the board. The euro is relatively weak anew with commodities broadly lower as well about 0.5%. Futures are broadly lower as well on weakness in Greece as well as a series of poor earnings reports in the like of EBAY and QCOM. Look for widespread weakness overall today although the losses should be contained pending what the euro does. Focus on the very liquid earnings plays in particular along with relative strength plays as short covering will be rampant in select equities should they not fall with the market this morning. 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 DCTH- phase III trial exceeded primary endpoint expectations NFLX- good earnings SNDK- good earnings CMG- good earnings NE- good earnings TER- good earnings VRTX- good earnings LEG- good earnings CYBE- good earnings STR- mulling spin-off of its natural gas and oil exploration production operations S, ITRI, SHAW- featured on âMad Moneyâ last night VMW- closed near a high after posting good earnings UTX- closed near a high after posting good earnings BA- closed near a high after posting good earnings TUP- closed near a high after posting good earnings PVH- closed near a high after posting good earnings TPX- closed near a high after posting good earnings CAS- closed near a high CTT- closed near a high ESV- decent earnings HSY- decent earnings MAR- decent earnings Q- being bought out by CTL for .1664 shares of CTL in a stock-swap deal CY- decent earnings PNC- good earnings Bad-The following stocks have bad news and/or a weak technical pattern EBAY- poor earnings QCOM- poor earnings AMGN- poor earnings MEE- poor earnings CTXS- poor earnings NVLS- poor earnings ACF- poor earnings ISIL- poor earnings CYH- poor earnings PTV- poor earnings HCBK- poor earnings FFIV- poor earnings FNF- poor earnings LRCX- poor earnings ADS- poor earnings TEX- poor earnings TSCO- poor earnings GHL- poor earnings LHO- poor earnings BAX- terrible earnings DO- bad earnings KMB- poor earnings NOK- terrible earnings VZ- poor earnings PM- poor earnings BTU- poor earnings PLD- poor earnings Earnings: THURS APR 22 BEFORE ABC ALK ALXN AN APD BAX BBT BGG BTU BX CAL CBE CLS CY DHR DO ESI ESV FITB GNTX GR HSY JNS KMB LLL LTM LUV MAR MNI NOK NUE NYT PENN PEP PLD PM PNC RCL RS RTN SHW SY TASR TXT UNP VZ ZMH THURS APR 22 AFTER ALGN AMZN AXP BCR BUCY CAKE CB CF COF CYMI CYT DDR DECK DOX EMN FII IGT MSFT NCR OSIP PMCS RMBS RVBD STM SYNA TCO TQNT WDC 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
FRI. APR. 23- Relative Strength In A Strong Market When the market is moving, relative strength plays and relative weakness plays can really be good. When there is a news event involved in an individual stock vastly outperforming or underperforming the market, relative strength plays and relative weakness plays can really really be good. When there is a news event involved in an individual stock vastly outperforming or underperforming the market on a given day with the market having a counter-trend day of its own, relative strength plays and relative weakness plays can really really really be good. This apex of a counter-trend day amidst a strong trend is a very powerful spot for trades- and a very rare thing at that. A number of conditions need to be present with the two main ones being a very powerful market and a very powerful counter-trend day on news. The reason this can become a ripe environment for traders is that emotions are higher than normal and if something doesnât move on the counter-trend day, ârealâ trend moves can become quite exaggerated. Yesterday was such a session. The broader tape has shaken everything off from Greece to the volcano to downright worries about the financial system. Yet the market was pounded yesterday morning on worries about the Greek situation as well as a number of earnings misses. Because of this, a number of stocks (particularly stocks with good earnings announced) opened weaker but trekked their way back toward unchanged on the session. Now hereâs the thing- once these stocks got to unchanged- with the good news- it no longer really mattered what the market did because so many people were short them that they scrambled to cover once the stocks got positive. A partial list of these stocks that you can peruse at your leisure include: SHW, FFIV, MAR, ADS, and GR. Furthermore, stocks that have been strong got much stronger as the session progressed due to the sheer emotion of the shorts; some of these include AAPL, AMZN, WYNN, CREE, SNDK, BIDU, and CMG. The markets may have seemed quiet overall yesterday, but there was a tremendous amount of action underneath the surface. To participate in the action, it is so important to be aware of the newsflow out thereâ¦and to make sure that you pay attention to each of the sub-stories/stocks in addition to the overall market to get a picture of the relative strength of some of these beasts particularly in this environment. Markets in Asia were down overnight with Hong Kong down 1%. However, as Greece agreed to take aid from their EU compatriots, things shifted in Europe with the bourses up from 0.8% in London to just over 1% in Frankfurt. The dollar is stronger against the yen, but surprisingly flat against the euro. That is the feature that will lead the way today as questions become raised about potential contagion effect in Europe as well as exactly what will happen next with the aid package. Futures are positive across the board on follow through from yesterday along with strength in some of the key financials. For today, follow the euro and follow the reactions of the earnings plays to their actual earnings. Track the stocks which had rampant short covering yesterday (many of which are highlighted below). From there, be very nimble but particularly play the stocks with earnings and relative strength/weakness albeit with smaller size than normal as stocks are gonna be moving. 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 AIG- closed near a high AAPL- closed near a high SHW- closed near a high after posting great earnings WYNN- closed near a high FFIV- closed near a high after posting great earnings MAR- closed near a high after posting great earnings CREE- reversed in closing near a high SNDK- closed near a high after posting great earnings BIDU- closed near a high V- closed near a high ADS- closed near a high after posting great earnings NFLX- closed near a high after posting great earnings GR- closed near a high after posting great earnings CMG- closed near a high after posting great earnings TXT- closed near a high after posting great earnings SCSS- closed near a high after posting great earnings URI- closed near a high after posting great earnings MKSI- closed near a high after posting great earnings ISLN- closed near a high after posting great earnings DHRM- closed near a high as an IPO TCK- closed near a high MOS- closed near a high BUCY- closed near a high IOC- closed near a high WDC- decent earnings AXP- good earnings COF- great earnings SYNA- great earnings RMBS- good earnings RVBD- good earnings CYT- good earnings EMN- great earnings ACTG- great earnings CSTR- set deal with Universal and Fox to offer DVDâs 28 days after release APWR- announced press conference for its Texas and Nevada facilities JCI- decent earnings PCX- decent earnings ERIC- good earnings Bad-The following stocks have bad news and/or a weak technical pattern QCOM- closed near a low after posting terrible earnings DCTH- island reversal in closing near a low despite announcing positive drug data SPSC- closed near a low as an IPO ACUR- FDA Panel rejected ACURâs Acurox AMZN- poor earnings MSFT- poor earnings NCR- poor earnings CYMI- poor earnings PMCS- poor earnings CAKE- poor earnings FII- poor earnings DV- poor earnings BCR- poor earnings STM- poor earnings DDR- poor earnings BUCY- poor earnings ABFS- poor earnings TRV- poor earnings IR- poor earnings WL- poor earnings Earnings: FRI APR 23 BEFORE ABFS CMS COL DOV ERIC EXC FLIR HON IR JCI PCX SLB TASR TROW TRV WL XRX 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. APR. 26- The Strong Economy I am as guilty as anyone of being a worrywart about many things. In the business world, I like many day traders have kept an eye on the Greek situation, geopolitics, and donât understand how a nation having more debt than my little brain can comprehend is good for anything or anyone over the longer-run. Yet, the stock market continues to ramp higher. Most people are missing the basic picture. Letâs put aside the notion that the United States markets are a âbastionâ for Asian investors worried about the Chinese property market or Europeans not know where to put money (which by the way is a two-pronged truism for what is occurring as foreigners are putting money into American markets). The fact of the matter is that in the immediate-term, the economy is improving. On Friday, we got data which showed that sales of new homes were up 27% in March (the biggest gain in 47 years) and orders for durable goods ramped higher as well. Now sure, I am well aware that the ending of a government tax credit on April 30 is helping to spur a rush into homes and do not deny the existence of the artificial jump but also know that the jump did indeed occur. But bookings for long-term owned things like industrial computers climbed 3%. Total orders did drop slightly, but was because of an artificial decline in commercial aircraft yet demand for things like car and truck parts rose sharply. So, âartificialâ or not, the fact of the matter is that there is growth in the economy in the immediate-term (which is expanding). Thus, the markets havenât cared whether it is government stimulated or not thus the sustained rise in stock prices for the past year. Markets were strong overnight with the major Asian markets up around 2% (2.3% in Tokyo, 1.7% in Hong Kong). In Europe, markets are higher as well to the tune of about ¾% on average. Oil is up a bit over and above 85 a barrel with the euro a tinge weaker. Futures are quiet, but slightly higher. Big cap financials are mixed, but techs are stronger. For the day, look for a maintenance of the strength in somewhat quiet overall trading. But there will be tremendous action underneath the surface on some decent earnings flow (most companies reported good results), lots of merger activity, and some microcaps on the move once again. 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 MRK- closed near a high after announcing intra-day information of U.S. health care reform legislation CHCI- among the small-cap homebuilders which closed near a high SII- closed near a high NFX- closed near a high WFT- closed near a high SLB- closed near a high after posting great earnings DEAR, FMBI, STSA, FPBI, BAYN- among the small regional bank stocks closing near a high WDC- closed near a high after posting earnings UAUA- closed near a high SLXP- closed near a high CSNT- closed near a high SOHU- decent earnings HUM- decent earnings WHR- great earnings DRAD- received 510(k) clearance from the U.S. Food and Drug Administration (FDA), enabling the Company to market and distribute its ergo large field-of-view, general-purpose portable imaging system. WX- being bought out for $21.25- 11.25 in cash and 10 in CRL stock DTG- being bought out by HTZ for 41 including a cash dividend of 6.88, 25.92 in ash on close, and .6366 shares of HTZ CAT- good earnings guidance CRNT- decent earnings DNDN- announced presentation of additional data from phase 3 IMPACT data CHKP- decent earnings Bad-The following stocks have bad news and/or a weak technical pattern BCR- closed near a low in an island reversal after posting earnings AMZN- closed near a low after posting earnings GS- closed near a low CRL- buying out WX and poor earnings RMBS- negative article in âBarronâsâ Earnings: MON APR 26 BEFORE ACV BLK CAT CHKP EXP HUM LO OSIS ROP SOHU WHR MON APR 26 AFTER ACL AMP BSX CNI ELX HMA JEC MAS OMI PCL PPDI RCII SANM SLG TXN UHS VECO WMS 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
TUES. APR. 27- Keeping Yourself In Check As any person with any degree of intelligence, reason, logic, and some degree of wealth knows, going to Las Vegas or Atlantic City can be a pleasurable experience- win or lose. Both the Las Vegas Strip as well as the Boardwalk have been gentrified somewhat over the last few years, the restaurants and hotels have fine amenities if at the right place, and oh by the way- there are casinos. For those that love gambling, this is real paradise. But the main way to keep the average person from losing a tremendous amount of money much less ruining his/her vacation (or life for that matter) is to go into a casino expecting to win yet being well aware of how much money one is willing to lose if things go awry- and stick to it. I am loathe to compare day trading to any form of gambling because if one knows what one is doing, one can and will make money over time (which in fairness is true in gambling as well in games such as poker). With that in mind, even the experienced traders among us (certainly including me) are going to have a dreadful trading session every now and again. Just as with the Vegas analogy, one must go into each trading day knowing how much one is willing to lose- and stick to it so as not to blow out oneâs account in one day much less one trade. I had a particularly bad day a week or so ago in which almost everything I picked out did indeed moveâ¦but not until I exited for a small loss yet on the three positions I held a little longer, they kept going against me. To my credit, I kept trying to fight it in thinking that Iâd come back if I kept plugging away, but it was not to be. I hit my personal loss limit (something that happens on average two times a year) and stopped. I then paper-traded to keep myself fresh and build up a little rhythm for the next day (a day in which I gained back about half of what I lost- and all of it and more in two days). Had I kept trading on that losing day though, I donât know what would have happened. And I donât want to know. Thus, realize no matter what you do, sometimes things just wonât go your way; when that is the case, have a mental loss number and stick to it. Over the long run, youâll save yourself a lot of mental anguish much less money. Markets in Asia were mixed overnight with Tokyo up 0.4%, but Hong Kong and China both down about 2%. In Europe, the tone is decidedly negative as Wall Street failed to rally yesterday plus Greek and now Portuguese worries are on the front burner. The euro is decidedly weaker in danger of breaching 1.33 with oil off 1%. Futures are lower as well with earnings plays like TXN offered lower. Bellwethers GS and AAPL are also down again. Look for the weakness to maintain (and contain) itself unless euro weakness gets exacerbated. Trading will likely be slower than yesterday as people will be listening to the GS hearings starting at 10AM ET. Trade less frequently in quantity of trades today than in the last couple of days, but there will be opportunities so hit them as best as possible when you can. 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 RIMM- closed near a high after announcing theyâll be updating their web browsers for their new Blackberry OS ASFN- closed near a high FNSC- closed near a high PPHM- closed near a high LNY- closed near a high RSH- decent earnings TXN- decent earnings CAVM- good earnings SOA- decent earnings PPDI- decent earnings RCII- decent earnings VECO- decent earnings HMA- decent earnings HMA- decent earnings ICE, WFT- mentioned on âMad Moneyâ last night CIT- good earnings CMI- good earnings DD- good earnings KCI- good earnings LXK- good earnings MMM- good earnings SWK- good earnings TLAB- good earnings UA- good earnings WU- decent earnings Bad-The following stocks have bad news and/or a weak technical pattern GS- closed near a low CRL- closed near a low after announcing WX acquisition and posting poor earnings PCBC- closed near a low BANR- closed near a low WHI- closed near a low CSR- closed near a low after posting earnings GOOG- removed from Recommendation List at Goldman Sachs ELX- poor earnings BSX- poor earnings MAS- poor earnings SANM- poor earnings WMS- bad earnings SWI- terrible earnings AIG- rating cut by KBR with a price target of 6 AMED- poor earnings EL- poor earnings F- beat earnings estimates, but missed revenue estimates KCI- poor earnings NTY- poor earnings UPS- poor earnings ODP- poor earnings TYC- poor earnings Earnings: TUES APR 27 BEFORE ADP AGCO AMED ASH AVY BEAV BP CE CIT CMI CVG DD ECL EL ENR F FPL HCP HSP KCI LCC LXK MHP MMM NEM NXY NOV ODP SWK TLAB TYC UA UAUA UPS VLO WAT WU X TUES APR 27 AFTER AFL BRCM BWLD BXP CENX DFG DVA DWA FIS FLEX LIFE MOLX MTW NSC PNRA RHI RRC 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. APR. 29- Focusing On The Best If you were a huge Yankees baseball fan with no obligations and plans to go to sleep on a Friday night but were given free box seat tickets three hours before game-time to a Red Sox-Yankees game, you probably would make the effort to get out to Yankee Stadium. If you were a theater buff and you had plans to go out with a friend to a dinner but said friend received tickets to a Broadway show, youâd both go to the show. Even more specifically, if you really really really wanted tickets to either the game or the Broadway show, youâd be aggressive about it in trying to obtain the tickets from the Internet or the phone rather than just hoping a random friend comes up with them. Sometimes the hope comes to fruition, but usually when youâre not doing what youâre supposed to do, you miss out on the good opportunities by not being aggressive in doing what it is you are supposed to do. Such is the case with trading. It astounds me that when one is trying to trade for opportunities to make at least 20 cents easily in time that one would waste time looking at shares of things like Parametric Technology (PMTC) â a stock with a range of about 40 cents on the day- when things like GS and AAPL were flopping around in point increments while opportunities to make at least 20 cents relatively easily abounded in things like UIS, AIG, and PNC. This principle applies to all types of trading. Why hone in something that may work a little when one can do something bigger within any style of trading one wants to do? Time really is money. If you are staring at something that has next to no chance of working- and even if it does, it wonât provide a lot of benefit- you are simply keeping yourself from making a living. Thus, no matter what type of trading you do, make sure you focus on the true opportunities rather than spinning your wheels in wasting your time and money. Markets in Asia were generally lower overnight with Hong Kong down about 0.8%. However, there was a distinct trend shift in Europe as hopes for a Greek bailout renewed themselves following statements from the German government with the bourses trading generally higher to the tune of about ¾%. Oil is nicely higher anew again with the euro gaining a bit of strength. Look for the marketâs gains to hold pending anything major out of Europe. Focus on the myriad of earnings out there and trade aggressively off of news as long as the market remains somewhat stable. 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 CLF- good earnings BIDU- phenomenal earnings FSLR- great earnings AKAM- great earnings FTI- good earnings OIS- good earnings IRBT- great earnings TSRA- good earnings BEC- good earnings OKE- good earnings CPNO, MSO- mentioned on âMad Moneyâ last night GS- closed near a high SHPGY- decent earnings PDE- decent earnings AZN- decent earnings AET- good earnings CELG- good earnings CNX- good earnings IMAX- good earnings IP- good earnings LZ- good earnings NIHD- good earnings OMX- good earnings OSK- good earnings HOT- decent earnings BWA- decent earnings BMY- decent earnings Bad-The following stocks have bad news and/or a weak technical pattern HPQ- acquiring PALM for 5.70 in cash OPWV- terrible earnings ETFC- share offering SNV- share offering ESRX- poor earnings V- poor earnings VAR- poor earnings VRSN- poor earnings WLT- poor earnings XLNX- poor earnings GMCR- terrible earnings ALL- poor earnings LNC- poor earnings OII- poor earnings RYL- poor earnings SKX- poor earnings OI- poor earnings CERN- poor earnings CVD- poor earnings RDN- closed near a low UIS- closed near a low after reporting earnings AOL- closed near a low after reporting earnings PPL- closed near a low after announcing acquisition of a German entity for $7 billion plus OXY- poor earnings CAGC- share offering EK- poor earnings PG- poor earnings POT- poor earnings PCBC- terrible earnings XOM- poor earnings Earnings: THURS APR 29 BEFORE AEP AET APA AVT AZN BC BDX BMY BWA CAH CAM CELG CL CME CNX D DLR EK ETR FO HAR HOT HP IMAX IP IPG IRM K KBR LZ MJN MOT MRO MYL NBL NIHD NRG OCR OMX OSK OXY PDE PG POT PTEN RAI SHPGY SWY TEN TWC UTHR VCI WM WY XEL XOM XRAY THURS APR 29 AFTER ACS AEM AMCC AMX APKT CQB CSTR DRIV ELY EXPE GNW GPRO HGSI HIG ITMN JAH KLAC MET MFE MHK MWW MXIM QLGC RSG SPWRA SQNM SUN SWKS SWN TRMB TSO VSEA WFR WYNN 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