FRI. MAY 21- Hubris With the volatility occurring right now and the markets very dangerous, I want to pause from the turmoil momentarily to further emphasize what I recently wrote regarding managing positions and being safe. In 2001, just after I got married, my father-in-law asked me when I wanted to retire. I modestly told him I hoped to do so sooner than later, but believing in my heart of hearts that I wouldnât be trading for more than another few years. The relatively quiet markets of the next few years (compared to the stretch between 1999-2001) unfortunately presented a reality whereby for me anyway, I could make a consistent living but it was not as quite as good as the early part of the decade. Part of what me made me exhibit hubris in 2001 (even if I didnât totally believe it then in the way I definitely do now) was that nothing is ever guaranteed. Well, on the other extreme is what I consider to be the worst part of what I do for a living. You have to understand- trading is 95% psychological and 5% numbers to me, but one of the major external components is being completely honest with fellow traders about my own trading- and theirs. One recent morning, I had to tell one of the most genuinely decent souls Iâve met that I didnât think he should keep trading. I literally stayed awake almost all night the previous night thinking about it because it bothered me that much. Iâve seen many people come and go over the years; with that comes but one characteristic for those of us still around- true humility. Iâve been fortunate enough to have carved out a respectable living net-net over the years in the trading arena. But painful reminders such as the one that Monday morning hammer home the true meaning of the word âhumility.â Markets constantly change. Trading changes. As traders, we must evolve as well constantly. Thereâs an old saw that a trader is only as good as oneâs last trade. I donât agree with that; anyone can have a good or a bad trade. What is true though is that trading is exceptionally difficult and the one trait Iâve seen in the traders that make it is humility. All of the relatively successful traders Iâve met have been humbled by the market too many times to count. So, I learned yet again in a painfully human way recently that nobody with any degree of success should take anything for granted at any time- because any of us could be next particularly if we do not do what weâre supposed to do in terms of managing our trading properly. Markets overnight were predictably hit hard with Tokyo down 2.5% and every major European bourse down at least 2% as of this writing. Every other non-equity market is amazingly subdued with the dollar up a bit against the yen but down against the euro, gold ostensibly flat, oil down 2%, and S&P May futures expiring on the open. Futures since the close have been all over the map with Dow trading down 50, rallying 150 from there, falling 200 to below the flash crash low, and slightly off of the floor as I type. With everything somewhat quiet and the expiry of the futures, look for the down open with some further selling pressure to the futures lowâ¦but then I think things turn at least for a bit. Look to play relative strength plays. After that, let things sort outâ¦if the external markets remain quiet, we should see a violent snap-back rally. The thing to watch at that point would be to see if the leaders are strong and remaining strong (GS, AAPL, et al); from there, follow the leaders for the tone for the balance of the session particularly at the close of trade in Europe later 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 MRVL- decent earnings FL- good earnings ARO- decent earnings NDSN- good earnings Bad-The following stocks have bad news and/or a weak technical pattern DELL- poor earnings CRM- poor earnings GPS- poor earnings INTU- poor earnings RRGB- poor earnings BRCD- poor earnings ZUMZ- poor earnings FCX- closed near a low AIG- closed near a low RIG- closed near a low GS- closed near a low LVS- closed near a low POT- closed near a low IBM- closed near a low X- closed near a low GOOG- closed near a low RIMM- closed near a low RDN- closed near a low CREE- closed near a low APC- closed near a low PRU- closed near a low FSLR- mentioned negatively on âMad Moneyâ last night Earnings: FRI MAY 21 BEFORE ANN TECD 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. MAY 24- Sigh Of Relief Whenever I am highly uncertain of something, my stomach is in a knot. It is just a very unpleasant feeling. When I get the news- good or bad, I at least am somewhat settled before tackling the issue- again, good or bad- because I now know what it is I need to deal with. Usually, the higher the likelihood of a negative income, the worse I feel leading up to the news and the less of a shock it is once the news comes out. Such was the case on Friday with the markets which was a major reason I called for a bounce shortly after the open. First, on Thursday night, the U.S. Senate by a 59-39 vote approved a comprehensive regulatory bill the likes of which has not been passed since the Great Depression. The bill includes restrictions on proprietary trading by banks and also creates an oversight agency with the sole intent of (attempting to) prevent abuses by lenders. Furthermore, there is a means which would eliminate the unwritten âtoo big to failâ provision that has prevailed for many years in the United States. The other major issue that was resolved on Friday was the fact that both houses of the German Parliament approved the loan to Greece that had already been decided upon by the EU. There was certainly an element of âwhat-ifâ there. Finally, notably, the euro rallied very sharply starting in the middle of last week. This was actually slightly negative as the velocity of the move was quite sharp because so many funds were short, they had to cover the short in euro and to raise money, the impetus was to sell other assets such as- you guess it, equities. Well, while nobody knows the exact details of the financial reform bill, the markets didnât like itâ¦but it passed. Nobody was totally sure Germany would approve the Greek loans nor is anybody certain thatâs the best thing for Germanyâ¦but it happened. Finally, nobody was totally certain what the hedge fund risk was on an options expiration Friday with the euro rallyingâ¦but near-term S&P futures expired on the open and there was no announcement of a hedge fund blow-up. Thus, much immediate-term uncertainty was taken off the table. We got a negative outcome for the markets with the bill, a finalization of the approval in Germany, and the purging forced selling by funds was done on the opening bell (itâd seem). With the immediate-term uncertainty removed despite a negative outcome in particular re the legislation and the hedge fund selling, the stage was set for things to perk up a bit at least in the next few hours from early Friday morning to mid-afternoon on Friday. Totally on point: never forget history, but donât let it influence future judgment of trades. Despite all the negatives, the worst was over in the immediate-run with everything out there. So, the âreliefâ that some major obstacles were over and could now be dealt with helped spur the early Friday move for equities. Markets were mixed in Asia overnight. Tokyo was down 0.3%, Hong Kong up 0.6% and China up very sharply (over 3%) on hopes that some of the credit tightening would be halted in light of recent worries over worldwide (much less domestic) growth expansion. European markets, however, are down across the board from slightly in London (0.2) to over 1% in Frankfurt. The euro is getting hit very hard after no major developments occurred In Europe over the weekend. Oil is quiet, gold up slightly, and bonds up a bit. Futures are sharply lower albeit off of their morning lows as of this writing. Individual big-caps are notably mixed with materials and most financials lower but many big cap tech stocks a bit higher. The slight giveback is not surprising given the rapid ascent in the last few minutes of trading on Friday and the euro hit. There will definitely be a tug-of-war this morning; the declining euro and the sharp advance late Friday versus positive tidings out of tech early on will set the stage for the day. Look for a quieter day than Friday with moves not quite as sharp. There will likely be an attempt to shoot for unchanged from the down open, but the force of the decline of the euro and the early strength of the techs will truly set the battle ground for the day. Reiterating- If the whole story is not there - If something is good, assume either a short thru unchanged or an A-B-A2 (preferably to the downside in a downside market and the upside in an upside market) based on direction of the market unless specified. If something is bad, assume either a buy thru unchanged or an A-B-A2 (preferably to the downside in a downside market and the upside in an upside market) based on direction of the market unless specified- Good- The following stocks have good news and/or a strong technical pattern HAR- closed near a high WYNN- closed near a high BIDU- closed near a high IBM- closed near a high JOYG- closed near a high PNC- closed near a high JPM- closed near a high CTSH- closed near a high PXD- closed near a high FTI- closed near a high ATI- closed near a high KFN- mentioned on âMad Moneyâ on Friday night Bad-The following stocks have bad news and/or a weak technical pattern BP- indicated sharply lower after oil slick situation in the Gulf worsened over weekend Earnings: MON MAY 24 BEFORE CPB LFT YGE MON MAY 24 AFTER DCI PVH 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. MAY 25- Flashes Of Flashes Much has been rightly made of the âflash crashâ which occurred on May 6. It is still not known exactly what caused it nor is it known whether it was human error, computer error, or a combination of both. But what there is little doubt of in my mind anyway is that the problem has not been fixed. There have been mini-bursts of activity reminiscent of that particular session many times. We saw one such spate of motion on Friday afternoon. Let me backtrack for a second- for those who do not remember, the market gapped sharply lower on Friday, rallied tremendously, and then slowly gave back the early gains for much of the day. Suddenly, starting at 3:39PM, the S&P launched almost 1.5% into the bell. Part of it was short covering of course, part of it was relief, part of it was a reflex move after the dayâs initial tremendous rallyâ¦.I get all that. But it was a very bizarre rush of a move suddenly late on a Friday afternoon. In any case, this is the market weâre in and these are the moves weâre having. As day traders, we need to adapt to them. That late Friday spike actually set the stage for the activity yesterday morning. Any whiff of bad news was to be âoverreacted toâ because of the move higher; this is why Dow futures traded down 120 points (almost the entire spike) before the pen Monday morning and helped contribute to the weakness of the broader tape yesterday (well, that and the euro retracing as well). Thus now more than ever, day traders need to focus upon seemingly unusual movement in equity prices because an opposite reaction will likely happen at some point shortly thereafter. Markets overnight were hit very hard throughout the world. The Asian markets were down anywhere from 3% in Tokyo to 3.5% in Hong Kong. The losses are about as steep in Europe with the FTSE and DAX down about 3% with Spain down almost 5%. The euro is getting crushed as the gains from last weekâs rally have now evaporated. Gold is down about 0.5% with oil down 4%. The two main triggers are quite disparate but both disturbing. A number of regional banks are consolidating which seems to imply some trouble within their system as regulators are nudging lenders to merge with stronger partners after the IMF yesterday said that Spain needed to overhaul the condition of its financial institutions. Then, there were belligerent comments made by the North Korean government which will likely ring hollow, but the bellicose words have put that nation as close to war as it has been since the Korean Conflict stopped in the 1950âs. This is leading to a major down move for futures with the Dow down about 220 as of this writing (albeit 50 off of its overnight low). I donât think the markets bounce back quite the way they did on Friday. The euro crumbling and the North Korean worries plus the increasing nervousness over Spain are major overhangs. There will likely be an attempt to uptick, but I think it gives way to another wave of selling. The euroâs performance (or lack thereof) will likely set the tone for the balance of the day. Focus only on big caps and trade in much smaller size than normal with an eye toward relative strength and weakness plays in particular. It is a total momentum market, but one fraught with peril (and opportunity). 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 NBIX- positive phase II results for its endometriosis drug SUNH- splitting into two publicly traded firms NCR- Greenlight Capital filed a 13G on the stock SD, PRGO- mentioned on âMad Moneyâ last night Bad-The following stocks have bad news and/or a weak technical pattern DRH- 20 million share offering AIR- warned on earnings outlook IRE- closed near a low GS- closed near a low RIG- closed near a low X- closed near a low FCX- closed near a low IOC- closed near a low AIG- closed near a low BP- closed near a low WYNN- closed near a low TSL- poor earnings Earnings: TUES MAY 25 BEFORE AZO CBRL DSW FLO MDT SAFM TSL TUES MAY 25 AFTER TIVO 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. MAY 26- A Turnaround Tuesday The markets started out down dramatically yesterday on the heels of two major stories. First, in the fashion by which Washington Mutual was suddenly sucked into JP Morgan (JPM) ostensibly overnight on a seemingly random Thursday night, a number of regional banks in Spain were vacuumed into larger (hopefully more) healthier banks. The IMF ostensibly told the Spanish governmental financial authorities to shore up their books pronto so the gentle nudging sparked the consolidation. This sparked all sorts of awful memories of a bad time in international finance ala 2008 and early 2009 which caused massive selling of the euro (and the European stock markets). Yet, the first story occurred hours before that. North Korea announced it was going to cut all ties with South Korea and made bellicose statements about military provocation due to alleged violations off of its waters off of its west coast. This was done of course after the South blamed the north on a recent torpedo. Now, it doesnât make much sense for North Korea to have taken these steps due to its poor economic state, but many things from the Pyongyang approach are habitually odd. So before Spanish Bank Crisis, there was Korea War Crisis. What turned things around? Well, as it appeared yesterday that Security Council action is not going to be swift, that took some of the palpable nervousness away. Why? If the United Nations is not responding immediately to this, perhaps the talk is just that- talk. The other factor was that Representative Barney Frank indicated that Congress may well pass a much milder version of the financial overhaul bill that is on the table. With that came a rally in the likes of such stocks as beaten-down Goldman Sachs (GS)â¦and suddenly the makings of the turnaround were set. Uncertainty over European debt problems will continue to weigh on things, but for an afternoon at least, the market sighed a happy sigh that nuclear war is not immediately at hand on the Korean Peninsula. And maybe, just maybe, the push for âfinancial reformâ will be lightened a bit following a 10% plus decline in the Dow Jones Industrial Average in the last few weeks. Markets rebounded worldwide overnight with Tokyo up 0.7%, Hong Kong 1.1%, London 1.6%, and Frankfurt 1.9%. Commodities bounced as well with gold up 0.5% and oil ahead 3%. The euro is giving back some of yesterdayâs bounce, but that is the only cloud in the sky this morning. Look for a gap higher open as a number of entities are caught short in the immediate-run as the worst did not happen. Following that, Iâd be looking for A-B-A2 set-ups to the upside as the scared shorts will outweigh a few lucky longs. The market should hold its strength as there is no immediate-term trigger to shove it down thus there will likely be a very placid mid-section of the day with it 90 degrees and sunny outside. Movement will occur again in likelihood in the last 1- 1 ½ hours based on how well (or poorly) the euro is holding. 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 NZ- good earnings VRTX- positive late-stage data of its Telaprevir PNC- closed near a high GS- closed near a high WYNN- closed near a high AMZN- closed near a high X- closed near a high JOYG, BUCY- closed near a high FCX- closed near a high IOC- closed near a high RIG- closed near a high AIG- closed near a high AZO- closed near a high after posting good earnings CLF- closed near a high GOOG- closed near a high POT- closed near a high FSLR- closed near a high MHS- decent earnings guidance SOLF- great earnings TOL- decent earnings Bad-The following stocks have bad news and/or a weak technical pattern GTXI- poor phase III results for Toremifene TIVO- poor earnings UIL- closed near a low after announcing acquisition of several gas utilities which would be dilutive to earnings next year NNA- closed near a low AEO- poor earnings Earnings: WED MAY 26 BEFORE AEO DSX SOLF TOL VIP ZLC WED MAY 26 AFTER DBRN NTAP PAY SIGM SMTC TTWO Good luck today. Epiphany Trading, LLC www.epiphanytrading.com Erik R. Kolodny- Chief Markets Strategist Brendan P. Byrne- President Joseph R. McCandless- Managing Partner D. Timothy Seaquist- Managing Partner
THURS. MAY 27- Korea A Focus? As the markets continue their global whirl of geopolitical hotspots, a new one has come up this week- the Korean Peninsula. I made reference to it a few times in this space, but have not gone into it in any sort of primer. So, here goes. Since the Korean War in the early 1950âs, there has always been a general state of unease in the region. There have been various skirmishes and military maneuverings, but nothing of any overwhelming consequence since their conflict ended (technically, it never ended because no treaty was signed by the way). In the last 50 plus years, South Korea has thrived economically (even hosting the Summer Olympics back in 1988) with all kinds of technological innovations coming from that part of the world. In stark contrast, under Communist rule (almost autocratic at that), it is hard for anyone to argue that North Korea has come into the 2000âs much less the late 1950âs in any facet as the country has floundered for years. If one does a Google maps search and seeks out a night satellite graph of the region, it is downright startling to note the amount of lights/electricity in South Korea and the dearth of such things in North Korea. North Koreaâs ailing leader Kin Jong Il has been ill and is widely viewed as desperate by many. The first big question facing the world, however, is this: does North Korea have nuclear weapons and if so, how far can they be deployed? The second question: if there were an escalating conflict, would anyone else get involved? Well, earlier this week, North Korea noted it is going to sever all ties with South Korea as âpunishmentâ for being accused of sinking a South Korean warship with 46 South Korean sailors perishing on march 26 (even though South Korea seems to have ample evidence indicating this is indeed the case). Kim Jong Il told the military to be combat-ready, a development which caused the Korean Kospi to fall to its lowest level in several months earlier this week with the Korean won weakening more than 3% against the dollar. In the interim, Chinese Premier Wen Jiabao has not acknowledged that North Korea has torpedoed the South Korean ship. Coincidentally, China is North Koreaâs largest trade partner. Yet, China certainly wants to avoid a conflict and is arguably concerned that taking South Koreaâs side may tip the North Korean government into push for war. China did about $500 billion of trade with Japan and South Korea last year according to Chinese customs data- with less than $3 billion of trade with North Korea. But if the region falls into chaos, it undermines the interests of all nations except of course for North Korea. Basically, China does not want to push North Korea to be aggressive nor does it want to advise South Korea to punish North Korea with warfare. Market-wise, as was shown in the whipsaw action earlier this week, developments in the region have the potential to affect stock prices. The decline in South Korean assets sparked a wave of selling worldwide on Monday night and the lack of action by the Security Council on Tuesday showed a lack of urgency to the matter which the markets viewed as positive. Thus, while the situation is seemingly not of immediate-term consequence (I hope I am right about that), it certainly is a situation to monitor over what could be a very long hot summer on the Korean peninsula. Markets overnight were higher in Asia by about 1.2% in both Tokyo and Hong Kong. But the major fireworks took place later in the evening as China indicated it will maintain its holdings of its EU-based assets, there were wild rumors that North Korea would apologize for its perceived role in the South Korean torpedo, and a number of major names made bullish conference at a hedge fund conference. This led to a rally in euro shares with prices up 1%-2% for the bourses. The euro is sharply higher (although off of its highs) along with oil which is building on its 4% plus surge from yesterday. Futures are strongly higher as well although off of their highs as of this writing by a fairly good margin (Dow indicated up 150 or so, down from almost 250 earlier). Look for thinner rumor-driven trading all day in a bit of a narrower range than yesterday with illiquidity a key word. Rumors will drive trading all day with some selling into the gap open but the gains likely to stand barring the latest rumor out there. Trade relative weakness into market selling pockets otherwise donât fight the tape. Focus on the bigger cap names as volume will be at a premium particularly as some traders head for the exits in an attempt to make it a four day weekend. 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 NTAP- good earnings PAY- decent earnings SMTC- good earnings FSII- boosted earnings guidance VOD- featured on âMad Moneyâ last night BP- trading higher on thoughts that the company was able to plug the damage via its âtop killâ strategy RGEN- announced FDA and EMA approval of re-analysis of images from phase III trial of its RG1068 COST- decent earnings TIF- decent earnings Bad-The following stocks have bad news and/or a weak technical pattern CSTR- poor earnings guidance GS- closed near a low X- reversed in closing near a low POT- closed near a low AAPL- reversed in closing near a low BIDU- closed near a low DWA- closed near a low AEO- closed near a low after issuing poor earnings FCX- reversed in closing near a low FSLR- reversed in closing near a low MCO, MHP- fund manager David Einhorn announced he had major short positions in these companies; featured on âFast Moneyâ last night RMBS- said the International Trade Commission extended the target date for finishing its investigation of a patent-infringement case against NVDA Earnings: THURS MAY 27 BEFORE BIG COST HNZ TIF THURS MAY 27 AFTER BCSI JCG NOVL OVTI 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. MAY 28- It's Almost Summertime Sometimes, a little common sense is needed to trade. Mind you, I emphasize the phrase âa little bit.â Not a âlot.â âA little bit.â Today is one of those days. Weâre ahead of the kickoff of summertime, a much-needed holiday weekend, it is supposed to be nice overall in many parts of the country weather-wise, traders are tired, and very few of us want to be in front of computers. This is going to lead to sparse trading crews with many people leaving mid-day to get an early jump on traffic much less to get outside and enjoy what will hopefully be a peaceful few days for us. As a tangent, remember why we have Monday off- yes, barbecues are wonderful, but even more wonderful is the honor we are bestowing to the many people who have perished to allow us to do things like throw a burger on the grill. Back on point, in what has been a very volatile environment, illiquidity will rule the day today. Spreads will be quite wide on many stocks with trading volumes lower overall. Typically on a day like today, much of the activity will occur by 11:30AM with things quieting down dramatically thereafter. After 11:30, of two things usually happens. First, the scenario of nothing happening is very much in play. When I say ânothing,â I mean stock prices just donât move which makes trading difficult. The other option is that prices can be pushed up or down much easier due to a dearth of participants so random volatile moves can occur albeit on low levels of activity and in highly illiquid conditions. That second condition always intrigues me in enticing me to stick around âjust in caseâ as many of my better days occur in conditions such as this because the moves are much smoother when they happen due to the lack of activity. Thus, it is best to get the bulk of your trading done before the noon hour. If you do stick around, be prepared to do a lot of busywork at your deskâ¦but also hope for the latter scenario when prices can and indeed do move which can lead to some very nice profits. Circling back to my point, today is a day to not question why things arenât trading as normal, why volumes arenât high, why one is not getting a lot of fills. Just go with it. But with that in mind, trade with much smaller sizes than normal, aim to go for a little more juice in a move, be prepared for what could be a wonderful (or dull afternoon) and be prepared to get out immediately if wrong about a trade because the low volume environment can be even more restrictive than normal in providing any chance of a good exits if holding on to a loser. In short, use common sense in trading smaller, keeping losses extra tight, and holding off on trading if things get very quiet this afternoon. Markets world-wide are higher with Tokyo and Hong Kong both ahead about 1.5% and the FTSE and DAX up about 0.7%. The euro is marginally higher with oil and gold both ahead as well. Itâs actually a relatively placid morning which (unfortunately for traders) sets up for the dull scenario above. With AAPL up over 5, look for the markets to open higher. As long as there is a dearth of news and a lack of movement in the euro, look for a very narrow and quiet session with an upside bias. Focus on a few relative weakness plays as well as techs to see how they perform with the AAPL gain. Trade smaller than normalâ¦and keep all stops very very tight due to what promises to be very illiquid conditions as the day progresses. Reiterating- If the whole story is not there - If something is good, assume either a short thru unchanged or an A-B-A2 (preferably to the downside in a downside market and the upside in an upside market) based on direction of the market unless specified. If something is bad, assume either a buy thru unchanged or an A-B-A2 (preferably to the downside in a downside market and the upside in an upside market) based on direction of the market unless specified- Good- The following stocks have good news and/or a strong technical pattern JCG- decent earnings OVTI- good earnings HEV- agreed to joint venture with Wanxiang (the largest auto parts supplier to the Chinese car industry) MENT- Carl Icahn took a 7% stake in company NLY, AAPL- mentioned on âMad Moneyâ last night ESL- good earnings CSTR- closed near a high after posting earnings guidance FSII- closed near a high after posting great earnings NTAP- closed near a high after posting great earnings GS- closed near a high MON- near island reversal in closing near a high after posting an earnings warning POT- closed near a high MOS- closed near a high AMZN- closed near a high RIMM- closed near a high BIDU- closed near a high IBM- closed near a high CREE- closed near a high SNDK- closed near a high SPWRA- closed near a high AIG- closed near a high FCX- closed near a high CLF- closed near a high WLT- closed near a high X- closed near a high BUCY- closed near a high DVN, OXY- closed near a high FSLR- closed near a high AFL- closed near a high XOM- closed near a high JPM, PNC, WFC- closed near a high DECK- 3-1 stock split Bad-The following stocks have bad news and/or a weak technical pattern BCSI- terrible earnings GES- poor earnings AUXL- closed near a low on reimbursement worries re its business Earnings: FRI MAY 28 BEFORE MENT 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. JUN. 1- The Next Trade I know many people who are on diets (whether they need to be or not). They pick out the type of diet/food they will eat (South Beach, Atkins, Weight Watchers, Jenny Craig, and so forth). They are attempting to adhere to the rigors of said diet and are focused on losing weight. The thing that all of these people have in common regardless of whether they are succeeding at said diet is that they all are focused on the present and the future rather than the past. For instance, the attempt in my household at the moment as put forth by the king (and queen) of my household- my wife- is a âgood fatsâ diet with olive oil the type of key ingredient found in many of our (admittedly delicious and healthy meals- hope youâre reading this, love!). It doesnât matter if people dieting had cheese lasagna last week or a BLT the week before. What matters is the future. Why can people so easily attempt to shed pounds by not thinking about what happened before yet cannot attempt to make money without obsessing over their next previous trade? The beginning of the month is as appropriate time as any other time to note that in my head, I start over at 0 on June 1. But I also do that on June 2. And June 3. And June 4. And June 5. Oh yeah, Iâll also do it after the first trade I make today. And the second. And the third. Do not get me wrong. I am a student of history and firmly believe that if one fails to learn from past mistakes, one is bound to repeat the mistakes. Also, as noted in the past, I have a certain number whereby I only paper trade (or trade 100 shares of positions) if I am having a wretched day. But I inherently know that my next trade has very little if anything to do with the previous trade. If I am short 1,500 shares of Goldman Sachs (GS) in an attempt to profit from it going through yesterdayâs close as the market is selling off and it doesnât work because the market takes a small upblip for the broader market, it doesnât necessarily mean that it wonât work if I am short 1500 shares of Apple (AAPL) next with the same pattern in identical circumstances. Yes, I do keep in the back of my head what just happened but my focus is on making money in the AAPL trade in the right circumstances rather than my loss in GS. Thus, as you trade, realize that one can learn from history to be certain- but the only way a trader is going to make money is to focus on the present and future in making profitable trades rather than obsessing over the past. Markets in Asia were overall lower the last couple of days with prices off about 1%. In Europe, markets in general staged a relatively weak rally on Monday with typical gains of 0.3% to 0.5%, but most bourses have declined 1.55 to 2% overnight. The euro is very weak in touching a new four year low below the 1.22 level to the dollar on worries about the Spanish debt situation. A skirmish between Israel and Turkey and a worsening of the BP oil slick situation also are casting a pall over a negative outlook for equity prices with futures sharply lower as of this writing (albeit off of the floor). Look for a thinly traded session overall on a day after a holiday with the bias overall to the downside. With that in mind, a positive move for AAPL combined with an exaggerated sell-off into Fridayâs close sets the stage for random sharp short covering rallies so tread carefully. Focus on stocks that are relatively strong as your main source of trading conduits particularly in the early going. 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 FCN- closed near a high OREX- says FDA accepted a new drug application for review of the companyâs product for fighting obesity AAPL- announced it has now sold two million iPads Bad-The following stocks have bad news and/or a weak technical pattern BCSI- closed near a low after posting awful earnings UVV- closed near a low after posting awful earnings ATPG, OII, DRQ, DO, SLB, BHI- all closed very weak on worries of further restrictions in the oil drilling industry FTI- closed near a low RVBD- closed near a low Earnings: TUES JUN 1 BEFORE None today TUES JUN 1 AFTER GAME PSS SNDA 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. JUN. 2- What Is Luck? The other night, a very close friend of mine who has been trading very well in the last several weeks inadvertently left an order out after a very hectic day...week...month...and year! He got filled an hour or so after the close. He immediately put an order out there to exit his position exactly where he entered it. Would you believe at 7:15PM that evening - on a Friday no less- he got filled?! My immediate thought was "how lucky!" My second thought was that if I shared this parable with everyone, most of them would think "Why can't this sort of thing happen to me?!" That really got me thinking about a major concept that nobody really talks about. There is certainly an element of luck to this trading game. A computer goes down while in a position. Or there is a power outage. Or a major world event happens. But, for the most part, traders tend to create their own luck- good or bad. Going back to the original story, the individual who got that fill could easily have placed an order a few cents away from the prevailing market and hope for the best. But he didn't. In a relatively active stock (even on a Friday), he placed it exactly where he entered it and felt that it was quite plausible that an institution may choose to exit a position over the weekend. So, was it possible that he could have been stuck with the thing? Yes. But by handling the situation intelligently and logically, he was able to put himself in position to exit without so much as a scratch. Now of course the example I used was somewhat extreme, but day-in day-out, I here how "that kind of stuff never happens to me" or "I'm cursed" or "I only seem to get filled when it goes against me immediately." The thing is though that the markets are a thing- not a person. Yes, some people have more ability than others to handle numbers better or think a bit quicker, but day traders as a whole trading for their own account are pretty much on the same playing level. The other thing that bugs me about the complainers is that they don't realize how lucky in life most of them are. We've witnessed two major earthquakes in the last several weeks. We've heard tales of random civilians killed by suicide bombers. We've witnessed people at a very young age having horrific diseases. For myself and most of the people I know who trade, we all get to go home to a place with a roof over our head, running water, and don't have to worry about a suicide bomber detonating a bomb at our local grocery store. That's truly luck. So, yes, there are going to be days and trades that nothing seems to go right. But if you do what you're supposed to do, over time, what you think are 'lucky' fills that tend to happen to 'lucky' people will tend happen to you as well. Markets throughout the world were lower overnight with markets in Asia falling about 1% on average in most major Asian and European nations. The yen is relatively weak to the worldâs basket of currencies after the Japanese prime minister resigned. In turn, this is having an impact on the carry trade with oil and gold a bit weaker, the euro off slightly against the dollar, and sparking a little buying in American stocks as a safe-haven. Furthermore, there is hope- however speculative- that the latest maneuver from BP will stop the oil flow which is lifting many energy shares early on. Add to the mix more gains for AAPL as well. Off-hand, the gains will likely hold today barring a major debacle in the euro. TVâs will be tuned to Buffett in front of the Congress as well. So, look for a summer Wednesday with continued illiquidity albeit with an upside bias. Focus on the drillers and pay particular attention to the stocks in the news today to see if they respond ârationallyâ as a quieter environment will likely yield some good trades there as well. 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 JSDA- closed near a high PANL- closed near a high after an upgrade AMGN- announced approval of Prolia COST- featured on âMad Moneyâ last night JOSB- good earnings TSRA- raised revenue guidance for next quarter LOCM- raised earnings guidance DIVX- being acquired by SNIC for 3.75 in cash and .514 shares of SNIC MON- signed licensing deal with Dow AgroSciences and was upgraded by Goldman Sachs AVII- AVI-4658 demonstrated positive phase 1b/2 data from AVI-4658 Bad-The following stocks have bad news and/or a weak technical pattern PSS- poor earnings MF- share offering SLB, DRQ, OII, CAM APC, HAL NOV, DO, RIG, NBL, SII, ANR, ATPG- all closed near their lows in a very weak oil rig sector POT- closed near a low FCX- closed near a low CLF- closed near a low MEE- closed near a low X- closed near a low UVV- closed near a low FSLR- closed near a low RIMM- closed near a low GS- closed near a low BUCY- closed near a low WLT- closed near a low HRBN- closed near a low CSIQ- postponed release of earnings resultsâ¦boosted shipments guidance, but audit committee started inquiry after receiving SEC subpoena SNDA- poor earnings AIG- AIA/Prudential deal on verge of collapse Earnings: WED JUN 2 BEFORE DAKT JOSB WED JUN 2 AFTER CPRT CWTR HOV 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. JUN. 3- Rally Day In this manic market, the last two days have been particularly manic with the shorts having a party on Tuesday afternoon followed by a weak overnight in foreign markets and thenâ¦and thenâ¦a 2.6% pop in the S&P 500 in going off at the dayâs highs. There were two main factors which accounted for the run-upâ¦both beginning with speculation and then getting cemented from DC. First, there was hope- however vain (although hopefully it becomes realized) that British Petroleumâs (BP) latest attempt to plug the massive well spewing oil into the Gulf of Mexico will succeed. I wonât go into extreme detail as you can look up the procedure on any website or in nay newspaper, but suffice to say investors were betting that the splitting of the spill into pieces may help ease the flowâs pressure and thus allow for the plugging of the pipe. This was not discussed in detail by President Obama yesterday, but he did mention the magic words ânatural gasâ in definitive terms with the thinking that natural gas as a viable alternative to oil may come into vogue. Thus, not only did oil stocks rise, but natural gas plays did as well as the energy sector led the rally. The second factor was jobs. No matter that the job gains may be ephemeral because of the census worker tally or that all anecdotal evidence indicates that the unemployment picture does not remain all that happy. But yesterday was the first time in my career (almost 15 years) of plugging away at a trading desk that I remember a president and a vice-president in the same day indicate that a job report due out imminently was strong. They have no incentive to talk about it otherwise so why do it unlessâ¦the number may well be strong. It may be just a coincidence, but that chatter scared a few shorts as well. Thus, as markets try to anticipate what will happen rather than react to events, the stage was set for a nice all-day rallyâ¦which is exactly what we got. Markets overnight were strong throughout the world. In Asia, Hong Kong rallied 1.6% with the Nikkei surging 3.2%. The gains are sharp in Europe as well with London up 1.7%, Germany 1.8%, and Paris 2.2%. Oil is up about 1%, gold is down 0.5%, and the euro is slightly stronger against the dollar. Futures are modestly higher in lockstep as drillers are once again higher. The ADP report came in a tinge weaker than expected though so some of the gains are mitigated as of this writing. Look for a continued attempt to build on yesterdayâs rally in the early part of the session. Everyone will be looking to short because that is what has workedâ¦thus, it probably wonât work this time simply because a lot of people are caught short and the short covering has a way of feeding on itself with the backdrop of positive psychology. As the morning turns into afternoon, keep your eye on the major financials and techs but especially the energies to see if they can build on their gains. Look to short relative weakness after about 12PM in particular whereas the morning should be spent buying A-B-A2âs as long as the market does indeed hold. 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 APSG- good earnings XIDE- great earnings CYBX- decent earnings CWTR- decent earnings HOV- decent earnings JEC- rallied on rumors of an LBO BIDU- closed near a high HAL, SII, SLB, OII, NBL, CAM, BHI, UPL, APC, NOV, ANR, BP, ATPG, PXP- closed near their highs TSRA- closed near a high after posting good earnings AMGN- closed near a high after getting Prolia FDA approval POT- closed near a high FCX- closed near a high CLF- closed near a high MEE- closed near a high X- closed near a high GS- closed near a high FSLR- closed near a high AMZN- closed near a high IBM- closed near a high LVS- closed near a high PNC- closed near a high EGP, CMI, PCAR, NAV- featured on âMad Moneyâ last night REGN- closed near a high WPRT- closed near a high in a major reversal after posting earnings DE- closed near a high DVN, RRC, SWN- closed near their highs JOYG- blowout earnings Bad-The following stocks have bad news and/or a weak technical pattern CEPH- phase II trial of schizophrenia treatment did not meet primary endpoint UVV- continued weak in closing near a low IFLG- continues a very negative downtrend after exploding earlier this year; closed near a low CPC- closed near a low Earnings: THURS JUN 3 BEFORE CHRS JOYG STP UTIW THURS JUN 3 AFTER COO SAI 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. JUN. 4- The Annual ASCO Conference Over the upcoming weekend, the annual meeting of the American Society of Clinical Oncology (ASCO) will occur. They always hold their convention the weekend after Memorial Day Weekend. There will be exciting things like dense abstracts, long drawn-out presentations, and symposiums regarding heady discussed. Kind of an awesome way to spend a weekend, huh? Still, once one gets past the very complex nature of all of the work, it is actually a fascinating conference. Getting serious very fast as weâve all either directly or indirectly faced cancer or know someone who has, ASCOâs purpose is quite important. Simply put, ASCO is the foremost organization in the world representing physicians of a variety of oncology specialties whose primary goal is to care for people afflicted with cancer. The members of the organization are committed to advancing cancer education for physicians and patients, promoting communication about cancer, and perhaps most notably attempting to improving care of and prevention of cancer. ASCO members meet annually as noted with upwards of 30,000 people attending the conference. Clinical trial results and updates of cancer studies are presented each year in noting the yearâs progress against the fight against cancer. As day traders, we have a much less noble purpose: earn a living from trading stocks of companies making presentations. There tends to be an enormous news flow out from the conference. Obviously, some years are better than others for trading purposes depending upon the degree and breadth of studies done at the conference. But oftentimes, leading up to, during, and a couple of days beyond the conference, there are some major moves in many biotech stocks. Many recent big movers have been in the biotech sector with stocks like Dendreon (DNDN) having made significant moves in 2010. Indeed tiny microcap stocks to titans like Amgen (AMGN) often move in double digit percentages particularly just after ASCO. Over the weekend, hundreds of companies will present their yearâs work; headlines will be pouring out all weekend about the findings. By Monday morning, there will be a flood of news. Again, some years are better than others for trading these things, but extra homework has got to be done by the prepared day trader. I cannot emphasize enough- Iâve observed in the many years Iâve been day trading that most traders who do not do homework and try to trade this incredible opportunity tend to lose a tremendous amount of money. They just cannot understand why a stock could be up 300% or down 20% despite posting âpositiveâ results. See, a major finding can put a company in the limelight because if the market capitalization is, say, $15 million but they may possibly have a $500 million drug on their hands, why shouldnât the stock triple âjust in caseâ the unknown product does play a factor? Conversely, if a company has a âsuccessfulâ phase III FDA trial, the stock may still fall if, say, the drug passed safety tests but failed to pass statistical significance results (which will be discussed in every phase II release). As a side note, phase I clinical trials involve a small sample size of humans, phase II on a large set of humans once safety tests were proven on the tiny phase I set, and phase III over a huge sample size with reams of data comparisons made to placebos and efficacy of similar products. Anyway, over the weekend into Monday morning, check sources like Yahoo Finance, Googleâ¦heck even mainstream news sources like CNN will report some results. The bottom line is to make sure you read every headline (if not story) possible regarding this oftentimes incredible trading phenomenon if you wish to trade it. As noted, it is seemingly random as to which years these stocks vacillate wildly, but moves like what occurred in Intermune (ITMN) early last month are entirely possible and indicative of what may happen come Monday morning in select stocks. So please be prepared as knowledge is key here (as it so often is) in terms of knowing what came out of the conference and how to interpret the newsflow. Markets in Asia treaded water overnight ahead of any potential news coming out of Europe as well as the U.S. jobs report with both Tokyo and Hong Kong closing almost exactly where they started. The story changed in Europe though with rumors of a large derivative loss at big European bank SocGen and negative comments out of Hungary over its debt situation. Furthermore, the jobs report came out weaker than expected. This is all leading to a near complete reversal of the gains of the last couple of days with European bourses now down 2% on average. Oil is down 2%, gold is slightly weaker, and the euro is now edging towards the 1.20 level. Futures are getting demolished with the Dow indicated down about 200 as of this writing. For the day, the main number from here is the euro with the rumor of the moment dominating the landscape. Look for the markets to open deeply negative and then not really stray too far from opening levels news as there will be no reason to do much of anything pending any major news along with traders getting a jump on what will be a hot and humid weekend in many parts of the country. 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 TRBN- the Board of Appeal for the European Patent Office upheld the Opposition Division's original decision to revoke Genentech and Biogen Idec's European Patent (BIIB) COO- decent earnings JRJC- good earnings MATK- good earnings CMTL- good earnings RIG, BP- closed near a high NBL, APC- closed near a high SWN, DVN, RRC, CHK- closed near a high WLP- closed near a high ZQK- decent earnings RCMT- received (and rejected) a 5.20 takeover bid from CDI WPRT- featured on âMad Moneyâ last night Bad-The following stocks have bad news and/or a weak technical pattern PNC- closed near a low BK- share offering ULTA- decent earnings, but doing a share offering X- cut at Goldman Sachs Earnings: None today 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