NoiseTrader: Reading the Order Flow

Discussion in 'Journals' started by NoiseTrader, Apr 12, 2006.

  1. Daily Market Read for 4/13/2006:

    The broader market is forming a top and we are looking for a low-risk spot to short SPY or ES (SP futures). The name of the game here forward is going to be simple: capital preservation & defensive trading. A rising tide may raise all ships, but the increasingly selective breadth means only specific type of longs will continue to work well: precise stock selection based on superb analysis of specific sectors and ongoing market themes.

    Institutional money is not going to leave the stock market altogether, just rotate into very select areas. As an example, we think we’ll see some emerging order flow into Biotech…

    Order flow will continue into specific market themes, such as overseas plays in Brazilian stocks and specific names that insitutions have to buy on weakness, such as GOOG, AMD, AAPL & CHS.

    Order flow is still moving into financial stocks and commmodity based ETFs & stocks that represent inflation hedges such as GLD and USO, etc or industrial and brand name stocks that represent calls on global growth.

    In essence, I’ve been implementing this strategy since the beginning of the year with excellent results. Again…Only specific types of longs will work well: precise stock selection based on superb analysis of specific sectors and ongoing market themes.

    I’m currently stalking biotech very selectively. If you want my complete list you can always drop me an email at my blog:

    Use the "BUY LIST" button, right-hand column at:

    I’ll forward my current watch list of stocks (and commodities) and my daily traidng plan
  2. Infrequently trades develop in such a way that I feel no hurry whatsoever to take profits, in fact I know I should add as it moves my way.

    In most cases, I like to take a quick partial profits on a fraction of the initial position even if it theoretically diminishes the overall gain.

    There's just something about ringing the cash register, and laying off part of a leveraged position that puts me in a long & strong position -- where I can manage the rest of the position with greater equanimity.

    Maybe over time, as old trading wounds completely heal, the need to take partial profits will diminish. But, trades like the AMD come along and remind me why I like to take partials.

    AMD was a good example where the trade imploded yet due to aggressive partial profit-taking the trade actually made (to my great surprise) a profit.

    We had trade location long from 34.10 (4/10) and yesterday, (4/12) we took aggressive profits (one at 35.26 and the second at 35.49) due to the imminent release of earnings. And, this morning we got stopped out of core long at 31.97 for an average liquidation price of 34.24 for a .4% profit.

    Now, here comes the kicker -- if AMD stopped me out of the entire long positon with zero partial profits, would I have been too bitten to initiate a new long in QN (Nat Gas) today in the correct size? Maybe....

    On other fronts, I continue to see order flow creep into Biotech and this is a sector we are stalking. Aside form the ABI and BIIB longs, we're checking out names like: GENZ, GILD, CELG, PDLI, AFFX, CVTX, TECH, ALKS, MEXD, ZGEN & CBST as possible adds.

    If you want my datailed daily list of exact actions taken in stocks (and commodities) and my daily trading plan you can always drop me an email at my blog:

    Use the "Send me your BUY LIST" button, right-hand column at: