Day Trading Thoughts For Wed. Jan. 7

E

erikrkolodny

ET Sponsor
One of the features of the recent relative quiet bull channel environment has been the absolute necessity to get out of your trades when you are wrong. This is particularly true in even the best of set-ups. Yesterday afternoon, I witnessed one of the best theoretical paper trades I’ve seen in awhile: a short of ENDP through 20 around 1:30PM ET yesterday. It had all of the criteria one would seek in a good trade- the ability to make 20 cents, decent liquidity, news, was at a low of day, market was dwindling down, and it had hung around 20 for a few minutes. I shorted a good swath of the stock at 20 in thinking it just had to go; I mean, all the stars were aligned, right? I even thought enough of it to note it in my trading room’s audio and verbal chatrooms. The stock immediately flew down…and paused. So, I took half of my position off just above the 19.91 low (covered 19.92). It got back to 19.95 bid and the buyer stayed there so I took more off at 19.96. When it got back to 20, I sucked in my pride and took the rest of it off. And wouldn’t you know? The stock never got back below 20 again. The moral of the story here is that for all the times we moan and complain about the trades we should have held (and I am the king of it), the fact of the matter is that usually if something doesn’t act as expected in the time horizon I/you set out for it, get out. So, as my time horizon was ‘immediate or bust’ on ENDP, I got out as applicable in ENDP and made money…not as much as I’d have liked, but not as bad as the massive loss I’d have taken had I held. Thus, always remember: if something is not going as expected in the time horizon you have set out for it, better safe than sorry.

Stocks in Asia were higher overnight in Tokyo by about 1%, but down across the rest of Asia as Satyam (SAY) announced they had massive accounting fraud. This set off a massive selling wave in India with the Sensex down 7% plus. The weakness spread to Europe with more bourses down just under 1%. State-side, futures are a bit weaker with futures indicating a giveback of yesterday’s S&P/ Dow gains. Look for today to be a lot like yesterday (barring something extraordinary in the jobs numbers at 8:15AM) except that the bias should be to the downside. However, there are many smaller stocks out there whipping around so trading should be very good today in those (as evidenced by the huge idea list below).


Reiterating-If the whole story is not there -
If something is good, assume either a short thru unchanged or an A-B-A2 based on direction of the market unless specifiedIf 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

ACAS- continued its march higher yesterday; looking for more momentum thru 7.39 Tues high

MPG- closed near high; looking for a buy point thru Tues 2.35 high

ALD- the thing keeps going as well. Looking for buy thru 4.99 Tues high

XTXI- huge rally yesterday; likely A-B-A2 off of open with a focus on Tues 6.98 high

FFIV- warned, but not horribly; news may be factored into the stock as it traded higher yesterday afternoon

PLCM- preannounced to the upside

NTCT- preannounced to the upside

IWOV- preannounced to the upside

ARTC- continued its march higher

ICOG- won a case against BA

LJPC- announced deal with BMRN in which it can potentially receive a huge amount of cash

IR- Trane won contract from Fed. Gov’t valued at up to $5 billion

ARM- very strong in closing near a high; looking to buy thru 3.99 Tues high

LXP- strong; closed near high…looking to buy thru Tues 5.96 high

AHD- closed near high looking to buy thru 7.05 Tues high

DFT- strong; looking to buy thru Tues 3.75 high

FCE/A- closed near high; looking to buy thru Tues 8.59 high

TXCO- strong energy stock; looking to buy thru Tues 3.15 high

XTEX- small energy stock closing near high; looking to buy thru 7.19 Tues high

MCGC- strong; looking to buy thru Tues 1.74 high

MGA- closed near high; looking to buy thru Tues 35.83 high

WFR- closed near high; looking to buy thru Tues 17.81 high

WDC- very strong in closing near high; looking to buy thru Tues 14.45 high

KBR- preannounced decent earnings

QCOM, ETN, VZ, GIS- all on “Mad Money” last night

PLCM- pre-announced decent earnings

RMBS- announced a major contract with Samsung

FDO- good earnings

STZ- decent earnings

MON- good earnings


Bad-The following stocks have bad news and/or a weak technical pattern

SMSC- warned miserably for next quarter

MCHP- warned slightly for the quarter

PGN- announced 11.5 million share offering

AA- undertaking massive restructuring

IXYS- earnings warning

PERY- warned badly

BABY- has trended sharply lower last couple of days; looking for a short thru Tues 9.87 low else an A-B-A2 reversal

SAY- the Enron of India as CEO admits to cooking the books


Earnings:

WED JAN 7 BEFORE

FDO MON STZ SVU

WED JAN 7 AFTER

BBBY BLUD CBK SONC


Good luck today.

Erik R. Kolodny
 
As for market analysis, all I care about is the framework for the day. For instance, my prognostication this morning: "Yesterday was a prime opportunity for a sell-off and when none happened, it has given some people a bit more of an impetus to get back in. Look for the gains to hold overall as there just is no real selling pressure out there, but in relatively placid trade" summed up the action pefectly, I am happy to note. Why worry about Fibonacci or Elliott Wave or astrology or retracement levels or volume when what I wrote was perfectly fine? Why write about something I don't feel is necessary on any given day? There are days in which things like 'break outs' are applicable, but I find (for me) that simple is better so why confuse myself much less anyone who reads what I have to say?

Good Morning Erik. A couple things. One I am typing on my wife's computer for some reason and I find absolutely no porn links!
Yesterday was not a prime example of a sell off day I'm afraid, you need to always keep the psyche of the market in general in mind and the talking heads over the weekend. There was lots of talk about a 20% up 1st half of the year making the rounds of the brokerages.
So yesterday was rather a fake out day a fools day a good day to find an extended name and short if that's what you do. I don't. Fortunately or unfortunately I have been at this every day for over twenty years, I truly feel I do not learn anything new anymore although of course I make some of my same old mistakes. Your average hold time of two minutes and your goal of twenty cents sounds farcical but you must understand that I come from a much deeper more researched place for my ideas- due to this hard research- I enjoyed many many 300% plus gainers over the years that helped build up an account from $200,000 to well over a million. However times have changed and I have lost a good portion of my gains. This new environment might be better suited for your style but I assume you have the tax break that professional traders apply for, out of laziness and lack of wanting to rely on stocks forever I have not done that. If I did I might do the reams and reams of stock ideas but like I said I deal with real people both money professionals and just plain old investors who know me from my newsletter days- they demand much more. That is why you throw in the stars and cycles and market breadths, volume analysis money flow and the rest... it's best to get as much on your side as possible. ET readers know my uncanny ability to call rallies out of no where and they always asking how did you know I should of gone long the 3x blah blah... well you know by using just the tools you are ignoring. I hope you understand that there is a section of investors out there who don't scan for stocks that had a big move the other day or a big fall the other day or an announcement-- simple chart study will give you your buys especially if you are willing to stay in front of a computer all day.

Now here you have another too long list. If you went through your last one as I did you would of found very little actionable moves... will it be my job to tell everyone which of your ideas is the right one for each day? Perhaps. I would like to work together here in some fashion as I have been posting forever and leading he charge forever and like a General who took an arrow through the brain but still rides... I'm still here in some fashion but not loving the war anymore. The enthusiasm for stocks have been ripped out of my soul. That didn't happen in the tech crash nor the big crash, it kind of happened with Mexico in the 80's and but not LTCM or Asian Tiger meltdowns. Willing to roll with sector changes I always was able to invest myself out of the hole I was in... never have I experienced a full flush in every sector like this time... never have I taken such a hit... this isn't oh I got tripped up daytrading a few times... this is someone who overseas 7 or 8 portfolios of folks who have investments for life; any tinkering I do daily or weekly or three weekly is to boost performance. Anyway with that said we encounter a market pull back today and it might be a good time to initiate longs.

You have a BIG list I shall try to add to it and give you my ACTUAL trade of the day and or week and I hope we both have a good day.

The reason why I replied to your post and not to so many others is I could instantly recognize someone who has the base attitude that I do an attitude that these mercenary types on ET do not have and will never have... I too like to help without asking for anything in return. People can't understand why I give top picks away. I think you do. ~ stoney
 
ACAS- continued its march higher yesterday; looking for more momentum thru 7.39 Tues high DOWN 10% in pre.

MPG- closed near high; looking for a buy point thru Tues 2.35 high... Geez a ST play in a REIT! YOU DO KNOW THESE HAVE TAX IMPLICATIONS!

ALD- the thing keeps going as well. Looking for buy thru 4.99 Tues high. herb Greenberg has a lot of issues with this co of the legal kind. These guys might be criminals and have been subpoenaed.

XTXI- huge rally yesterday; likely A-B-A2 off of open with a focus on Tues 6.98 high. Actualy an A-b 3 open down 13%

FFIV- warned, but not horribly; news may be factored into the stock as it traded higher yesterday afternoon- one of my favorite tech names of recent past. Want to read that warning. Right at sig resistance of $23 sure to get through it. On the surface I like this set up.

PLCM- preannounced to the upside- If this is the teleconferencing stock I think I own it! Not a great stock though.

NTCT- preannounced to the upside- Impressive jump up gap of 25%, not an unkown name though bares watching for a retrace.

IWOV- preannounced to the upside-ZZZzzzz I did own this at $45 and rode it to $1 as I remember back in 01'

ARTC- continued its march higher- an now lower -8.7%

ICOG- won a case against BA- big spike 27%

LJPC- announced deal with BMRN in which it can potentially receive a huge amount of cash.- I guess you could say having a good day UP 93%!!!! lol

IR- Trane won contract from Fed. Gov’t valued at up to $5 billion- Nice Spot. Great Chart. Potential for more!

ARM- very strong in closing near a high; looking to buy thru 3.99 Tues high- DOWN 6%

LXP- strong; closed near high…looking to buy thru Tues 5.96 high- $2.5 Billion debt- Exposure to BOTH Ciruit City & Daimler- Chrysler!

AHD- closed near high looking to buy thru 7.05 Tues high.- 4.5% Down

DFT- strong; looking to buy thru Tues 3.75 high OH GOD NO! This is a data center REIT that is having projects pulled left and right.

FCE/A- closed near high; looking to buy thru Tues 8.59 high - Is this a REIT don't know the name...

TXCO- strong energy stock; looking to buy thru Tues 3.15 high. YUCK down 16% already today. Am I in the "good" section? Just kidding but like I said this is why we should tighten up your lists... al of ET would benefit.

XTEX- small energy stock closing near high; looking to buy thru 7.19 Tues high- Don't know these guys, more later

MCGC- strong; looking to buy thru Tues 1.74 high.
YUCK don't like.

MGA- closed near high; looking to buy thru Tues 35.83 high- oh my! A car parts supplier, what are you smoking- That A2? $5 dollars ago ok as a lark but with 24% of Rev from GM... It's tough. I like Many Moe the Pep guys that has a fat div and is like $3 I believe- haven't looked in a while and I wrote up ORLY here and own it and made good $... But my ideas in this segment are geared towards to home market and the fixer uppers- the folks who will have cars on the road longer now without the ability to buy new ones... Magna is a direct supplier to the fading car makers... risky, even for two minutes!

WFR- closed near high; looking to buy thru Tues 17.81 high. Hummmm. Kind of like. Lost money on them twice.

WDC- very strong in closing near high; looking to buy thru Tues 14.45 high- That high would be right at 3 month resistance- if it does poke through $16 is there but not the best risk reward.

KBR- preannounced decent earnings- Jana Partners reduced their stake by 68% recently, my family used to do business with them, I'll try and find out why. I kind of like the idea. This is my choice as of now of your ideas.... comeback chart. Good sector for Obama bounce. Will tear through some finacials today...

QCOM, ETN, VZ, GIS- all on “Mad Money” last night-
not a valid reason for investment

PLCM- pre-announced decent earnings- gapping 9.6%

RMBS- announced a major contract with Samsung
-gapping 4%
FDO- good earnings- Gapping 9%

STZ- decent earnings- booze is always good in recessions

MON- good earnings- Gaping up 9%

>>> man Erik it's taken over a half hour, three mugs of coffee and a pipe to get this done!

>> The best bets for a short term holding of at least 3 days from Eriks list today are-
FFIV / NTCT / WFR / IR / KBR with BBBY on the earnings side... Now that's a tight list you could send around !
Best,
~stoney
 
i like FFIV to 23.90 area. It hit 23.60. i scalped it for 23 cents but bailed early from the open. i am looking at it again here at 23.21 with a stop just under today's low.
 
was stopped out of FFIV earlier for a .20 cent loss. back in at 23.02 with a stop at 23.87. i still think it can re test the highs or hit 24 today. i will sell at 23.49 area.
 
Quote from trader2000:

i think the market rally's to the 10k area on Obama optimism.then falls hard. just my opinion.
More...

Obama optimism may be priced in, but recession fears by the doom and gloom media are overdone The recession is very shallow according the economic numbers.
 
Stoney- first, a big thank you. Will do this in a couple of parts. I love discussing this stuff with people clearly my intellectual equal or superior; it is a tool I use to learn and improve myself as a trader much less human being.

Could not agree more re the whole talking heads stuff. But for me, it does not matter. I cannot emphasize enough- I truly take a minute-to-minute approach. I set out a broad array of thoughts/ideas…typically, I am watching 100-150 stocks at a time. I have no mechanical ability whatsoever, but I was blessed with the ability to have an encyclopedic mind for numbers so I type out my stuff, study it, and scan a gigantic watch list.

Yesterday was not a prime example of a sell-off day, because, well, the market was up. But my point is that I try to make money within the framework of the micro every day so I don’t care on a day-to-day basis whether the market is up or down.

I agree; yesterday was a good day to find a stock that has an extended move and short it. Now, I’m not accusing you of saying such a thing on a big down day, but I could easily have said the same thing yesterday morning with things like DRYS having quadrupled from the lows. Or the same thing last week with DRYS having tripled from its lows. That’s just my point: I don’t know. So, I don’t try to guess.

I’ve been at this part-time for 21 years and full-time for almost 13. And I truly feel that I learn something new every day. If I don’t, it means I have perfected this- and that is far from the truth.

Here is the table I was quoting from yesterday re per trade average as far as time went on the composite of all of my trades last year (with commissions deleted for privacy sake):
Per Trade Averages
Share Qty Held
1974 00:02:41


As for the 20 cents, what I am saying is that it is much easier to make 20 cents rapidly in an GS or a STP rather than INTC or MSFT. I am not claiming I make at least 20 cents on every trade I do; that of course is not true. What I am trying to impart is that I study my previous day’s trades every single day and found that if I don’t thin kit is possible to make 20 cents easily in a trade, I won’t do it.

Please do not think that I do not do hard research; I am up at 5AM, at the office by 7AM, leave at 6PM and after some much needed time with my bride and my two daughters, I typically work/respond to e-mails about trading, et al between 9PM and 1AM. I dig and dig and dig for ideas.

That said, although I have built an account which started with $1,000 to the seven figures, I have not enjoyed 300% gainers over the years because for whatever psychological reason, I do not have the ability to hold positions nor is whatever knack I have for immediate-term moves good for longer-term trades. I am not good at it. So, I do not try anymore. I stopped trying in 1997 and have been trading this way since the last time I had a bad loss from a long-term trade.

Yep, I have the mark-to-market accounting designation.

And I agree- and I’m actually fascinated to know your identity considering I used to read newsletters with an unabashed passion during my learning process from 1987-1996. But, I am not doing a newsletter…and if I am, it is a different kind of newsletter for the year 2009 day trader. I misspoke slightly; I do tend to ignore many indicators intra-day, but do watch for the longer-run. But, what I am saying is that if one is using, say Bollinger Bands- one can have a reading of 85 and ye the stock can still be a buy for a three minute time horizon. So, I found (for me) that all of the stuff was extraneous noise that was confusing me in the time horizon of the trades I commence.

I agree and am well aware that there are a swath of people out there who rely exclusively on technicals or fundamentals or whatever. I try to blend both. I do not have an ability to look at a chart and tell what is going on without using the fundys…and if that does not make sense, how many people went home long SAY last night because it had broken out on a chart following its downside gap on Dec. 16th?

I could care less the quantity of the stuff that actually works that I shout out on individual ideas; you are making my point for me. If a stock does not do what I want it to do, I do NOT make the trade. I am not saying “Because XYZ closed here, it will do ABC;” what I am doing is calling out individual thoughts and acting on them if they get to the prices I want. I did A FEW of them today and finished up well into four figure territory on the day.

As for this statement, you again make my point: “Anyway with that said we encounter a market pull back today and it might be a good time to initiate longs.” Is there 0% chance tonight of another SAY or a terrorist act or whatever? Thus, I have no idea whether one should initiate longs or not. I am just interested in the immediate-term. Now, I am not going to do this every day because, frankly, I am really really tired right now and have a couple more hours ahead, but just want to go thru what I did. I’ll note in CAPS what I did following your notes.


Quote from stonedinvestor:

As for market analysis, all I care about is the framework for the day. For instance, my prognostication this morning: "Yesterday was a prime opportunity for a sell-off and when none happened, it has given some people a bit more of an impetus to get back in. Look for the gains to hold overall as there just is no real selling pressure out there, but in relatively placid trade" summed up the action pefectly, I am happy to note. Why worry about Fibonacci or Elliott Wave or astrology or retracement levels or volume when what I wrote was perfectly fine? Why write about something I don't feel is necessary on any given day? There are days in which things like 'break outs' are applicable, but I find (for me) that simple is better so why confuse myself much less anyone who reads what I have to say?

Good Morning Erik. A couple things. One I am typing on my wife's computer for some reason and I find absolutely no porn links!
Yesterday was not a prime example of a sell off day I'm afraid, you need to always keep the psyche of the market in general in mind and the talking heads over the weekend. There was lots of talk about a 20% up 1st half of the year making the rounds of the brokerages.
So yesterday was rather a fake out day a fools day a good day to find an extended name and short if that's what you do. I don't. Fortunately or unfortunately I have been at this every day for over twenty years, I truly feel I do not learn anything new anymore although of course I make some of my same old mistakes. Your average hold time of two minutes and your goal of twenty cents sounds farcical but you must understand that I come from a much deeper more researched place for my ideas- due to this hard research- I enjoyed many many 300% plus gainers over the years that helped build up an account from $200,000 to well over a million. However times have changed and I have lost a good portion of my gains. This new environment might be better suited for your style but I assume you have the tax break that professional traders apply for, out of laziness and lack of wanting to rely on stocks forever I have not done that. If I did I might do the reams and reams of stock ideas but like I said I deal with real people both money professionals and just plain old investors who know me from my newsletter days- they demand much more. That is why you throw in the stars and cycles and market breadths, volume analysis money flow and the rest... it's best to get as much on your side as possible. ET readers know my uncanny ability to call rallies out of no where and they always asking how did you know I should of gone long the 3x blah blah... well you know by using just the tools you are ignoring. I hope you understand that there is a section of investors out there who don't scan for stocks that had a big move the other day or a big fall the other day or an announcement-- simple chart study will give you your buys especially if you are willing to stay in front of a computer all day.

Now here you have another too long list. If you went through your last one as I did you would of found very little actionable moves... will it be my job to tell everyone which of your ideas is the right one for each day? Perhaps. I would like to work together here in some fashion as I have been posting forever and leading he charge forever and like a General who took an arrow through the brain but still rides... I'm still here in some fashion but not loving the war anymore. The enthusiasm for stocks have been ripped out of my soul. That didn't happen in the tech crash nor the big crash, it kind of happened with Mexico in the 80's and but not LTCM or Asian Tiger meltdowns. Willing to roll with sector changes I always was able to invest myself out of the hole I was in... never have I experienced a full flush in every sector like this time... never have I taken such a hit... this isn't oh I got tripped up daytrading a few times... this is someone who overseas 7 or 8 portfolios of folks who have investments for life; any tinkering I do daily or weekly or three weekly is to boost performance. Anyway with that said we encounter a market pull back today and it might be a good time to initiate longs.

You have a BIG list I shall try to add to it and give you my ACTUAL trade of the day and or week and I hope we both have a good day.

The reason why I replied to your post and not to so many others is I could instantly recognize someone who has the base attitude that I do an attitude that these mercenary types on ET do not have and will never have... I too like to help without asking for anything in return. People can't understand why I give top picks away. I think you do. ~ stoney
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