A few days ago, I was having a dialogue with a fellow trader about General Electric (GE). We were discussing the stock mid-morning as GE had steadily weakened the entire morning in defiance of the general small uptick in the market. When he asked me what I thought of it, I noted that the stock may keep going down, but I was nervous about establishing a decent position in the stock as I tend to get shaken out of the superliquid stocks if they go against me. If I were short, say, 7500 shares of the stock from 15.16 with it in a 15.15 to 15.18 range and it ticked merely to 15.19, I’d cover based on my line of thinking in taking a quick out thus rapidly taking a three cent hit. As I told him, I was lost in the trees in the forest and would definitely have lost at least a penny average on the 7500 shares when the stock broke to a new low, but came right back up through the 15.15 resistance which was the old support. That is a $100 knick or so plus tickets…well, this adds up. What I told him that it was entirely plausible that the stock would trade below 15 at some point during the day (which it did), but that I did not have the psychological ability to put it away and forget it. I further noted it was one of my biggest weaknesses as a trader. In this time of relatively low intra-day volatility (well, compared to the latter half of last year), let me please make three points. First, there are many ways to day trade. One of them indeed is to hold things for longer than the two minutes average I tend to hold my positions. There is obviously a much greater risk-reward ratio for holding positions for longer durations of time, but GE sure did look weak…yet I’d have lost money trading it the way I normally trade. Second, we all know our strengths, but it is equally important to know our weaknesses. I know one of mine is that I am very antsy when it comes to trading so I try not to play to that weakness because all it can do is work against me. Finally, be aware of alternatives to fight the weaknesses. In my case, I preach after years of analyzing my trades on a daily basis, I tend not to make money net-net if I do not see a path to make at least 20 cents per share easily in a trade. I daily see people calling out ideas in which this is difficult to do; if they can make money scalping, more power to them. I cannot. Thus, it is safer to me to trade a stock like a DRYS or a GS if versus a GE if I can clearly see the possibility of making at least 20 cents per share on the trade whereas people with more patience yet people who will take more risk can see that. The big conclusion: know yourself and you will be much a better trader for it AND know your stocks and you will be a much trader for that too.
Watch list:
1292009Eriklist.zip
Overnight, stocks were up nicely in Asia; prices up 1.5% in Tokyo and 4.5% in Hong Kong after their market was closed for three days for the Chinese New Year. However, European bourses were slammed 1% to 2% across the board after Shell posted terrible earnings, terrible unemployment numbers in Germany, and a resumed slide in banking shares. State-side, futures are taking their cue from Europe with futures down. Look for the trend to continue into the open. After that, on what is the busiest earnings morning of the quarter, things should be amazingly quiet. With three days of gains under our belt, there will likely be some short covering, but the banks/financials will lead the way today so look for a shallow down day unless the financial sector totally reverses.
Reiterating-
Please understand that if the ideas do not get to the hoped for set-ups cited below, more often than not, one should not blindly trade the symbol next to said idea.
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-
Most stuff today is news-centric as equities did not close near a high nor a low yesterday. Furthermore, it is a very news-worthy day with the bank rumors and earnings moving stocks.
Good- The following stocks have good news and/or a strong technical pattern
SEPR- great earnings
SYMC- good earnings
WDC- good earnings
CAI- good earnings
HBI- good earnings
CVD- good earnings
WHI- closed near a high; looking for momentum thru Wed 12.20 high if it gets there
SBAC- closed near a high
NTRS- closed near a high
TROW- closed near a high
IBOC, PRSP- among regional banks closing near a high
SUN- closed near a high
AMB- closed near a high
LNC- closed near a high
CMA-closed near a high
BNE- closed near a high
MTG- closed at a high
MKC, NUE- on “Mad Money” last night
LLY- decent earnings
RTN- good earnings
Bad-The following stocks have bad news and/or a weak technical pattern
QCOM- bad earnings
SBUX- bad earnings
RYL- bad earnings
ALL- atrocious miss on earnings; PRU and MET could move in sympathy
RHI- beat slightly, but stock was down after-hours
CTXS- terrible earnings
NTY- bad earnings
ISIL- bad earnings
AVCT- bad earnings
DRYS- announced $500 million share offering
ALD, CNB- debt at both banks downgraded yesterday morning; both stocks demolished
NEM- pricing 30 million shares at 37 in secondary offering
CENX- pricing 24.5 million shares at 4.50 in secondary offering
ABFS- bad earnings
BDK- bad earnings
CSH- bad earnings
EQT- bad earnings
FO- bad earnings
PII- bad earnings
SII- bad earnings
TROW- bad earnings
TKR- bad earnings
TXT- bad earnings
ZMH- atrocious earnings
ALK- bad earnings
KMT- bad eanrings
Earnings:
THURS JAN 29 BEFORE
ABFS AEP ALK
ALV AMB AN
BC BCR BDK
BLL CA CAL
CELG CL CSH
D EK EQT
ETH F FCS
FNFG FO GFI
GNTX HOT HP
HSC IP ITW
JBLU KMT LCC
LLL LLY MMM
MO NCX NPBC
NWL ODFL OSK
OXPS OXY PCZ
PFS PII RCL
RTN SBIB SII
TROW TKR TXT
UA UMPQ WCC
XEL ZMH
THURS JAN 29 AFTER
ACF ACS AMZN
BRCM CB CMO
CX CYBS CYT
DRIV EMN GBCI
HUBG INFN JNPR
KLAC MCHP MWW
MXIM PKI RMBS
SPWRA VAR VSEA
WMS YRCW
Good luck today.
www.epiphanytrading.com
Erik R. Kolodny- Chief Markets Strategist of Epiphany Trading, LLC
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