What occurred on Friday is one of the primary reasons I get into the office so very early. Besides the everyday things I do (this commentary, compose a watch list, and such), I am able to get early clues for how the day will progress. Sometimes all one has to do is pay attention and one cannot help but learn when he/she sees things. On Friday around 8AM ET, despite most of the techs and the financials trading higher, I mentally noted that Capital One (COF) was actually trading a little lower, Apple (AAPL) was off of its high after its earnings were reduced at a tier 1 brokerage firm, and Amazon (AMZN) could not seem to rally whatsoever. So, I knew if the markets broke a bit, those were relatively weak and those were the stocks I’d short. Put another way- let’s say you are picking players for your basketball game pick-up style. There are 10 of you there of seemingly relatively equal ability…two of you, however, have slight physical issues (say slight hamstring pulls, but want to play anyway). As the game starts, which two players do you think will struggle from the get-go both physically and mentally to keep up with the flow of the game? Well, it is the same here. If the market is holding strong but there is a possibility it could weaken, wouldn’t you want to short the weaker stocks out there (and vice versa…on a more longer-term scale, anyone notice that GE was barely down last Wednesday and Thursday, and higher Friday and Monday before the market took off)? But, the only way to learn these early clues are to be there; this is what gives me a substantial part of whatever insight I have for the open. If one walks in the door at 9:35AM ET and says “What’s going on,” more often than not, that person is going to lose as a day trader. On point, a lot of people asked me how I ‘knew’ that AMZN, AAPL, and COF in particular would work just after the open. Well, of the people in my office, I may well be the least intelligent and certainly the least likely to hold positions for longer periods of time, but I do know that as things develop early, one can pick up on clues that others would never even comprehend simply because I pay intense attention to the pre-open. And in this case, those three stocks were the weakest of all of the financials and techs that I monitored early Friday morning. Everyone says trading is not ‘brain science.” Everyone is right. But, certainly, simply observing what is going on early in the day and mentally noting things out of the ordinary could give you a day’s pay in the trading world.
Markets traded nicely higher throughout the world overnight. Prices in Asia and Europe are up about 2% on average. Oil is down after OPEC said there’d be no cuts at this time (not that it’d have mattered anyway per a blog piece written several weeks ago as what we have is a demand problem rather than a supply issue). Futures are sharply higher on the performance of the foreign markets plus positive comments made by Fed Chairman Bernanke on “60 Minutes” last night. For today, with financials so buoyant, there is no reason for stocks to dramatically give back these early gains. Ahead of the holiday tomorrow, look for the market’s gains to remain sustained and built upon a bit, but it will likely be a lot slower than last week on even lower volume.
Watch list:03162009Eriklist.zip
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-
Good- The following stocks have good news and/or a strong technical pattern
APP- closed near a high the company got financing for an 18% stake to Lion Capital
ASPM- leading shareholder changed its holder status to ‘activist’ on Thursday night; stock closed near high of day
EK- closed near high of day
MS- strong all day in closing relatively near a high
AMLN- up sharply several days in a row; closed near a high
MHS, ABC, AET- among the stocks in the healthcare sector which were very strong
AIPC, CGRB- on “Mad Money” Friday night
Bad-The following stocks have bad news and/or a weak technical pattern
MDT- announced a medical device it sells could be a factor in 13 deaths…and removing the wires from the heart device is very dangerous as well; watch BSX off of this news as well
NTCT- this stock continues its horrible descent
NFJ- slashed its dividend
GM- the government hired bankruptcy attorneys for a task force for the automobile industry
Earnings:
MON MAR 16 BEFORE
none
MON MAR 16 AFTER
ESC FRPT SINA
Good luck today.
Epiphany Trading, LLC
www.epiphanytrading.com
Erik R. Kolodny- Chief Markets Strategist
Brendan P. Byrne- President
March 16th
ReplyDeleteBULLTRADE NEWSLETTER
(Please make a note of the disclaimer, located at the newsletter's end.)
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TRADING PORTFOLIO KEY
DB/DS - Date Bought / Sold, PP/PS - Price Purchased / Sold, AC -- Average Cost
CR - Current Recommendation, AD / U - Average Down / Up, SL - Stop Loss
AS - Average sold price, 2 prefix - bought or sold twice
PIF - (position is fixed) = This position will not be added to at any time
March Portfolio
General Electric (GE) DB: 2/24 PIF: $10 CR: Sell at even (see below) 3.8% loss
Pepsi (PEP) DB: 3/5 PP: $46 CR: Hold 5.7% gain
SOLD Portfolio for March 2009
Nike (NKE) DB: 3/5 PP: $40 DS: 3/12 PS: $44 10.0% gain
JPMorgan (JPM) DB: 3/6 AC: $18.45 DS: 3/12 PS: $20.30 10.0% gain
Alpha Natural (ANR) DB: 3/3 2AC: $17.46 DS: 3/6 PS: $17.46 0.0% gain
Lowe's (LOW) DB: 3/2 PIF: $15.75 DS: 3/10 PS: $14.17 10.0% loss
UPS (UPS) DB: 3/2 2AC: $42.06 DS: 3/11 PS: $42.06 0.0% gain
Target (TGT) DB: 3/3 2AC: $27.61 DS: 3/11 PS: $27.61 0.0% gain
SOLD Portfolio for February 2009 -- COMPLETED with a 4.7% gain
CVS Caremark (CVS) DB: 1/21 PP: $26.15 DS: 2/6 PS: $28.50 9.0% gain
Target (TGT) DB: 2/3 PP: $30.10 DS: 2/6 PS: $33 9.6% gain
U.S. Oil Fund (USO) DB: 2/18 PIF: $25.61 DS: 2/25 PS: $25.61 0.0% gain
Dell (DELL) DB: 2/23 AC: $8.57 DS: 2/27 PS: $8.57 0.0% gain
SOLD Portfolio for January 2009 -- COMPLETED with a 3.4% gain
Alpha Natural Res. (ANR) DB: 1/13 PP: $17 DS: 1/28 PS: $17.85 5.0% gain
United States Oil (USO) DB: 12/23 AC: $32.01 DS: 1/5 PS: $36 12.5% gain
Shorted Nasdaq 100 (QQQQ) DS: 12/9 PS: $30.50 DB: 1/7 PP: $30.50 0.0% gain
Altria (MO) DB: 12/16 PIF: $15.94 DS: 1/13 PS: $16.02 0.5% gain
Shorted Amazon.com (AMZN) DS: 1/5 2AS: $52.48 DB: 1/13 PP: $51.23 2.3% gain
Bank of America (BAC) DB: 1/15 AC: $9.05 DS: 1/15 PS: $9.05 0.0% gain
SOLD Portfolio for December 2008 -- COMPLETED with a 18.5% gain
SOLD Portfolio for November 2008 -- COMPLETED with a 6.5% gain
SOLD Portfolio for October 2008 -- COMPLETED with a 7.0% gain
SOLD Portfolio for September 2008 -- COMPLETED with a 4.8% loss
SOLD Portfolio for August 2008 -- COMPLETED with a 5.8% gain
SOLD Portfolio for July 2008 -- COMPLETED with a 3.8% gain
SOLD Portfolio for June 2008 -- COMPLETED with a 6.0% gain
SOLD Portfolio for May 2008 -- COMPLETED with a 15.0% gain
SOLD Portfolio for April 2008 -- COMPLETED with a 11.0% gain
SOLD Portfolio for March 2008 -- COMPLETED with a 9.5% loss
SOLD Portfolio for February 2008 -- COMPLETED with a 20.9% gain
SOLD Portfolio for January 2008 -- COMPLETED with a 2.2% gain
Click here for past results:
http://www.bulltrade.com/pastResults.asp
PORTFOLIO SUMMARY & MARKET OUTLOOK
No doubt about it - we got lucky. We had a huge portfolio that was down in the
dumps. But we diligently added to the portfolio, hoping for either a full-fledged
recovery or a dead cat bounce. What we got last week was most definitely the
latter. What can only be seen as a bear market rally brought huge gains to all of
the major indices, with the Dow rallying 9.0%, the Nasdaq up 10.6%, the S&P 500
strengthening 10.7% and the Russell 2000 advancing 12.0%. The proof is in the
pudding, as they say, and this last week was pudding-free. There was not a single
valid reason for last week's rally. You had some choice words from some of the
struggling financials (words are often just words), a rumor of the reinstitution of
the uptick rule, and buzz that mark-to-market may be suspended soon. But not a
single fundamental reason exists for last week's rally. In fact, one could argue
that there are still a number of stocks that are extremely overvalued. Either way,
the rally was welcome to our heavily beaten down portfolio. Instead of being saddled
with huge losses, we were able to escape unscathed from some dog positions, cash in
huge profits on some unlikely positions, while almost completely eliminating the
biggest loss in our biggest position, GE. After last week's across-the-board gains,
you can be sure we will not be buying at all on Monday. In fact, if we see a
continuation of the rally, we will be shorting at least one or two stocks come
Tuesday.
GE - While we would love to own this stock until it yields huge returns, we first
have to eliminate this current position. It is far too concentrated to go
unchecked. We will hope for a bounce to $10 to exit the current position, and then
we will immediately revisit this stock on the first sign of weakness. We still feel
that in this current market this is one of, if not THE best, large-cap bargain blue-
chip out there. We learned a valuable lesson that we never have had the opportunity
to learn before. For the first time in history, as far as we can tell, shorts were
able to drive financial stocks lower to the point that the low share price increased
the companies' chances of failure. In essence, short-induced fear actually
influenced a company's fundamentals, versus the traditional method of shorting
because of a company's lack of fundamentals.