One of the most common refrains around any trade room is “(insert the choicest meatiest curse words here), I wish I’d have held that thing.” And it is worth noting that every single person who trades for a living is guilty of this. I have two things of note on this topic. First, this common aforementioned sentence should all be said/thought (r not as the case inevitably is) in accordance with the methodology used. We’ll use the Epiphany methodology as an example (www.epiphanymethod.com) simply because it is what I utilize on a daily basis and thus the model of trading with which I am most familiar. Everything is done with the goal of getting out rapidly. My average time horizon for a trade this year is about 90 seconds. However, when wrong (i.e. a stock does not perform as I think it will in the immediate-term), I am out in as quick as 1-3 seconds many times. Thus, there are going to be many many many times when a stock will move afterwards eventually. My simple response: if say you buy XYZ at 43, 43 refreshes, you sell at 42.99, and it ticks 43.01, there is no law that says you can’t re-buy it. Furthermore and just as important, for every one time that we do a trade and it just keeps going, there are several times something will do the exact opposite of what we originally felt it’d do and we are happy we are out. For instance, AGCO yesterday afternoon very much appeared to be a short at 28. I and a few others shorted the stock at 28 relatively late in the day. The stock traded to 27.92, popped back through 28…and traded to 28.80 within a few minutes. Everyone I spoke to about it took a small loss on it by getting out no worse than 28.10 yet not one person complained when it went 70 cents higher. The schematic of the Epiphany methodology is to enter and exit rapidly so I simply don’t worry what the stock will do afterwards because I am only concerned with the next two minutes…not the next two hours. Second, particularly for those of us guilty of repeatedly regretting these moves we are not part of, two pieces of advice. First, sell half your position when right at the first pause, ¼ at the 2nd pause, and then be calm with the last ¼ selling at either the next major pause or if it breaks below, say, where you sold the previous ¼. So, if you pay 40 for something and sell ½ at 10, ¼ at 15, hold the balance as the stock goes higher using 15 as the uncle point. The other point is to stop.obsessing.about.it. If you intrinsically do what you are supposed to do, you’ll come out ahead net-net. Just because I bowl a strike doesn’t mean I can bowl 13 strikes in a row (and this from an admitted perfectionist). But it doesn’t mean that if I do what I am supposed to do that I can’t bowl a 175-200 game time and again. The bottom line-reiterating what I just wrote because it is that important- do what it is you are supposed to do; over time, everything else will fall into place.
Markets in Asia were strong overnight, up about 1.5% on average. European bourses are also up on the heels of Wall Street’s latest rally yesterday with equities up about 1/25 on average. The dollar, bonds, oil, and gold markets are all quiet. Futures are slightly weaker after ORCL traded sharply lower overnight on a disappointing earnings report. Look for a quieter day today albeit in the framework of an incredible bull market. Prices will likely trade on both sides of unchanged, but stocks will likely stage a morning rally to some degree with many microcaps in particular running. Focus on the microcaps and the stocks in the news- a common refrain these days.
Watch list:
09172009Eriklist.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 (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
IMGN- signed licensing deal with AMGN
AUXL- FDA Arthritis Advisory Committee voted unanimously to recommend approval of Xiaflex
USG- closed near a high
ACAS- closed near a high after receiving almost $200 million from sale of a bioscience unit
VMC- closed on a high
AMZN- closed near day’s high after being upgraded
IBM- closed near a high
NITE- featured on “Mad Money” last night
IVAN- labeled its Ecuador-based Pungravacu heavy-oil field “world-scale status”
FPP- closed near a high
CFSG- closed near a high
DCTH- closed near a high
PRU, HIG, PFG- closed near highs
TVL- closed near a high
AIB, IRE- closed near a high on the Irish plan to buy back bad loans at a discount
SFI- closed near a high
MELI- closed near a high
LNCR- closed near a high
XNPT- positive phase IIb for its post-herpetic neuralgia drug
AMR- obtained $2.9 billion in new financing
MGM- amended terms of its previously announced notes offering
YMI- the company’s Nimotuzumab approved for marketing in Mexico
QDEL- obtained special 510k clearance to add 2009 H1N1 reactivity information to its QuckVue Flu Test package insert
COL- pre-announced decent earnings
RNN- agreed to a licensing agreement with Teva
PIR- decent earnings
Bad-The following stocks have bad news and/or a weak technical pattern
ORCL- bad earnings
MLHR- poor guidance
DBRN- bad earnings
CKR- terrible earnings
AGP- guided earnings lower…yet still above analyst estimates
EK- seeking to raise $700 million in capital including a $300 million notes offering
WYNN, LVS- closed relatively near lows of day in casino stock reversal, but may well move with MGM this morning
EBAY – founders of Skype rumored to sue EBAY over theft of peer-to-peer technology
Earnings:
THURS SEP 17 BEFORE
DFS FDX PIR
THURS SEP 17 AFTER
PALM
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
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