The watch list can now be found on the "Trade of the Day" thread at: http://www.tradeoftheday.org/The blog will continue to be posted here and can also be found on our forum via the Epiphany Trading Blog thread.
Something which I will be attempting to do this morning will be imbalance displacements. I discussed it in detail on the Friday afternoon video which I trust everyone watched to get as much notice as possible in which case this will be repetitive so I apologize to those of you who watched it. However, since this imbalance displacement is what I’ll almost exclusively focus upon initially today, I want to explain it here as well. First and foremost, Friday was as busy of a day at the open and the close as I intimated it would be when I noted it’d be busy at the open and the close...if you left at, say, 3:35PM just to wrap up a little early for no good reason, you missed an incredible opportunity as instances like Friday’s close don’t come around often. Specifically, I noted the following on Friday’s blog and discussed it on the morning call as well: “With many money managers making today their last day (of the trading year), they will look to wrap up. There will also be a number of changes to the S&P 500 index on the close and a rebalancing of the index at that. So, volume will definitely come in late this afternoon.” Basically, many people did a lot of shuffling in and out of some particularly lower liquidity issues. When an institution or hedge fund wants in or out, a stock can really move. For instance, GEL has traded in a tight range of 17.20 to 18.50 for a few weeks…it traded to 19.24 Friday morning, but had a big sell imbalance relative to the volume that morning. It fell 1 ½ points on the close. Another example of what occurred was XRA which ramped 1.50 to close at 8.50 on a 65 cent uptick on the close. SNH went into an index and had more than a point upblip on the close. CIT had no imbalance nor indexing yet it had a buy order in there at 3:59PM ET which jacked it higher. Stocks such as BCAR more than doubled on an imbalance. ABCD jumped from 5 to 14.80 before plunging back to 6! Obviously, there was lots and lots of action for lots of reasons. So what now? Well, first, most of this stuff will be highly illiquid so if you want to try any of this, do it with tiny 50-100 lots if you’ve never done this before. I just want to try to explain my strategy since what I’ll be doing will be out of the normal course initially. I want everyone understanding what I am doing and equally important, I don’t want people getting hurt financially by doing ridiculous things like chasing these situations. In a stock like GEL, I’d expect it to rally. It was knocked down because of a gigantic sell order. Thus, if the stock opens at say 17.30 and goes to 17, I’d want to short it. Again, I am operating under the guise of one major seller on the tape so clearly I’d be mistaken if it got to unchanged. Conversely, if it opened at, say, 17.50, fell to 17.30, and came back up, I’d look to buy it in old school A-B-A2 fashion at 17.50 upon hitting that level the 2nd time. In a stock such as ABCD (yes, that’s the real symbol…look it up) which ramped from 5 to 14.80 and back to 6, I’d expect it to dwindle back to 5. If it does not and instead opens near 6.50, tries to sell off, and comes back up, it’s an A-B-A2 of epic proportions on the sheer illiquidity of it all. In a case such as BCAR which ramped from 3.40 to a 8.70 close…in 10 minutes…I’d look for it to trend back to 3.40. If it opens at say 6, rallies to 6.50, and comes back to 6, I’d look to do the A-B-A2 to the downside in shorting at 6 that 2nd time (pending locatability). In short, Friday afternoon was the ‘easy’ set-up. This morning will be trickier, but if you really study these situations, this particular morning can be lucrative if the set-ups present themselves albeit in small trading size due to the illiquidity which for once we as day traders can use to our advantage.
Markets in Asia were mixed overnight with Tokyo up 0.5%, but Hong Kong down 1%. Prices in Europe moved more uniformly, up about ¾%. The dollar is slightly stronger against the yen and slightly weaker against the euro. Futures are strong overall with no real reason to sell. There is a tremendous amount of newsflow in the microcaps and the aforementioned imbalances are in play so look to trade the smaller stocks on aforementioned news or comeback on the imbalances. Other than that, look for a gently rising market on quiet volume and trade sporadically if at all.
Reiterating-
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
SENO- found not liable for patent infringement on Friday morning; stock closed near its intra-day high
XRA- closed on a high on a buy imbalance
SNH- closed near a high after entering the S&P 400
CIT- odd buy order came in last minute; closed on a high
DRI- closed near a high after posting great earnings
HPJ- closed near a high
CELG- closed near a high after positive drug news
V- closed near a high upon inclusion into S&P 500; may reverse a little today though after last week’s run-up
AAPL, AMZN- among big-cap tech stocks closing near a high
GS- closed near a high
FSP- closed near a high
EXK- closed near a high
CENX- closed near a high
EWBC- closed near a high
ABCD- closed higher on an imbalance; I cannot do this move justice in this space…look at the chart
ASYS- closed near a high
BCAR- closed near a high on an imbalance; again, another to look at a chart of.
ONNN, PCS- featured on “Mad Money” on Friday night
CAG- good earnings
WAG- good earnings
TEX, BUCY- sold mining business to BUCY for $1.3 billion
ATHX- entered into global agreement with PFE to develop and market MultiStem for inflammatory bowel disease
NVMI- received $10 million in new orders
INCY- announced collaboration agreement with LLY
UPL- announced Marcellus acquisition
SGEN- announced collaboration agreement with GSK
Bad-The following stocks have bad news and/or a weak technical pattern
BCR- closed sharply lower after cutting its earnings guidance
GEL- closed on a low on a sell imbalance
POT- closed on a low after a brokerage downgrade
CTCM- closed near a low
KMGB- closed near a low
MDCI- closed near a low
WHI- closed near a low
MPX- closed near a low on one big sell order
ENP- closed near a low
OGXI- entered into collaboration agreement with TEVA, but disappointment exists over not being bought out entirely
Earnings:
MON DEC 21 BEFORE
CAG WAG
MON DEC 21 AFTER
JBL OMN
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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