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.
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Yesterday, in the markets section of the blog, I wrote this:
“Look for a quiet day for most of the day in choppy fashion albeit with an upside bias. As noted above, what happens at 2:15PM ET will set the tone for the rest of the day as the Fed makes it moves. Ahead of the announcement, focus on microcaps, stocks in the news, the relative strength plays…and avoid scalping of any sort.”
I thought I was crystal clear on this point plus I emphasized it 12 times in the chat room yesterday. However, I hereby issue an official apology because I apparently was not clear enough based on what I was seeing with my own eyes. I don’t know mow much more forceful I could have been than to tell any reader to focus on microcaps, stocks in the news, relative strength plays, and to not scalp whatsoever. I wasn’t because throughout the day yesterday, I was quizzed about various random stocks not in the news, stocks in narrow ranges, and stocks with no liquidity. There were only several major trades to do yesterday morning. For instance, I noted in the morning call and on the chat as well as the audio post-open that X was very strong despite the news in NUE (earnings warning). So, per the news/relative strength tenets I noted, as X stormed higher, it made all the sense in the world to buy NUE thru the morning’s high on an A-B-A2 pattern. If X and other steels were rallying and I was short, say, 10,000 shares of NUE and it began rallying as well in taking out early morning lows, I know I’d be nervous and look to cover. This is how short covering panics form and that is what happened starting at 9:32AM. When I noted JOYG was nearing unchanged despite its positive earnings news, I shorted it slightly early and paid for it as it began coming back up; I immediately took a 10 cent loss in not scalping/not hoping I’d be right. With proper stagnation, it got down near unchanged again and I shorted it thru unchanged and got 30 cents out of it the 2nd time on more shares. I did not hold it and take a 40 cent loss the first time. I did not avoid the 2nd time because I lost the 1st time. When there was a story on CNBC about a potential breakdown of an XTO/XOM merger because of legislation, I shorted XTO as it got unchanged on the day. It broke hard and fast, but not a lot…so I took what I could for a 13 cent gain. I did not randomly trade stocks that were moving fractionally on no news because if the market was not moving, over time, the moves would revert to the mean and become noise…and I’d lose. When the Fed made its news, as I noted in the blog yesterday: “After the announcement, focus on financials and big cap techs in line with whatever the market is doing.” In line with my battle plan, I noted that AMZN was near its low of the day and that I was looking to short it thru a new low should the market tail off after an initial uptick. I did not want to trade stocks other than big cap techs and financials immediately after the announcement because those are (relatively) liquid, they can move, and I don’t have to follow 1,000 stocks. After a lengthy period of stagnation, with the low of the day at 128.51, I shorted 128.50. I did not short 128.32. I shorted one tick below the low into a pool of liquidity. I did not short it at 128.60 after it made it move and came back up. I did not look to play CVS- a stock with no movement of any sort and one not a big cap tech nor financial. I did what I wanted to do, made my 17 cents average, and moved on. I am far from perfect as a human being much less a trader, but I certainly do my best in this space to provide a battle plan and it upsets me when people lose money because they don’t enter properly (i.e. chasing AMZN 20 cents below the true entry around the same time I am looking to exit yesterday at least part of my position), hold on to losers (if JOYG did not work, get out as illiquid as it turned out to be…don’t hold for four minutes…don’t buy RIMM and hold it all day only to lose almost a dollar a share), and flat-out ignore the entire methodology- all while trying to trade under the guise of making several cents a share in situations which have proven to be tenuous at best for profitability time and again. I bring all of this up to make one point: do what you are supposed to do- and have a plan for what it is you are supposed to do. If you want to follow what I am saying and I note AMZN is weak after I wrote yesterday morning that I’d be following big-cap tech and financials, know that I am not looking to short AMZN 20 cents and two minutes after it broke down. When I say I seek precision, I mean it. If the low is 128.51 and the market is falling, I want to be short no later than 128.50. And whether you follow me and/or want to do your own thing, you’ve got to have a well-thought out battle plan with much research done to form the basis for your trades. If you do not, you will scramble for action when none is present, miss action when there are things to do because of lack of preparation (and wind up chasing things and holding on too long out of desperation or exit too quickly due to not truly understand the situation at hand), and oh yeah, you’ll lose money time and again.
Markets overnight were down in Asia with Hong Kong down a bit over 1%. In Europe, markets are down about ¾% on average. Oil and gold are both down over 1% and the euro is getting drubbed on the heels of worries of Greek default; the thought is that if Greece goes, will there be a domino effect? In turn with this chaos hypothesis, U.S. futures are down as well. Now, the damage has been contained thus far and on low volume so we’ll probably have the opposite directionally of the type of day we’ve had so often recently in that the markets will likely go down and stay down but not move dramatically. The wild card here is if the euro gets out of control…it is an outside albeit not likely possibility with the dollar up almost two full euros right now. Assuming the damage is contained, it looks to be as noted before- a slow tricky day with a downside bias but no real energy. Focus on the stocks in the news, the solar sector, and be aware of the myriad of new in the financial sector.
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
FSLR- pre-announced in-line earnings estimates for 2010, but revenues above expectations; CSIQ, STP, LDK, TSL among others should move with it
DHR- pre-announced good earnings
FUN- rumored to be bought out by Apollo Management last night; acquisition at 11.50 announced this morning
PAYX- decent earnings
APC- closed near a high
HEB- believes issues regarding manufacturing woes have been addressed
AIR- closed near a high after posting great earnings
FIRE- closed near a high
CENX- closed near a high
PCP, HXL- mentioned on “Mad Money” last night
AONE- entered into joint venture with SAIC Motor to develop, manufacture, and sell its battery systems in China
GIS- decent earnings
PIR- decent earnings
PNC- initiated with a ‘buy’ rating at JP Morgan
BAC- finally obtained a new CEO
Bad-The following stocks have bad news and/or a weak technical pattern
HOV- terrible earnings
MATK- poor earnings
NANO- share offering
OSIP- FDA advisory committee recommended against approving Tarceva for first-line maintenance use in small cell lung cancer
AOL- closed near a low
ACHN- island reversal after yesterday’s positive phase Ib news
CNO- priced secondary offering at 4.75
C- priced offering at 3.15
HPJ- closed near a low
S.EH- closed near a low for a 2nd day after posting poor earnings on Monday
ME- closed near a low
TNL- closed near a low after announcing a notes offering
KRA- priced 10.29 million share IPO at 13.50, below 16-18 expected range
MS, GS- analyst Meredith Whitney cut earnings estimates
Earnings:
THURS DEC 17 BEFORE
ATU FDX GIS
PIR RAD WGO
THURS DEC 17 AFTER
DRI NKE ORCL
RIMM TTWO
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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