THURS. DEC. 3 - Studying Mistakes

This is one of those perfect ‘learn from my mistakes’ sin posts as I committed seven errors here and want to take a few minutes to share my thoughts (and drill it into my thick skull what I did incorrect). About two weeks ago, I was tracking shares of First Solar (FSLR). It was late morningish and things were somewhat busy although not insanely so. As FSLR was near a high and not selling off in a weak tape, I bought a little bit of it (600 shares- very small position) at the high of the day at 123.50. The stock immediately rallied to 123.78. And so ends the part I did right. I placed an order to sell half of it at 123.75, missed and ended up selling the 300 shares at 123.48. I held it for a couple of minutes and sold 150 shares at 123.74 when 123.78 got stuck and then again another 150 at 123.74. So, what did I do wrong? First, had I simply hit 123.70 instead of getting fancy in trying to fine-tune it, I’d have sold half of the shares at 123.70 rather than getting stuck. Second, I lost valuable time. In the six minutes I was in the trade, I actually missed three other plays that various people made money doing. Third, I allowed myself to get more than a little consumed holding a very small position. Fourth, I held the shares rather than exiting quickly. Fifth, when I sold my last piece, I should have held them back to just below where resistance was now support (123.50ish) instead of exiting out at 123.74 as well (and missing a move over 124 seconds later). Sixth, I bought stock (even a small position) in a weak market which is Ok except that the market was drifting down at the time. Finally, I made money in the trade. I was bright enough to realize that the stock was stronger than the market, but my personal rule is that I should have been out of all of it at the two cent loss rather than half of it. I didn’t deserve it to the point whereby I donated the profit to the scholarship fund of my daughters’ day care center that same afternoon. My point here is two-fold: mistakes can compound on themselves and although I got away with one here because I was bright enough to recognize that the stock had violent upblips during any pause in market selling, much more often than not, the tiny profits can and usually do turn into bad losses. Second and much more important longer-term, self-analysis is extremely important in trading. I take time every day to analyze my trades because I inevitably learn something…this particular trade (a $66 profit minus commissions) would not show up monetarily just from a casual glance, but was extraordinary in terms of how many mistakes I made. The only way to learn the craft of trading is to trade…the only way to truly understand it is to study your trades constantly and learn from them. You’ll figure out what you’re doing right and wrong over time and it’ll keep you very humble as you realize that there can be good losses, but bad wins as well.


Markets overnight were higher across the globe. In Asia, Hong Kong rallied 1.2% while Tokyo continued its stunning week with the Nikkei up another 3.8% as the yen has weakened against the dollar. In Europe, prices are up marginally in London all the way to about 0.5% in Germany. The dollar is stronger against the yen, but weaker against the euro. Gold is slightly ahead as well. There is broad strength on the tape this morning with nearly every sector higher following a mixed close yesterday albeit one in which almost twice as many stocks closer higher than lower on the NYSE. Look for more sustained gains today with relatively slow trade barring a meltdown by the retailers, but a few opportunities will definitely be there. The BAC news and AMZN recommendation will likely lend support to the financials and techs respectively. Exit expeditiously when you get into a trade if wrong, but if right, today is one of those days where things could go.

Watch list:
120320092Eriklist.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

PSS- good earnings

OPXA- closed near a high after announcing the hiring of a clinical expert to help develop Tovaxin; stock closed ahead more than 50%

LIWA- closed near a high

TSTC- closed near a high

GRH- closed near a high

CAGC- closed near a high

TSL- closed near a high

POT, MOS- closed near a high in a strong fertilizer group

GERN, STEM- closed near highs in a strong stem cell sector after the US National Institute of Health approved 13 human stem cells for research

BAC- announced it is going to come out of the TARP program although they certainly will need to raise some capital to do it

UAUA, AAI- among the airlines which closed near a high after a Morgan Stanley upgrade

KTCC- boosted earnings guidance

CGA- closed near a high

NAK- closed near a high

PFCB- closed near a high after positive comments from Morgan Stanley

YONG- closed near a high after it announced that its business model was recognized as one of the top 10 in China by Business Forum 2009

AMZN, BBY, APU- mentioned on “Mad Money” last night

TRGT- partnered with AZN in collaboration of its TC-5214 product; could receive up to $1.24 billion

GE- sold 51% stake of NBC to CMCSA

DLM- good earnings

Bad-The following stocks have bad news and/or a weak technical pattern

ARO- lukewarm earnings, but disappointing same store sales results in November

SNPS- poor earnings

JAS- poor earnings

SIGM- terrible earnings

CMI- closed near a low after laying off workers in a trucking facility thus giving worries about the earnings outlook

PLX- continued to decline despite the PFE deal news from Tuesday

HGSI- priced 15.5 million share secondary at 26.75

VRTX- priced 11.5 million share secondary offering at 38.50

COST, TGT- poor retail sales data









Earnings:

THURS DEC 3 BEFORE

APWR DLM TOL

THURS DEC 3 AFTER

MENT MRVL NOVL

SWHC



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