On November 24 just after 8AM, SEED was trading actively. That particular morning, it traded in a range of 11.29 at its height to around 10.80 for its low. Every time it traded to 11.29 (seven times), 11.29 refreshed on the offer, i.e. someone displayed 1,000 shares of stock yet was readily selling a slew of stock at 11.29. I noted orally and on the chat room that I was looking to buy at 11.30-11.31 specifically. Yet, despite the stock going from 11.30 to almost 11.50 instantaneously, I ask asked questions like “Did you buy the stock at 11.28?” and “I lost money trying to get in early at 11.29 so I wouldn’t miss 11.30; did you get in early?” It was exasperating because the only thing worse than losing money is losing money unnecessarily. One does not know how much stock the 11.29 seller has to sell nor should one buy a stock at, say, 11.50 for an immediate-term trade that was trading at 11.30 eight seconds prior because more often than not, the stock will retrace slightly. So, what specifically happened here? If there is a refreshing seller (as there was at 11.29) and the seller leaves, it means the 'overhang,' is gone, i.e. the seller is gone. If there just happens to be one major entity selling stock at an extreme of a move with the market going with the direction of the stock, usually the trend reasserts itself with force. When the 11.29 seller left, the pent-up buying pressure (and scared shorts) allow the buying pressure to let loose. Think of it as a storm wall during a hurricane. The water hits the wall and hits the wall and hits the wall growing in force and intensity (the buying of the stock to the one seller at 11.29). When the wall gives, the water tumbles through it with force and surges ahead. Same here. When the seller moved, the stock immediately ramped higher by about 25 cents. Momentum players piled in and nervous shorts rushed in combo…but the major seller at 11.29 was gone so there was nobody left to sell thus the stock’s demand far outstripped supply leading to the ascension of price. Thus, when a situation arises such as this one, realize that getting in early is gambling because the major overhang may never move and getting in late can be bad because one never knows how big the move will be. You’ve got to be ready to act instantaneously and with confidence rather than from a position of greed or anger.
Markets overnight were down a bit in Asia from 0.2% in Tokyo to 1% in Hong Kong. In Europe, prices are down sharply as well between 1 ½% and 2% depending on the market. Commodities are all getting hit with gold and oil down approaching 1%. The dollar is getting bruised against the yen, but is notably stronger against the euro. Add to the mix negative news from MMM and MCD and you we have a sharply lower open indicated on the futures. With all the financial turmoil recently, today could prove to be quite interesting. The markets are a bit vulnerable here and what happens today could occur if the currencies and commodities markets get out of hand. Off-hand, we likely will hold, but certainly focus upon stocks in the news, big cap tech and financials, and relative strength plays (i.e. AAPL upgraded this morning so if it gets positive with markets negative, AAPL could be a long). Keep your eyes on everything today.
Watch list:
12082009Eriklist.zip
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
ARO- announced $250 million buyback program
FDX- pre-announced terrific guidance; UPS and AMZN may move in sympathy
NTRI- closed near a high after inking a deal with Sam’s Club
DYP- closed near a high
REXX- closed near a high
ZION- featured on “Mad Money” last night
SAFM- decent earnings
AZO- decent earnings; beat on earnings, but merely met revenue guidance
IRF- guided revenues slightly higher
MON- reaffirmed guidance
XLNX- boosted revenue guidance
Bad-The following stocks have bad news and/or a weak technical pattern
CASY- poor earnings
PBY- poor earnings
FMCN- poor earnings
CELG- reversed after-hours yesterday despite positive drug news before the close
AAPL- closed near a low, but was initiated with a buy rating today at a lower-tier brokerage firm
GS- closed near a low
ZLC- closed near a low after being cut to a “Sell” rating at Soleil Securities yesterday
PIP- Dept. of Health canceled its request for proposal of the development of its anthrax vaccine
EBS- Dept. of Health and Human Services canceled its request for the procurement/development of the company’s rPA vaccines
NYB- priced 60 million share offering at 13
MMM- lowered 4th quarter earnings guidance
MCD- disappointing same-store sales results
KR- poor earnings
AIG- earnings estimates cut at UBS
Earnings:
TUES DEC 8 BEFORE
AZO HRB TLB
TTC
TUES DEC 8 AFTER
COO NCS SAI
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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