A few days ago, someone told me that he was trading a lot of the more aggressive stocks such as FCX, AAPL, and GS. But he consistently found that he was losing small net-net whenever he did so. I asked him to think about why this was. He responded by telling me he was not scared to trade volatile stocks. So, I asked him again to really think about it. His exact response was: “when (a stock) breaks a level, that's usually where we enter, I panic whenever it bounces back just above the entry point.” This response led me to having two distinct thoughts. First, most people don’t hold positions because they are afraid to do so. They would much rather do comparably ‘safer’ plays, but of course what happens with the stocks like CSCO and MSFT is that if they don’t hold them for longer than a few minutes, they tend to lose because the stock isn’t doing what they thought it’d do. Thus tedium and wonderment about the slow moving stock creep in mentally which leads to them exiting the position. I know. I learned the hard way because I used to flip 10000-15000 share blocks of slow movers in trying to capture a tiny profit when the markets were calm and found that I was unable to do it. I also know most electronic day traders are programmed to push buttons so I suffered the same fate most of them did when trying this strategy- small losses. Thus, for my typical 1-5 minute trades, I have to stick to the fast movers. I realized that Michael Jordan quite admittedly had a great deal of basketball ability. But made him so great was that he was confident in himself that he could use that ability anytime he wanted to do so. I also know if I cannot make money in a compressed time horizon, I have to do something different. So, after doing a few trades of the bigger ones and making money consistently, I knew I could do it- if for no other reason than trading ‘safe’ was not going to pay my mortgage. So, what I typically do when entering a trade is to know exactly where I am wrong and stick to it. Here's a real -life example...on Friday, a 217.65 bid on AAPL was refreshing with it consolidating in a narrow band sharply higher on the day. The high to that point was 217.70. I bought it as the market was upticking with the AAPL 217.65 refreshing, i.e. a recurring buyer was present just above the bid at re (217.66) at 10:52:31AM. If 217.70 refreshed on the offer when it got there, I'd take have taken half off immediately. I also knew if 217.65 was refreshing with the stock near high of day, it should not go below the 65 level. So if it did, I was cued up at 60 and would have been out immediately. Thus, I'd have sold the 1st half at 65-67 and the balance between 60-63. So, averaging say 66 and 62 to make it 64, I'd have lost two cents or so. And if right, look where AAPL could have gone. So I mentally know I'd lose 2 cents probably if wrong (6 cents worst case) and have the potential to make at least 20 easily...and thought there was a significant chance with the market aiding me that I'd be right. By using logic and preparation, I had a reasonable battle plan so…fear…was taken out of the equation. I resigned myself to the fact that if I was wrong, I’d lose 2-6 cents and was prepared mechanically (and mentally) to do so. So, by being prepared to be wrong while expecting to win, you take as much emotion out of the mix as possible while maximizing your chances to make money in a stock…or a career for that matter.
Markets in Asia were ahead nicely overnight with Tokyo up 1% and Hong Kong 0.7%. But everything else is very placid worldwide with Europe flat, currencies are unchanged, and commodities are up slightly. Futures are ahead nicely on the heels of a sizable gain in AAPL in the early going. For the day, no reason for anything major to change. The weather is horrible in the NYC Metro area; combined with many people off for the week, it is going to likely be quiet with the modest upside bias reasserting itself. Focus on the smaller cap stories and any relative strength play you see, but remain nimble as liquidity will likely remain low.
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
DHR- boosted earnings guidance
WHRT- closed near a high after it received positive words from Wedbush Morgan
KID- closed near a high after posting great earnings
CYD- closed near a high after a positive mention in “Barron’s”
AAPL, VZ- “WSJ” reported AAPL is working on a Verizon friendly CDMA iPhone; QCOM may move with these two
FCX, MEE, SWN, CLR- among the commodities stocks closing near their highs
BIOF- decent earnings
Bad-The following stocks have bad news and/or a weak technical pattern
CEPH- FDA questioning CEPH’s narcolepsy drug data
MYGN- lost a patent case relating to a series of patents covering two human genes which relate to breast or ovarian cancer
CNQR- convertible offering and in-line earnings guidance
SAFM- share offering
OXM- poor earnings
RIMM- traded sharply lower after-hours following the aforementioned AAPL report
ABIO- closed near a low in reversing Friday’s action after a report came out from TheStreet.Com which bashed the stock
AONE- closed near a new trend low
LDK- poor earnings
GNVC- phase III trial of TNFerade discontinued
Earnings:
TUES MAR 30 BEFORE
LDK
TUES MAR 30 AFTER
ZZ
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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