One of the terms tossed around the chatroom is “ VWAP.” But most people don’t know what that means or what the ramifications of the VWAP is. “VWAP” stands for “Volume weighted average price.” Even more specifically, the VWAP is a mathematical figure for the average price that a stock traded at over a period of time but also based on trading volume as well. If XYZ traded 500 shares at 10, 200 shares at 10.05, and 500 shares at 10.20 in a given day, the VWAP would be 10.0917 ((500*10)+(200*10.05)+(500*10.20))/1200 total shares. The VWAP tends to be used as a moving target for investors with a goal to remain relatively passive in their trade executions. Pension funds tend to be the biggest users of the VWAP in their strategy. It’s also used in algorithmic trading in which a broker may guarantee an execution at the VWAP of a particular order and then have a computer program to place the orders in order to earn a commission if not a small profit as well. But the overall goal of using the VWAP is to attempt to guarantee that a trader executing a particular order does as such in-line with the prevailing market because it tends to minimize market impact on a given transaction. For those that trade stocks with constant movement and/or relative illiquidity, the VWAP tends not to matter as much. However, in a relatively quiet market in a relatively non-volatile albeit active stock, the VWAP can very much come into play as entities tend to do their best to buy stock below the VWOP and sell above it. As was posted in our chat room on Thursday, “A large cap stock has a tendency to trade back towards the VWAP at the end of the day. If it trades near or on the VWAP most of the day, the stock tends not to move much. This is not a constant but a tendency.” I think that is a pretty good summary. So, be aware of the VWOP, do not necessarily rely exclusively on the VWOP but follow it particularly in hyperliquid stocks as the day progresses in a placid market environment.
Markets in Asia were generally lower overnight with Tokyo down 0.5%. In Europe, markets are generally slightly higher in a catch-up from yesterday, but gains are thinning as we approach the open with the bourses actually mixed as I write this. Commodities are giving a little back with bonds modestly stronger. The major story this morning is renewed worries about Greek debt on a rumor that the Greek government was looking to raise $5 billion to $10 billion from U.S. other investors to help cover its May borrowing requirement. The euro is getting hit fairly hard in leading futures lower. Look for another relatively quiet day with no major earnings of note out as well as relatively low newsflow plus many schools are still closed for the holidays. Watch out for the notes from last months Fed meeting to be released at 2PM ET. Follow through will likely be pretty good on moves just as it was yesterday so don’t overly trade, but things can work particularly nicely if right as there’s a little more emotion in the market. Focus on big cap tech as well as the stocks in the news.
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
AAPL- closed near a high after announcing iPad sales data
AUXL- closed near a high after positive comments from Cowen
DNDN- mentioned on “Fast Money” last night
COST, PVH- mentioned on “Mad Money” last night
ROG- positive earnings guidance
X- closed near a high
BW- closed near a high after posting earnings
HOG- closed near a high
CREE- closed near a high after a brokerage upgrade
CLF- closed near a high
WYNN, LVS, MGM- closed near highs
GS- closed near a high
PMI, MTG, RDN, MBI- closed near their highs
BUCY, JOYG- closed near highs
ATHR- closed near a high
NFLX- closed near a high
VECO- closed near a high
AVT- closed near a high
VHI- closed near a high
BRY- closed near a high
CPBY- selected by State Grid Corporation of China as the sole domestic GIS provider for Smart Grid
MTH- pre-announced revenues to the upside
Bad-The following stocks have bad news and/or a weak technical pattern
MEE- several killed in an MEE mine blast last night
BYI- warned on earnings guidance
BUSE- traded down sharply after-hours last night on no apparent news
TNK- share offering
BEXP- share offering
RDEA- stock offering
AAPL- mentioned negatively on “Mad Money” last night
CA- poor earnings guidance
Earnings:
TUES APR 6 BEFORE
none
TUES APR 6 AFTER
none
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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