I’ve made the topic of Europe kind of a topic du jour recently. The oil spill is not progressing. The 2nd quarter earnings season is ostensibly over. And happily, I am coming off of a weekend in which my focus was totally on my kids rather than doing intense research for trading over and above what I normally do on Sunday nights after my two little angels are fast asleep. Now, there is never nothing going on in the markets. I mean, it amazes me that one hears barely a comment in the media regarding the fact that a barrel of oil has fallen near 20% in price this month. But my point is that as Memorial Day Weekend approaches, volatility will likely remain amid all the euro turmoil but volumes are going to likely slow as they already have. With that in mind, there was a great deal of chatter yesterday about how the trading day was a “hard” day. It was not a “hard” day. It was a different type of trading session with prices chopping tremendously. It absolutely amazes me to no end the number of times I’ve cautioned in this space not trade in too much size particularly when markets and stocks are moving in a way traders are not accustomed to:
http://epiphanytrading.blogspot.com/search?q=size+does+matter .
Furthermore, I’ve also written numerous pieces on the strategy of exiting losers as I did in this piece entitled “exiting losers:”
http://epiphanytrading.blogspot.com/search?q=exiting+losers
I repost those entries after having learned the very hard way over a period of years to follow my own words of warning. Not months. Years. I don’t want others following in my lead in learning the hard way. Please don’t get me wrong. Volatility has picked up significantly in the last few weeks and is not likely to wane all that much. But the loss of participants to things like the beach, the boat, vacations, and downright fright from active movement is going to result in decreasing liquidity as we approach Memorial Day and for a few days (and maybe months) thereafter. Thus, don’t act on frustration with the likely lighter level of trade to do things you would not ordinarily do. Use the volatility and decreased level of activity to your advantage by trading smaller size but expecting wider swings on days when volume is notably lower than normal. Finally, it’s worth noting that when volatility does ebb, don’t even rely on wider swings with smaller trade size…just focus on the smaller trade size part! When conditions are right, play full-boat…if not, adapt accordingly.
Markets throughout the world were generally higher overnight following Wall Street’s Monday rebound with Toyo up nominally but Hong Kong and Shanghai ahead over 1% with London up 0.7% and Frankfurt up 1%. Gold is notably weaker in trading off over 1%. Oil is bouncing 2%. The ever-important currency markets are quiet with the dollar little changed against the yen and euro. Big-name earnings are up this morning with WMT leading the pack. The muted newsflow is leading to a vacuum of sellers which is leading to a positive picture in the pre-hours. Look for the strength to maintain itself today as big caps and the limited news are good. It should be much more muted than recently with fewer opportunities. Trade relative weakness plays in particular as well as the stocks in the news. The most likely play to work will be the A-B-A2’s to upside if the market grinds higher, but you have to show some patience on those.
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
COCO, CECO, ESI, APOL, DV- closed near highs on reports of a positive broker comment regarding the changing of a post at the Department of Education
MGM- Paulson & Co. reported a 40 million share stake
GOOG- closed near a high
BMO- mentioned on “Mad Money” last night
AKNS- entered exclusive agreement to provide solar panels to Westinghouse
HD- decent earnings
DKS- decent earnings
SPRD- good earnings
WMT- decent earnings, but warned for 2nd quarter; stock still ticking slightly higher in pre-open
SKS- decent earnings
CLH- pre-announced positive earnings
ALTH- received orphan-drug designation for bladder cancer drug
Bad-The following stocks have bad news and/or a weak technical pattern
V- closed near a low on continued follow through from Friday’s weakness
A.- poor earnings
MEE- closed near a low on continued worries about litigation from the mine disaster
ANR- closed near a low
FMER- closed near a low upon announcing a stock offering following its Midwest Bank acquisition
PWRD- closed near a low after posting poor earnings
VOD- poor earnings
FIS- plan to take company over by BX has collapsed according to “WSJ”
ABK- poor earnings
NBS- provided negative update on its pharmaceutical subsidiary
FMER- share offering priced at 19
TJX- poor earnings
Earnings:
TUES MAY 18 BEFORE
ANF DKS HD
SKS TJX VOD
WMT
TUES MAY 18 AFTER
ADI HPQ
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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