I feel like I’ve discussed my 20 cent rule and the idea of liquidity quite a bit over the last several months. But based on what I was seeing in our chat room the last couple of days, I want to readdress both issues from two different angles. First, the key word as is so often the case is “discipline.” One must pick a style and stick to it- whatever it is. In a whippy market, however, it is very difficult to hold positions. Furthermore, if exiting quickly, most of us (with me at the top of list) will be jiggled out- right or wrong- in the immediate-term if “immediate” gratification isn't granted. So many times, we discuss the trades which kept going. What we don’t discuss often enough are ideas like UFS one Wednesday afternoon a couple of weeks ago. It was first called out at 1:15PM or so. The stock breached its high y a few cents and then came back in before hanging out for about 15 minutes on low volume…and then rallied almost a dollar over the course of the next half hour. So, speaking for me, I’d have lost small because it didn’t go anywhere immediately. It was then called out again around 45 minutes later around 72 when it was just off of its high. The stock fell 50 cents on nearly non-existent volume in the next few minutes (and almost two points over two hours). Thus, if one plays the philosophy of holding things, one did well the first time if one wasn’t jiggled out, but would have been demolished the second time. If one played it for an immediate-term move, I know I for one would have been jiggled out and would have been crushed the second time because of low liquidity. In another example, PURE was called out just before 2PM. It immediately blipped higher before falling slowly and then leveling out. Thus, I definitely would have lost because of the initial blip as there is a lot of noise when a stock does not have the potential to move at least 20 cents easily yet holding it would not have worked either as it closed higher than the suggested short price by the person who called it out. Realize- there is a reason I list seven criteria as part of the Epiphany Method. Just because a stock is touching a high or a low shows it has momentum…but it certainly is not necessarily going to be a successful conduit for trading if it cannot move easily nor if it is particularly easy to enter and especially exit liquidity-wise.
Markets in Asia were broadly higher overnight with Tokyo ahead 1.8% and Hong Kong up 0.9% albeit on low volume due to holidays in China and Australia. Prices are higher in Europe as well with the DAX up 1.2% as of this writing and the FTSE up 0.7% (despite a 4% decline in BP). The euro is still in the midst of a mini-run with that currency topping 1.22 to the dollar. Gold is up slightly with oil up a sharp 2%. The net of all of this is some respectable early strength for the futures although prices are off of their highs. It’d seem today should be a fairly routine stereotypical Monday. Look for low volumes and high illiquidity in slow trade with prices not straying exceptionally far from unchanged. The upside bias is likely to stay in effect with a focus on some A-B-A2’s in the big caps and .some news in a few pretty big biotech names.
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
RIG- closed near a high
AAPL- closed near a high
PWRD- closed near a high
WYNN- closed near a high
X- closed near a high
ULTA- closed near a high after pricing a share offering at 22.25
NLST- closed near a high after Viglen approved NLST’s Hypercloud memory for HPC applications
NSU- closed near a high
IDT- closed near a high after posting good earnings
TBL- closed near a high
Bad-The following stocks have bad news and/or a weak technical pattern
QCOR- FDA delayed Acthar indication decision
CHBT- closed near a low after issuing poor earnings
HGSI- FDA issued discipline review letter re the risk/benefit assessment of Zalbin being dosed every two weeks
ONXX- phase III Nexavar trial failed to reach primary endpoint
Earnings:
MON JUN 14 BEFORE
None today
MON JUN 14 AFTER
LZB
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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