There are time when one is watching a baseball game, it’s the first inning, and your team falls behind 3-0. But you just know that your team has every shot in the world to come back (in what ends up a 12-11 game). There are also times when it’s the 5th inning, your team falls behind 3-0…and you just know no matter how are what they do, they just cannot catch up due to either weather or a great pitcher on the mound or health of players. That latter scenario for the trading world is well worth discussing for the next two weeks of trading as the period between options expiration Friday and Labor Day is typically one of the slowest volume stretches of the year. There are four main themes here which are all important. First, expect volume to be low. Earnings season is generally lower and many people are on vacation in the United States, Europe, and Asia. So, the machines will be on but the herds will be quite thin. Second, volatility will be there- or not. By that, I mean that there are going to be long slow stretches such as the one which occurred Friday afternoon for three hours but also there will be times when prices will really move such as at 10AM just after the Phily Fed number on Thursday. Be ready for both types of environments. Third, in line with that last sentence, go with what the market is giving you. When it is volatile, trade a little less than your normal size if volumes are thin because if you are wrong, you can be more easily trapped than normal. By the same token, when there is nothing to do, do nothing trading-wise. Finally, do not force anything particularly when down. On Friday, my first two days wiped out much of what I’d made on Wednesday and Thursday. But I knew inherently after way too many years of doing this that while many times I can get everything back- and more- in a rapid fashion, the opportunities were too few and far between to get overly aggressive. I do many things wrong; overtrading particularly on days when stocks aren’t really moving is not a good way of getting one’s money back so I did not make the mistake of doing so on Friday. As infuriating as it was to walk out the door poorer than when I had walked into it about 12 hours prior, not every day is going to be a winner. Thus trade very nimbly these next few weeks…and good luck.
Markets in Asia were lower overnight with Tokyo down 0.7% and Hong Kong down 0.4%. The trend shifted in Europe though with the bourses generally ahead around ½%. Oil is up 2/3%, gold up slightly, and bonds and the dollar are slightly weaker. The cog for the morning has been M&A with PAR getting a higher bid and rumors across the board in stocks such as POT. Futures are trading higher and will likely stay there on a day with low newsflow, high rumorflow, and no major earnings or economic reports due out. Focus on the M&A rumors, the fertilizer sector once again, and nay relative strength or weakness play.
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
AKAM- closed near a high on takeover speculation
CRM- closed near a high after posting great earnings
INTU- closed near a high after posting great earnings
VMW- closed near a high
FSLR- closed near a high
WXCO- closed near a high
JKS- closed near a high
WCRX- paying out special $8.50/share cash dividend
ISLN, CML- will likely trade higher as takeover targets as PAR’s direct competitors
Bad-The following stocks have bad news and/or a weak technical pattern
JAZZ- its lead fibromyalgia drug did not receive support from FDA panel
COCO- closed near a low after posting terrible earnings
CPIX- FDA extended its review of the company’s Acetadote
IDI- closed near a low after it warned on earnings and indicated revenues in past years were overstated
SAFM- poor earnings
Earnings:
MON AUG 23 BEFORE
SAFM
MON AUG 23 AFTER
FMCN
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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