As day traders, we must seek an edge- any edge. Well, among the continuing battle of the ECN’s versus the NYSE routes, there are two definitive and important nuances one should know over and above having the basic understanding of the ‘flash crash’ along with the reversal pattern of spikes/plunges discussed in a blog post several weeks ago. First, there is occasionally a ‘flash’ or even an ‘errant’ trade in a stock far away from the prevailing market. Recently, a trade took place in Goldman Sachs (GS) on the Boston Exchange (NQBX) at 10:10:30AM ET at 139.52 with the stock trading around 138 with an NYSE high of 138.55 at that time. Over the course of the next few minutes, I had four people ask me in some fashion what the high in GS was. This led to the trade. There was enough uncertainty over that out-of-whack trade in an ephemeral few moments when the market was upticking nicely that the tick became self-serving. Namely, people were looking at the stock trading significantly below where the charts and data indicated the true high to be. When the stock took out the true NYSE high of 138.55, it rallied to 139.64 in less than five minutes. This point plus move was perfect for day traders as there was a huge bid at 138.50 immediately upon entry so risk was limited from the get-go while the reward potential was relatively enormous. The second type of ECN vs NYSE battleground trade tends to take place just after the NYSE open. Oftentimes just before a stock opens on the NYSE, a few trades take place on an ECN. When the stock does open the band on the stock may show a high or a low intra-day that is away from the NYSE market. It is truly when the NYSE opens that a listed stock can pick up volume so this can be very important. For instance, the last time NCR reported earnings, it traded in a narrow NYSE band of an open of 12.41 down to 12.19 before going back to 12.40ish. Yet, the charts showed a 12.49 high due to an ECN trade just after 9:30AM ET. The stock for those that remember the story traded to 13.25 the previous session on news of an investment in the company by a major fund manager. When the market rallied early, I bought the stock through the NYSE high of 12.40 knowing that 12.49 would act as gravity for it particularly with the positive news the night before. I therefore saved myself several hundred dollars on the shares I bought by not waiting until the (ECN) tippy-top instead acting on the NYSE market. The moral here is to be aware particularly early in the day of what the range of a stock is on the NYSE and on the ECN’s; it can be the difference in your day at times.
Overnight, markets were stronger worldwide with gains of 0.5% to 1% throughout Asia and ½% gains found across the European continent. Gold, oil, and the currency markets are all quiet on the Rosh Hashanah holiday. A deficit of $47 billion for the trade balance is expected at 8:30AM and the weekly crude report is out at 11AM today. Don’t look for much today due to a dearth of earnings, news, economic reports, and participants. Stocks will likely meander in positive ground much of the session.
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
JOYG, BUCY- closed near day’s high
NZ- closed near a high amid renewed takeover chatter
PVH- closed near a high after posting good earnings
MAPP- closed near a high after releasing positive safety data for Levadex
CMTL- closed near a high after receiving a military contract
ASTI- closed near a high after announcing a new product line
NRGY- featured on “Mad Money” last night
GERN- announced a paper in which successful lengthening of telomeres to extend human lifespan is featured
Bad-The following stocks have bad news and/or a weak technical pattern
CAGC- closed near a low after a brokerage downgrade and an earnings pre-release
VECO- closed near a low after a brokerage downgrade
CREE- closed near a low in sympathy with VECO
V, MA- closed near lows after V was cut at Bank of America
AVAV- poor earnings
QCOR- FDA needs more time to review Acthar
ARST- closed near a low on rumors that it would not be bought out
FUQI- being probed by the SEC for failure to disclosure regulatory documents
Earnings:
THURS SEP 9 BEFORE
SNDA STEI
THURS SEP 9 AFTER
NSM
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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