They (whoever “they” is) say that the trading business is feast or famine. Well, conventional wisdom has certainly been fairly true for the last week or so. The last couple of days of trading were almost polar opposites of what last week was like. The range on most of the major indexes yesterday and Tuesday was a tiny fraction of what it was last week with volume sharply off of last week’s levels. There are two main things I do differently. First, it sounds so so simple- I cut back on my trading. I am actually going to give that short shrift although I could write a novella on it. But basically, if the market is not moving, why do much of anything? Save your powder for when things are going. Don’t get me wrong- I’ll still sit here all day long and wait for the opportunities that are there to spring up. I just know that I may earn in a day what it took me an hour to earn merely a week ago. But I can live with that because as we all well know, every little bit helps. In any case, when slow, most traders- and I speak from vast experience- tend to overtrade. All that tends to do is result in a lot of very small losses which of course add up to…one big loss. The other point is how I try to combat this a bit when in stocks that I think can move. I will use KV Pharmaceutical (KV/A) from yesterday as an example. The stock traded to 13.50 earlier this month before coming in sharply. Yesterday, the stock rallied sharply early in the day before consolidating a very narrow range for about half an hour in the late morning (with an overall range of 8.42 to 10). Just after 11:07AM, I noticed a few huge bids coming into the stock at 9.95 and 9.96. I bought half of what I wanted to buy at 10 and went to buy more just after 10 (at 10.01 and 10.02) but missed. By doing what I did, I would have been able to sell the position immediately if wrong in ½ the overall size at 95/96 at worst but if right, I was hoping to accumulate more yet would have something on if it ramped 20-30 cents once breaching 10. Getting to the crux of what I want to say- I knew that the thing could go 20 cents easily, but was prepared if it didn’t go. By that, I mean that it went straight to 10.12 but came in almost immediately to 10. To my detriment (or credit? I am still learning. Seriously. On the level.), I was not fast enough to get out on the way back down…but I didn’t really care. Why? Because I still felt that the stock would go. It poked its head back and thru 10 multiple times, but those huge big bids never left. With the advent of algorithms, this is common behavior in many stocks, i.e. things that have seemingly false breakouts but do go- particularly in slow ploddy markets. There was trouble in paradise, however, about eight minutes after I entered the trade. Now, mind you, I am usually out of things immediately when wrong…but the issue is that I was never wrong until the end. For the first time since entering the trade, the stock went below 10 and the offer refreshed. By that, I mean instead of it poking back above 10, that price was a ceiling. When I first entered the trade, the original thinking if you recall was “I would have been able to sell the position immediately if wrong in ½ the overall size at 95/96 at worst” in my own words. Well, now I was wrong so I sold the thing at 96 when I saw 99 offer come in and refresh on the offer. Namely, the original target where I was wrong came back into play so I held it thru all of the algorithms in thinking it still was going to go as these things have shown a propensity to really move the last few days albeit slowly (I give you CHGS or ROYL as but two examples).. So, in slower moving markets, give the things a tinge more time than in faster tapes as the computers do what they do..and we as human day traders attempt to adapt to it.
Markets in Asia were mixed overnight with Tokyo down 0.2% but Hong Kong ahead 0.4%. In Europe, stocks are sharply ahead with London up 1% and Frankfurt soaring 1.7%. The dollar is slightly weaker but oil is trading up a touch. Futures continue what has been a very good rally since late last week with the numbers indicating a strong start. The gains will likely hold in a narrowly banded range day. The focus will likely be on electronic retailers (BBY), stocks with share offerings (JRCC), techs particularly those in the news (MU), and relative strength/weakness plays.
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
WYNN- closed near a high
KV/A- closed near a high
WLT- closed near a high
CLF- closed near a high
NFLX- closed near a high
AMZN- closed near a high
BIDU- closed near a high
FFIV- closed near a high
IBM- closed near a high
LO- closed near a high
MEE- closed near a high
BTU- closed near a high
FCX- closed near a high
AUMN- closed near a high
RHT- great earnings
SCS- decent earnings
MU- good earnings
TORM- closed near a high
PFSW- closed near a high after posting good earnings
MOBI- closed near a high after inking a deal with SOHU
CSUN- decent earnings
Bad-The following stocks have bad news and/or a weak technical pattern
CREE- closed near a low after warning on earnings
NXY- closed near a low after the UK’s budget raised taxes on oil and gas
XOMA- closed near a low after disappointing drug trial results
PAY- questions swirl about whether the company will be used in GOOG’s NFC rollout
NOG- closed near a low amid a few negative press reports
FRP- closed near a low
MNOV- share offering
ENOC- closed near a low
JRCC- share offering priced at 23.50
SCHL- poor earnings
Earnings:
THURS MAR 24 BEFORE
BBY CAG CSUN
FRED GME TLB
UTIW
THURS MAR 24 AFTER
ACN DRI FINL
ORCL PRMW RIMM
SMOD
Epiphany Trading, LLC
www.epiphanytrading.com
Erik R. Kolodny- Chief Markets Strategist
Brendan P. Byrne- President
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