Recently, I took my two kids (ages 5 and 2) to my local Pathmark grocery store. Unfortunately, I sadly learned as evidenced by the bare shelves that the store was to be shuttered. A couple of weeks ago, I remarked that we needed a few things. My older daughter told me "Well, Dad, you can't go to Pathmark because it's closing but Waldbaum's and King Kullen are open for business." After marveling at Rayna's vocabulary, intellect, and logic, it drilled home one of my favorite trading lessons. My Mom is way above average intelligence but has never traded a stock in her life. I learned a long time ago that if I am with her on a one-on-one basis and I cannot make her understand a specific trading idea, I probably shouldn't do it. In general, the more complex that something is, the higher the likelihood that the intricacy of the idea will get in the way of it working. For instance, it makes sense to me that if a stock has run up 70% in the last three months, it beats its earnings, and the stock barely trades higher, I'll short it through unchanged. Maybe the company's growth is slowing. Maybe the company beat its earnings on sketchy accounting practices. I don't know. But I do know that if a company comes out with good news on the surface and its stock prices fails to react, the likelihood that the stock accelerates to the downside in time is quite high (witness JPM and its ensuing performance post-earnings last week). So, as my daughter who has not entered kindergarten as yet reminded me, everything does not have to be complicated. Her young mind was able to soak up the difference between closed and "open for business." As we trade on a daily basis, things should generally be that easy. I spent time a couple of weeks ago with a trader who'd been in the business for many years but had not traded in awhile. I asked him to explain what it was he sought to do. He spent half an hour talking to me and patiently answering my questions. And after half an hour, I hadn't the foggiest idea of his strategy. I am not the brightest tool in the shed, but I've been trading full-time almost 15 years. That was a warning sign. The moral: don't overcomplicate. Focus on what you see and react to it rather than what you think the facts should indicate.
Markets in Asia were generally weaker overnight with Hong Kong down 0.4%. Things are quiet in Europe with eyes turned to the wedding as all indexes are not straying too far from unchanged. The dollar is once again weaker with commodities once again stronger. Personal Income and Personal Spending are due out at 8:30AM, Chicago PMI (68.0) at 9:45AM, and University of Michigan confidence data (68.7) at 9:55AM. Futures are slightly weaker. Look for a relatively quiet day with Europe not moving plus it’s the first nice sunny Friday of the year so a few people may filter out a little early. The focus will be on the earnings plays, RIMM and its competitors, and A-B-A2 strength plays in the week’s momentum movers.
Good- The following stocks have good news and/or a strong technical pattern
AFL- closed near a high after posting good earnings
NSC- closed near a high after posting good earnings
ZMH- closed near a high after posting good earnings
FTNT- closed near a high after posting good earnings
VCI- closed near a high after posting good earnings
SRDX- closed near a high after posting good earnings
SPWRA- received a $23.25/share cash buyout for 60% of the company from TOT; FSLR, STP, TSL, CSIQ may move with it
CLF- decent earnings
CSTR- good earnings
DOX- decent earnings
KLAC- decent earnings
SIMO- good earnings
EMN- good earnings
MMI- decent earnings
CERN- good earnings
QLIK- decent earnings
SWN- decent earnings
TRLG- good earnings
NTKR- great earnings
ACOM- great earnings
SWKS- good earnings
CAT- good earnings
MRK- decent earnings
WBC- good earnings
SCEI- good earnings
AXL- decent earnings
GT- decent earnings
LEA- good earnings
AGP- decent earnings
DHI- decent earnings
LPNT- decent earnings
WY- decent earnings
Bad-The following stocks have bad news and/or a weak technical pattern
TDSC- closed near a low after posting bad earnings
HHS- closed near a low after posting bad earnings
POT- closed near a low after posting bad earnings
HP- closed near a low after posting bad earnings
FFIV- closed near a low
VRSN- poor earnings
CAVM- poor earnings
MSFT- poor earnings
DECK- bad earnings
RIMM- terrible earnings guidance
CROX- poor earnings
DRIV- poor earnings
AEM- poor earnings
LPS- poor earnings
KND- RHB had poor earnings; KND is buying out RHB
ENDP- poor earnings
IM- poor earnings
MWW- poor earnings
MTW- poor earnings
OCLR- bad earnings
RMD- poor earnings
VSEA- poor earnings
FRI APR 29 BEFORE
AGP AON AXL
CAT CPN CVH
CVX CX DHI
ETR FLIR GT
ITT LEA LPNT
MRK NVE PBI
PNW PPC RAS
SIFY SPG VFC
WBC WY
Epiphany Trading, LLC
www.epiphanytrading.com
Erik R. Kolodny- Chief Markets Strategist
Brendan P. Byrne- President
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