WED. MAY 11- Altering Trading Style

I love chocolate. And that, without a doubt, is my favorite beginning to a blog post in all the time I’ve been typing out these pieces. But, I do. More than any other food on the planet, the pleasure of a little chocolate is one of my favorite simplest pleasures in this life. Mind you, a little bit of chocolate every so often is a wonderful thing (for me anyway). Not often and not in great size……but say, one or two squares of a Hershey Bar after a filling meal is the perfect touch for me. Now, let’s say I ate 21 Hershey bars in one sitting. I may get a stomach ache and dull my affinity for chocolate. Or I may feel no pain at all and have quite the story to tell everyone I know about the time I ate 21 Hershey bars for fun. Either way, the cholesterol I am actively watching would soar. So, basically, I’d find out exactly what would happen if I just kept eating chocolate versus potentially getting sick and hurting my health. It’s just not worth it in the long-run net-net. And so it was when I began trading higher-priced stocks so many years ago. My first trade back in 1987 was for 100 shares of an eight dollar stock in Reebok. My next trade was for 200 shares of Church’s Fried Chicken (a seven dollar stock). Almost all of my next series of trades were in stocks which traded between 5 and 15. As I began to trade more actively in 1994, I slowly ramped up my trading of higher priced equities. I did quite well even before I started trading full-time in 1996. Let me rephrase- I did quite well for a time until I eventually got destroyed. Why? Because 10,000 shares of a 2 dollar stock does not play the same as 10,000 shares of a 20 dollar stock. The sheer delta indicates that a 25 cent change in a 2 dollar stock may be the same percentage as a 2 ½ point drop in a 20 dollar stock yet the monetary loss is 10% of the damage. Furthermore, stocks of similar prices act quite differently. For instance, when Citicorp was a low priced stock, it’d typically trade in a narrow range on huge volume. Sirius Satellite (SIRI) has the same big volume but trades in a much bigger range so trading the same size of SIRI as C will inevitably result in losses as human nature is to hold losers and cover winners ergo a faster moving stock would result in a poor outcome. So, particularly for those who haven’t traded stocks with double digits in them much less those with high deltas, realize that the size of your positions should not be identical as to the positions you executed in the lower priced stocks. Also, the movement of each stock is totally unique. Furthermore, it is even more important that one be on the right side of a trending market else the potential for damage is that much greater for immediate-term players. And by the way, a funny thing eventually happens…as your comfort level and knowledge increases of a different group of stocks, so too will your confidence, expertise, confidence, gut feel, confidence, size of your trading stake, and confidence to augment trade size without taking on undue risk.

Markets were mixed throughout the world last night with Tokyo down 0.2% but Hong Kong up 0.2%. London is down fractionally but Frankfurt is up 0.5%. The externals are a bit more notable with the dollar up a bit versus the euro and yen and commodities down across the board. Futures were up most of the morning but have come in. In general, it’s quite choppy but quiet. The choppiness will likely continue in what looks to be a consolidation session unless the commodities moves become exacerbated. The focus will likely be on the earnings flow, retailers, stocks with share offerings, 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

MED- closed near a high after posting good earnings

FOSL- closed near a high after posting good earnings

SREV- closed near a high after posting good earnings

CPE- closed near a high after posting good earnings

HELE- closed near a high after posting good earnings

CIEN- closed near a high on takeover rumors

DTG- closed near a high on more speculation that it will received a raised takeover bid

WYNN- closed near a high

SODA- closed near a high after Fidelity disclosed a sizable stake

ROVI- great earnings

ASYS- good earnings

IPSU- good earnings

GRC- closed near a high

OXGN- closed near a high

FEIC- closed near a high

AU- good earnings

TISA- good earnings

M- decent earnings

ZAGG- good earnings

Bad-The following stocks have bad news and/or a weak technical pattern

MCP- closed near a low; had poor earnings as well

CLF- closed near a low

SINA- closed near a low

BMTI- closed near a low following the release of FDA documents ahead of the May 12 panel meeting for the company’s augment bone graft

DIS- poor earnings

SGMS- poor earnings

STEC- terrible earnings

CPTS- poor earnings

PAL- closed near a low after posting poor earnings

ADES- closed near a low

AIG- to offer 300 million shares; 200 million from the gov’t and 100 million by the company

ACOM- 4.35 million share secondary at 42






Earnings:

WED MAY 11 BEFORE

AH AU CGA

CYD GIL M

SFUN TEVA

WED MAY 11 AFTER

CSCO CSIQ IAG

IOC OAS SINA

SVM SYMC



Epiphany Trading, LLC
www.epiphanytrading.com

Erik R. Kolodny- Chief Markets Strategist
Brendan P. Byrne- President