A few months ago, the stock of Roper Industries (ROP) went into the S&P 500. On the day of the announcement, the stock rallied about 4% and bounced around for the next few days. Two days before entering the esteemed index, the company announced it was going to undertake a share offering to coincide with the influx of demand from index fund managers. Going into the close on the day the stock went into the index (Tuesday December 22), there was a net imbalance of about a million shares to buy as index managers placed their orders to have proper weightings in their various funds. Yet, the stock plunged on the closing bell. Nobody is allowed to add to the side that the imbalance is published upon with market on close orders, i.e. after 3:45PM, nobody could place a market on close buy order in ROP, but people were still allowed to place sell on close orders. So, what likely happened is that someone (maybe the underwriters for the offering?) placed an order to sell the stock a couple of minutes before the 4PM ET NYSE close. This shifted the situation to a net sell imbalance with no notice. The stock plunged over a dollar on the close with the move resulting in a very profitable trade for many traders. The takeaway is quite important. First, be aware of which stocks and which days that stocks are going into and out of the indexes. I typically publish the list a few minutes before the close, but the information is readily available days to weeks in advance. Second, when playing index moves, always place buy and sell orders on the close well away from the last prevailing price because anything can happen at any time- and often does. As we all know, trading is hard. Thus, one must always be on guard for any potential opportunities- they can and do exist and can occur at any time.
Markets in Asia were down overnight with Tokyo leading the way down 1.3%. In Europe, the bourses are down ¾% to 1% across the board. The euro is relatively weak anew with commodities broadly lower as well about 0.5%. Futures are broadly lower as well on weakness in Greece as well as a series of poor earnings reports in the like of EBAY and QCOM. Look for widespread weakness overall today although the losses should be contained pending what the euro does. Focus on the very liquid earnings plays in particular along with relative strength plays as short covering will be rampant in select equities should they not fall with the market this morning.
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
DCTH- phase III trial exceeded primary endpoint expectations
NFLX- good earnings
SNDK- good earnings
CMG- good earnings
NE- good earnings
TER- good earnings
VRTX- good earnings
LEG- good earnings
CYBE- good earnings
STR- mulling spin-off of its natural gas and oil exploration production operations
S, ITRI, SHAW- featured on “Mad Money” last night
VMW- closed near a high after posting good earnings
UTX- closed near a high after posting good earnings
BA- closed near a high after posting good earnings
TUP- closed near a high after posting good earnings
PVH- closed near a high after posting good earnings
TPX- closed near a high after posting good earnings
CAS- closed near a high
CTT- closed near a high
ESV- decent earnings
HSY- decent earnings
MAR- decent earnings
Q- being bought out by CTL for .1664 shares of CTL in a stock-swap deal
CY- decent earnings
PNC- good earnings
Bad-The following stocks have bad news and/or a weak technical pattern
EBAY- poor earnings
QCOM- poor earnings
AMGN- poor earnings
MEE- poor earnings
CTXS- poor earnings
NVLS- poor earnings
ACF- poor earnings
ISIL- poor earnings
CYH- poor earnings
PTV- poor earnings
HCBK- poor earnings
FFIV- poor earnings
FNF- poor earnings
LRCX- poor earnings
ADS- poor earnings
TEX- poor earnings
TSCO- poor earnings
GHL- poor earnings
LHO- poor earnings
BAX- terrible earnings
DO- bad earnings
KMB- poor earnings
NOK- terrible earnings
VZ- poor earnings
PM- poor earnings
BTU- poor earnings
PLD- poor earnings
Earnings:
THURS APR 22 BEFORE
ABC ALK ALXN
AN APD BAX
BBT BGG BTU
BX CAL CBE
CLS CY DHR
DO ESI ESV
FITB GNTX GR
HSY JNS KMB
LLL LTM LUV
MAR MNI NOK
NUE NYT PENN
PEP PLD PM
PNC RCL RS
RTN SHW SY
TASR TXT UNP
VZ ZMH
THURS APR 22 AFTER
ALGN AMZN AXP
BCR BUCY CAKE
CB CF COF
CYMI CYT DDR
DECK DOX EMN
FII IGT MSFT
NCR OSIP PMCS
RMBS RVBD STM
SYNA TCO TQNT
WDC
Good luck today.
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
Index trading is about markets, movements and general economy. It is used to spot the volatility of stocks for a period of time. Buying and selling of stock needs a lot of timing to gain more profits. You have to know the general market movement before you can trade.
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