WED. APR. 21- Probing

For those people who despise buying a car, one of the only enjoyable parts for those individuals tends to be test driving. I mean, most people tend to know what they want when they go into a dealership car-wise. They may not know if they want a Honda or a Ford or a Toyota, but they do know if they want a smaller car like a Honda Civic or a minivan like the Toyota Sienna. Thus, people will go from place to place in trying out the cars because how else will they know if they actually like the piece of machinery they’ll be spending way too much of their lives in for the next several years? So what happens is that before even commencing serious negotiations, most individuals at least will know what it is they want to target. I mean, why spend time negotiating seriously if you have no intention of buying a particular car because you didn’t like the interior, how it drove, or any of many other factors that go in to the test drive phase? I rattled on a bit on this on purpose because I am trying to subliminally hammer home the idea that this same principle applies to trading. There is very rarely “nothing” going on in the markets. Most of the time, in fact, the only way to try to figure out a move is to play with it very small. For instance, all last weekend I tracked the estimates of iPads. I heard estimates as high as 700,000 units. With the stock trading slightly higher about half an hour after I got to work, I decided to test my hypothesis:

04/05/10 07:02:10 AAPL BOT 400 236.6 EPIPHANY18 ARCA
04/05/10 07:02:38 AAPL SLD 131 236.49 EPIPHANY18 ARCA
04/05/10 07:02:52 AAPL SLD 50 236.2 EPIPHANY18 ARCA
04/05/10 07:02:52 AAPL SLD 219 236.18 EPIPHANY18 ARCA

That didn’t go so well. It indicated to me there was some weakness in the stock because it just wasn’t acting as I internalized it would. I tested that too:

04/05/10 07:04:04 AAPL SLD SHRT 125 235.5 EPIPHANY18 ARCA
04/05/10 07:04:44 AAPL BOT 125 234.9 EPIPHANY18 NSDQSTGY

So now I knew that my bias on the news was to be to the sell side because the stock was acting a lot worse than I thought it would…and I’d lost small money being long and made small money being right. I knew there’d be an 8:30AM press release and was totally ready for it after the stock had rallied a bit on people coming into the door trying to play the same game I tried 1 1./2 hours prior. When the headline came out that they had “over 300,000” units sold, those early trades combined with the news enabled me to be highly confident in being as aggressive as possible about it (I wanted 2500 shares, but despite trying to hit a bid 25 cents below prevailing market, the stock was going so fast that I couldn’t get it all unfortunately):


04/05/10 08:30:38 AAPL SLD SHRT 1200 236.25 EPIPHANY18 NSDQSTGY
04/05/10 08:30:57 AAPL BOT 200 236 EPIPHANY18 NSDQSTGY
04/05/10 08:30:57 AAPL BOT 250 236 EPIPHANY18 NSDQSTGY
04/05/10 08:30:57 AAPL BOT 150 236 EPIPHANY18 NSDQSTGY
04/05/10 08:31:13 AAPL BOT 200 235.9 EPIPHANY18 NSDQSTGY
04/05/10 08:32:22 AAPL BOT 200 234.3 EPIPHANY18 NSDQSTGY
04/05/10 08:33:15 AAPL BOT 180 234.2 EPIPHANY18 NSDQSTGY
04/05/10 08:33:15 AAPL BOT 20 234.2 EPIPHANY18 NSDQSTGY

The point here is that the only way to test my original hypothesis (proven incorrect) was to go to the trading lab. Then I tested it anew the opposite it way and confirmed my original hypothesis was incorrect by making money in doing the opposite of what I thought I should do on my drive into the office. So, when the real trade came, I was as ready as I could be. During the day, I “probe” all the time in trying to figure things out because if I don’t test drive a major idea as I would a car, how can I know with as much confidence as possible that something will work?



Markets overnight were mixed. Very mixed. Tokyo was up 1.7% on the heel of AAPL gains yet Hong Kong was down 1.2% on Chinese currency rumors. London is down 1%% on worries about the economic impact from the volcano while Frankfurt is about flat. Commodities are slightly higher. The euro is weaker as the Greek bond-German bund spread continues to widen. Stateside, S&P’s are flat while the techs are higher. All of this leads to a very jagged picture for Wall Street today. Look for choppiness and rumor driven trading with no real direction- unless the euro weakens in which case the selling pressure will increase overall. Focus on big cap techs and financials with relative strength/weakness plays at the forefront along with the huge amount of entities releasing earnings today.



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

AAPL- great earnings

VMW- decent earnings

PVH- decent earnings projections, but planning stock offering

SYK- decent earnings

PNRA- decent earnings guidance

DEAR- great earnings

STX- good earnings

ALTR- great earnings

TPX- great earnings

TCK- good earnings

TSS- good earnings

TUP- good earnings

CIEN, PIR- on “Mad Money” last night

AIG- closed near a high

BIDU- closed on a high

V- closed near a high

CPY- closed near a high after posting great earnings

SCL- closed near a high after posting great earnings

HGSI- good reversal in closing near a high after posting poor drug data

BNVI- announced that the US Patent and Trademark Office has issued a patent covering a method of using BNVI's proprietary drug candidate Bezielle for the treatment of metastatic breast cancer

CUR- closed near a high

CAGC- closed near a high

WYNN- closed near a high

ZION- closed near a high after posting earnings

HBAN- decent earnings

KEY- decent earnings

ZLC- selling minority stake to Golden Gate Capital

MS- good earnings

ECA- decent earnings

MAN- decent earnings

STJ- decent earnings

GS- SEC has testimony that seems to contradict facts of case


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

CREE- poor earnings

GILD- poor earnings

JNPR- terrible earnings

YHOO- poor earnings

EW- poor earnings

CSIQ- terrible unit guidance

NUVA- poor earnings

SNV- poor earnings

DRYS- share offering

TSFG- poor earnings and announced need for capital

ACUR- reversed massive intra-day gain in closing near a low after indicating the FDA needs additional data on one of its drugs

GMCR- closed near a low

JEF- closed near a low on poor earnings

FCX- closed near a low

ALGT- closed near a low after posting poor earnings

ETN- closed near a low after posting earnings

NTRS- closed near a low after posting earnings

COV- poor earnings

DGX- poor earnings

LH- poor earnings

ABT- poor earnings

V- acquiring CYBS

WFC- poor earnings

FCX- poor earnings

CHRW- poor earnings

CMA- poor earnings

UTX- poor earnings



Earnings:

WED APR 21 BEFORE

AAI ABT AMB

BA BPOP CMA

COV DGX ECA

ELN EMC GENZ

HBAN KEY LH

LMT MAN MCD

MCO MO MS

NITE NYB R

STI STJ T

TIN UTX WFC

WED APR 21 AFTER

ACF ADS AMGN

CMG CTXS CYH

EBAY EQIX FFIV

FNF HCBK ISIL

KMP LEG LRCX

MEE NE NFLX

NVLS PLCM PTV

QCOM SBUX SLM

SNDK TER TEX

TSCO VRTX




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