Many people describe the style of trading that I and many other day traders utilize as “momentum trading.” But what I for one do, it’s not the case whatsoever in the truest sense of the word “momentum.” The only time I truly try to utilize momentum trading is when the market is moving rapidly. For instance, Citrix Systems (CTXS) at 11:23AM yesterday ticked to a new high. Upon ticking to that aforementioned intra-day high, the stock fell 36 cents (about 0.6%) in the next 15 minutes. The danger of that fake immediate-term break-out actually has a high likelihood of occurrence when one momentum trades as market downticks and there's no news on the individual stock. Basically, I’m noting that it was a decent set-up but when something has no trigger for entry, it is hard for me to pull the trigger. Plays like that become pure momentum ideas and when the market is neutral or downticking, it becomes very difficult to make money in the immediate-term routinely trading like that. Trading momentum for momentum sake is very hard (for me). Instead, I look for a nuance to do my trades. For instance in using an example from yesterday, it makes logical sense to me that if the market has rallied but is coming off and J.P. Morgan (JPM) beat its earnings handily on the bottom line number yet the stock breached a low and unchanged to go negative, it's a short. Why? Because it couldn’t go higher on the news. When traders who happened to be long the stock were puzzling as to what was going on, they acted first and asked questions later which is why one can get quick spike moves such as the one that occurred at 9:35/9:36AM yesterday. That's putting the odds in one's favor. Momentum is only good (for me) when market is really moving rapidly, but for the most part, look for a reason to do a trade over and above flowing with the trend if trading for an immediate-term horizon.
Markets remained strong in Asia overnight with Hong Kong rallying 1.7% and Tokyo even stronger in closing ahead 1.9%. The picture is certainly more mixed in Europe with Frankfurt up 0.5% but London down 0.3%. The dollar weakness is even more notable this morning with the dollar approaching 81 yen and below 1.40 euros. Gold is up once again with prices now approaching $1,400 the ounce. Oil is up ½%. Futures are mildly higher. Core PPI came in as expected although the headline number was slightly stronger. Jobless claims data was weaker than expected. With options expiry tomorrow, look for more of the same- a mild choppy upside session with eyes on GOOD this afternoon. Focus on the takeover stocks like YHOO, the education stocks off of the APOL warning, and the myriad of stocks which closed at or near highs today for extensions of moves (or reversals today if market reverses).
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
V, MA- closed near their highs
CSX- closed near its high after posting great earnings
ZAGG- raised revenue guidance
EXAS, AA- featured on “Mad Money” last night
YHOO- rumored to be in early discussions to be acquired
MON- closed near a high
VHC- closed near a high
RIG- closed near a high
CRWN- closed near a high after a positive mention in the Motley Fool newsletter
DSTI- closed near a high
COHN- closed near a high
HOC- closed near a high
AGO- closed near a high
GBX- closed near a high
RUSHA- closed near a high
JOBS- closed near a high
SIGA- closed near a high after winning a smallpox contract
PWRD- closed near a high
IL- closed near a high
WNR- closed near a high
Bad-The following stocks have bad news and/or a weak technical pattern
APOL- warned on earnings; CECO, DV, STRA, ESI may move with APOL
CSH- closed near a low as CASH sold off after being accused of violating law
JOE- closed near a low after a negative mention in a newsletter
ADTN- closed near a low after posting earnings
LSTR- poor earnings
Earnings:
THURS OCT 14 BEFORE
FCS GWW LSTR
PGR SWY
THURS OCT 14 AFTER
AMD GOOG JBHT
Epiphany Trading, LLC
www.epiphanytrading.com
Erik R. Kolodny- Chief Markets Strategist
Brendan P. Byrne- President
No comments:
Post a Comment