While trading in the late 1990’s in particular, my best trading month of the year was December with my premier specific trading days between the days around major holidays (such as Christmas Eve) to large swaths of time such as the last two trading weeks of the year. The reason for that is in those heady years, there was a very high level of interest in the stock market. Some would call it a ‘speculative fervor,’ but I just happened to think of it as ‘people staying home playing “stock market” because they had nothing better to do.’ Furthermore, there are many junior traders anchoring trading desks this time of year as senior traders rotate their vacations. Finally, college kids and many people considering career changes in the first part of the new year use December as a litmus test to see if they want to day trade full-time. Thus, some truly ‘common sense’ type of trades become frighteningly easy and applicable. One of my favorite happens to be what I call the ‘media mention’ trade particularly in smaller capitalization stocks. What happens is astoundingly obvious- all of these (usually) smaller players who tend not to be as experienced in the day trading realm as others hear an analyst mention a stock and drive the price up in a scramble to get in at once- even if the prediction for the stock is based on a 12-24 month outlook! For instance, CNBC did a segment with a focus on stocks under $5/share on last Friday around 10:50AM. The two stocks mentioned were Journal Register (JRN) and Smith & Wesson (SWHC). SWHC rallied from 4 to 4.15 over the course of a few minutes- a pretty impressive near 4% pop. But the total volume on relatively illiquid JRN was about 13,000 shares before analyst Brent Wilsey recommended buying JRN. In the next 10 minutes, JRN rallied 50 cents on 425,000 shares. Why? Because things were relatively slow on Friday morning and people have relatively little fear right now so many traders want ‘the next big thing’ here and now. Thus, as we wind the year up, pay specific attention to the words of analysts when they mention particularly somewhat illiquid equities to a national TV audience. Most of the time, the words ring hollow in the immediate-run by TV pundits, but not in a rampant bull market as a ready and willing crew of people are eager right now to build on the year’s performance…and hopefully make some nice quick money for themselves- which can lead to quick profits for us day traders simply by keeping an ear out for the television set and an eye out for the news ticker.
Markets remained quiet worldwide overnight with Tokyo down 0.7%, Hong Kong flat, London down .1%, and Frankfurt up 0.3%. Everything else is muted with the dollar and all commodities trading very close to unchanged. The Irish approved their austerity measure program while China once again raised its reserve requirements. But has been so often the case recently, everything has been shaken off. The October trade balance and export/import prices came in in-line this morning with Michigan Sentiment (72.5) due out at 9:55AM and Treasury budget ($134 billion) at 2PM. Look for what will likely be a quiet day with a modest upside bias. There is a tremendous amount going on underneath the surface though with a focus today on the earnings plays (such as GMCR), the merger/takeover plays (BEC, THC, et al), the ARG/APD saga, and relative weakness plays particularly in the first few minutes of trading.
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
ESL- great earnings
PLL- good earnings
AIG- closed near a high after announcing its controlled exit plan; also, Fairholme Capital announced it had increased its stake in the company
CIEN- closed near a high after posting great earnings
SFD- closed near a high after posting great earnings
FRC- closed near a high on the day of its IPO
ONP- closed near a high after posting great earnings
ZQK- closed near a high amid takeover rumors
GT- closed near a high amid takeover rumors
ARB- closed near a high after J.P. Morgan upgraded the stock after a major contract renewal
NFLX, FFIV, NFX, CVC- to join the S&P 500 on the close on December 17
THC- reportedly received $6/share takeover offer from CYH
NAK- closed near a high
OCZ- closed near a high after receiving an OEM mass production order
SINA- closed near a high
DMND- closed near a high after posting great earnings; featured on “Mad Money” last night as well
CYDE- closed near a high after saying it doesn’t expect to have restate earnings and it will keep its Nasdaq listing
NVLS, LULU- featured on “Mad Money” last night
EPCT- positive results of a new analysis for its Ceplene
OXY- divesting Argentine assets to Sinopec and buying Shell gas fields in south Texas
BEC- put itself up for sale according to “WSJ”
MCP- agreed to $130 equity and debt investment from Sumitomo
VRSN- declared special $3/share dividend
Bad-The following stocks have bad news and/or a weak technical pattern
GMCR- terrible earnings
NSM- poor earnings
ASTM- share offering
CRZO- share offering
BONA- closed near a low on the day of its IPO
SDTH- closed near a low after announcing a convertible notes offering
OXM- closed near a low after posting awful earnings
MATK- closed near a low after posting awful earnings
UTX- poor earnings
HTWR- closed near a low after announcing a share and notes offering
Earnings:
None today
Epiphany Trading, LLC
www.epiphanytrading.com
Erik R. Kolodny- Chief Markets Strategist
Brendan P. Byrne- President
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