I want to do a bit of a follow-up on a piece from last week- specifically focusing on the issue of trading a stock within the context of what the market is doing. This is the piece:
http://www.capitalmarketforum.org/entry.php?237-WED.-JAN.-12-Acute-Analysis-Of-Minute-To-Minute-Moves
When I trade on a strong trending day, I simply let the market act as a backdrop. I don’t let it dominate my trading. For whatever reason, people love to trade on momentum with no news. It's gotten to the point where I rarely comment in our chatroom regarding the question 'what is the trigger/news event' for the trade because most of the time, there isn't one. Yet if I put one on the spot (and vice versa as I like most get defensive when questioned), oftentimes it makes that individual want to do the trade even more. It’s the old principle of telling your child not to put their hand on the stove. All it does is make them- you guessed it- put their little hands on top of the hot stove. In any case, the only time you'll see me do an AAPL trade or the like in a 'normal' market, i.e. one that isn't moving rapidly is on a relative weakness/relative strength basis. For instance, if the NASDAQ is up 25 and AAPL has been hovering just above unchanged, I'd short it thru unchanged. But most of my plays tend to have a trigger behind them. Using the same AAPL example, if AAPL beat its earnings by 37 cents a share and it only opens up 1, rallies to up 1.30, and goes back to up 1, as long as the market isn't ripping higher (and better yet trending lower), I have no problems shorting it. I love doing things in their own little cocoons...again, if in that example, the market is at the high of the day and ticking higher, I may not do the trade. However, if it is neutral/trending lower, I will happily do it. The types of stocks I trade for the most part- CHGS on the news story that it was not a rare earth play to the rumored IMAX deal that never materialized, et al from the week before New Year's - the market barely moved. I just didn't need the market streaking higher if I wanted to short both of those very different stocks...but in the slightest tick down, both plays worked to perfection. The same goes for the rare earth sector as a whole recently. It has not mattered much the trend of the market. Ergo, ostensibly everything I said in that quite long and detailed post stands with the main offshoot of today’s piece being that it’s inevitably easier to do immediate-term trades with a reason to do them news-wise rather than letting a gentle market dictate the click of your mouse when the markets aren’t moving all the while using the trend of the market as your guide rather than what happened in the last 15 second S&P-wise.
Markets throughout the world were lower overnight with Tokyo down 1.1%, Hong Kong 1.7%, Frankfurt 0.7%, and London 1.4%. Oil and gold are down ½% with the dollar marginally mixed. Jobless claims data came in as expected. Existing Home Sales (4.8 million units), the LEI (0.6%), and Phily Fed (20.5) are all due out at 10AM with Crude Inventories out today at 11AM. Futures are down slightly on terrible numbers from the likes of FFIV. Expect a downside bias overall today albeit likely nothing huge on either side. The focus will be on the earnings plays such as FFIV and everyone in its sector, the banks and brokers off of PNC/MS, the metals off of FCX, and relative strength plays following yesterday’s weakness.
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
IBM- closed near a high after posting great earnings
EBAY- good earnings
DDS- disclosed intention to form a wholly-owned subsidiary that will seek to operate as a real estate investment trust
RJF- decent earnings
ZIOP- received positive opinion for orphan drug designation from EMA for Darinaparsin
MS- decent earnings
COL- decent earnings
FCS- decent earnings
UNH- decent earnings
WEN- exploring possible sale of Arby’s
Bad-The following stocks have bad news and/or a weak technical pattern
AAPL- closed near a low in a near complete reversal despite posting great earnings
GS- closed near a low after posting terrible earnings
CREE- closed near a low after posting terrible earnings
MTG- closed near a low after posting terrible earnings; RDN moved with it
MOS- closed near a low after Cargill announced it is selling its stake
MSB- closed near a low
MEE- closed near a low
AMZN- closed near a low
FCX- closed near a low
WLT- closed near a low
NFLX- closed near a low
SNDK- closed near a low
AIG- closed near a low
X- closed near a low
MON, POT- closed near a low
FSLR- closed near a low
RIG- closed near a low
MCP, REE- closed near a low
APC- closed near a low
FFIV- horrible earnings; RVBD CRM JNPR CTXS APKT RAX AKAM VMW NTAP will likely all move in sympathy
STX- poor earnings
PLXS- poor earnings
ARQL- share offering
ISLE- share offering
FITB- decent earnings, but share offering
SHZ- closed near a low after announcing a share offering
DANG, YOKU- closed near their lows
NTRS- closed near a low after posting poor earnings
TESS- closed near a low after posting poor earnings
SBAY- closed near a low
WPRT- closed near a low
MNKD- received complete response letter for Afrezza which raised several concerns
PH- poor earnings
FCX- good earnings, but lukewarm revenues
UNP- poor earnings
PNC- poor earnings
Earnings:
THURS JAN 20 BEFORE
BPOP COL ESI
FCS FCX FITB
HBAN JCI KCG
LUV MI MS
PGR PH PNC
PPG TEL UNH
UNP
THURS JAN 20 AFTER
AMD CBST COF
CYN DQ ELX
EZPW FLEX GOOG
IBKR IGT ISRG
MSCC MXIM PBCT
PLCM SWKS SYNA
TPX
Epiphany Trading, LLC
www.epiphanytrading.com
Erik R. Kolodny- Chief Markets Strategist
Brendan P. Byrne- President
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