On Friday, I suffered my worst tactical trade of the year. Wynn Resorts (WYNN) reported its earnings last Thursday night. On Friday morning, the stock opened a little lower but quickly breached the 'unchanged' marker. It rallied to around a point higher, got stuck for a few minutes, and looked poised to keep going. I bought it, had an instant profit in it...and then scrambled to exit in horror as it fell a point in seconds. The stock then fell almost three more points...before eventually rallying over 10 points over the duration of the day! There are several points of learning. First, when presented with a terrible situation such as that one, suck it up. Please understand- as recently as three years ago, I'd have essentially taken my keyboard over my knee in an effort to break it in two and bellowed loudly. That had its positive as it released anger...but besides the fact it was brutally unfair to all around me, how good was it for my blood pressure? So in my old age, I've realized what we should all realize- things happen. Nobody is perfect and nobody can trade perfectly. The second thing is to forget the trade immediately if your style is to trade for 1-2 minute time horizons. In a 162 game major league baseball season, a team is almost definitely going to win at least 54 games and almost definitely lose at least 54 games. The difference between the good and bad teams is what they do with those other 54 games. Well, that trade was one of the 54 that I was gonna lose (even the best teams can lose 19-1 on any given night). One corollary: if your game is to trade for longer than 1-2 minutes, study the trade very hard so as to see how you can improve otherwise the fact it went way down and then way up is irrelevant. Third, take time to understand the mistake. If you have a bad (or series of bad) trade(s), don't put it out of sight, out of mind without trying to figure out what happened. If you study the situation intensely, you'll probably realize at least one trigger for your mistake. If you don't take time to study, all that will happen is that it'll fester and you will have a "why me" attitude rather than trying to figure it out. In the specific case, I realized my mistake- instead of buying it thru unchanged, I bought it on momentum with precious little consolidation. So while I'm not being self-aggrandizing it in saying I deserved to lose, I certainly did put myself in position to maximize my odds of profitability. Next, study the broader picture. On Friday for instance, stocks acted differently than they had in recent times...subtle but things like CLX rallied several points upon a release of a report that an investor had accumulated a stake in the company. Such a reaction was highly unusual and signaled a bit of a change in the market tenor. Finally, live to fight another day. You gotta. What if I got way off my game? I could have lost two or three months of income in an effort to "get it back." Instead, I withdrew and reevaluated...I made a series of smaller trades in adapting to how the market was acting. I finished the day down less than 1/4 of what I'd made the previous day (about 1/15th of what I'd made on the week). I realized very positively that one mistake could wipe out some work...but not a career...and put myself in position to get everything back and a lot more the next day. So, a lot to soak in, but introspection without overanalyzing certainly does help.
Markets overnight were stronger throughout Asia with Hong Kong and Tokyo closing higher in excess of 1% but the rest of the world is quiet with the bourses in Europe trading in a tight range from up 0.2% to down 0.2% depending on the market. Gold is down slightly, oil is up slightly, bonds are a tinge lower, and the dollar is mixed with slight losses against the yen but showing decent gains against the euro. Futures are down ever so slightly. It’s the first relatively quiet day in awhile with no economic news of consequence due out today nor any major earnings out. Look for the quietness to continue for the averages what with the VIX closing below 16 but there should be some noise within all of that. The focus will be on the companies in the news such as the few earnings plays and the merger news plays, the momentum plays based on slightly older news (such as JDSU closing near a high after gapping higher on earnings last week), small biotechs in the news, and the casinos to see the reaction to MGM numbers.
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
CLX- closed near a high after Carl Icahn disclosed a 9% stake in the company
OPEN- closed near a high on followthrough from earnings and a mention on “Mad Money” on Thursday night
WBC- closed near a high after posting earnings
INPH- closed near a high after posting earnings
WYNN- closed near a high after posting earnings
RAX- closed near a high after posting earnings
PNRA- closed near a high after posting earnings
PNSN- closed near a high after posting earnings
BIDU- closed near a high
NPTN- closed near a high
SMED- closed near a high
SWS- closed near a high
MEG- closed near a high
MLP- closed near a high
VECO- closed near a high
MERU- closed near a high
PANL- closed near a high
PNSN- closed near a high
JDSU- closed near a high
NFLX- closed near a high
CREE- closed near a high
AMZN- closed near a high
POT, MOS- closed near their highs
COP- closed near a high after announcing a major stock buyback and dividend increase
KLAC- announced additional 10 million share repurchase program
TEVA- featured on “Fast Money” on Friday night
NVDA- partnered with Samsung to develop Galaxy Tab 10.1 Honeycomb tablet
ACUR- Acurox tablets new drug application was accepted for filing with priority review status
BPAX- positive LibiGel safety data
STEC- decent earnings
Bad-The following stocks have bad news and/or a weak technical pattern
VTRO- closed near a low after posting earnings
CGNX- closed near a low after posting earnings
MDC- closed near a low after posting earnings
EXPE- closed near a low after posting earnings
WLT- closed near a low
TCI- closed near a low
ENOC- closed near a low
MCP- closed near a low after announcing its share offering priced at 50
SWSH- announced private placement of up to 12,262,500 subscription receipts at $4.80/share
XOMA- filed $100 million mixed securities shelf offering
HUGH- to be acquired by SATS for $60/70/share
HAUP- poor earnings
HAWK- sold assets to HERO via a chapter 11 bankruptcy
EMS- to be acquired for $64/share in cash from Clayton, Dubilier, and Rice
Earnings:
MON FEB 14 BEFORE
DBD MGM STEC
VAL
MON FEB 14 AFTER
A FTI LLNW
MAR MAS SKH
UCTT WLT
Epiphany Trading, LLC
www.epiphanytrading.com
Erik R. Kolodny- Chief Markets Strategist
Brendan P. Byrne- President
No comments:
Post a Comment