Buying a car and buying a mattress tend to be a similar experience at the dealer. When one walks in to one of these places, one looks at the sticker and knows that there is no way no how that one will walk out of there paying sticker price. It’s obviously up to the consumer to do a lot of homework and figure out exactly what a good deal is, but it’s well known that if one pays retail, one is likely getting ripped off. As a guy who purchased his last car for several thousand dollars under manufacturer’s retail price and his last mattress for 40% off of the original quoted price (plus free delivery thrown in), there are fewer people you’ll meet than me who try to scour out a good deal. In stocks though…in stocks, it is utterly totally different in my immediate-term trading. I demand to enter at retail and exit at retail. Let me explain. I seek definitive trigger points for every trade that I do. As a for instance, I wanted to trade Molycorp (MCP) yesterday per my commentary in the Trade of the Day section on the forum. The Chinese government made some noise about building up its strategic reserves of rare earth metals on Sunday night. By Tuesday’s close (near the high of the day), the stock was four points higher than where it closed Friday. My initial line of thinking was that there’d be some short covering but the stock broke down to 54.50 from a 55.40 close shortly after the opening bell. It tried to rally but failed. When it ticked to 54.50 at 11:13AM ET, I shorted it at the low of the day. Had I tried shorting it at many other times (say 55.05 at 10:45AMish), I’d have watched the stock spring a bit and lost money. The idea is that many of the people who were long the stock would panic out if it took out its old intra-day low because the stock clearly failed to react in a continuation pattern to the news. Ergo the idea is that I wanted to wait until the last possible second to short the thing at the low of the day rather than springing in early. Then when the stock thankfully broke, I didn’t throw a bid out hoping I’d get hit. Rather, I wait until the stock pauses..and then I bid up for it. Had I thrown out a bid to cover half my position at say 54.40, I’d have missed out on the fact it broke 35 cents rapidly…I did not cover 54.15. Instead, when I saw one bid refresh there, I paid up and exited 54.20 in making sure I was able to exit it ( a nickel off the low but 20 cents better than I otherwise would have done). So, as you enter into a trade, know why you want to enter it and don’t try to get in exceptionally early; similarly, when exiting, let the market comes to you and particularly when something is really going your way you have got to make sure you pay up when you exit to assure your exit (which will tend to be better than if you did not pay retail).
Markets were down very slightly in Tokyo (0.1%) but much bigger in Hong Kong as the Hang Seng slid almost 2%. In Europe, Frankfurt is down 0.4%, Paris 0.7%, and London 0.9% as of this writing. Oil and gold are down slightly with the dollar up against the euro. Bonds are up a bit this morning as well. There are two catalysts. First, CSCO’s conference call was terrible; shares of CSCO are off 10%. The other thing is that Portuguese debt spreads widened dramatically to the point whereby it’s a legitimate concern as to whether the nation will need a bailout. On the domestic front, Initial Claims (413K) and Continuing Claims (3900K) are due out at 8:30AM, Wholesale Inventories (0.7%) at 10AM, and the Treasury Budget (-$50.0 billion) at 2PM. Futures are sharply lower at the moment. For the day, there will likely be some stirring of a rally what with the recent market momentum and an eight-day Dow winning streak on the line. But the market likely won’t make it; I’m looking for the downside bias to hold with no huge swings either way from the open. The focus will be on the earnings plays, the techs off of CSCO, the insurance sector, and relative strength plays for some potential short covering.
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
BWLD- closed near a high after posting earnings
SWS- closed near a high after posting earnings
RAH- closed near a high after posting earnings
DSCI- closed near a high
WSM- closed near a high
ECA- establishing a joint venture with PetroChina through 50% interest in Cutbank Ridge assets
MCX- good earnings
WFMI- great earnings
RE- decent earnings
SFSF- good earnings
MYGN- positive Prolaris test results
CLB- decent earnings
SWI- decent earnings
ENS- great earnings
SCSS- great earnings
BG- decent earnings
S- decent earnings
ALU- great earnings
GT- decent earnings
SQNM- announced publication of ‘locked assay’ study in “American Journal of Obstetrics and Gynecology”
IPGP- raised earnings earnings
Bad-The following stocks have bad news and/or a weak technical pattern
RIG- closed near a low
NAK- closed near a low
DGW- closed near a low
SIAL- closed near a low after posting earnings
NTGR- closed near a low after posting earnings
MOTR- closed near a low after posting earnings
CSC- closed near a low after posting earnings
CSCO- bad earnings
AKAM- terrible earnings
ALL- bad earnings
ATVI- bad earnings
EQIX- poor earnings
NUAN- poor earnings
FLIR- bad earnings
AMKR- bad earnings
CGA- poor earnings
TEX- poor earnings
TQNT- bad earnings
PACR- bad earnings
PEP- poor earnings
TKLC- poor earnings
SHPGY- poor earnings
TX- 19.2 million share offering at 36
Earnings:
THURS FEB 10 BEFORE
ALXN BG BWA
CBOE ECA GRA
GT LF LH
LPX MNTA NBL
PEP PM S
SHPGY SNI SPR
TAP TDC TKLC
WWE
THURS FEB 10 AFTER
ATHR CEPH CGNX
CMG DVA EXPE
GDI GRM IM
KFT MNKD NILE
PNRA RAX RSG
TCO
Epiphany Trading, LLC
www.epiphanytrading.com
Erik R. Kolodny- Chief Markets Strategist
Brendan P. Byrne- President
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