Whenever I write these pieces, I have a dual aim. The first is an altruistic one in trying to impart bits and pieces of knowledge about news events as well as providing insight into whatever success I have had through providing parcel snippets as to what has routinely worked for me as well as what has not worked for me over the years. The other aim is selfish. I learn as I type plus this writing exercise forces me to put into words matters related to the economy and trading in a very public venue. This demands searing focus. Usually, I am able to type a coherent place…not so sure this time as I am at a bit of a loss for how to say what I want to say, but let’s try. And another piece using WYNN as an example coincidentally enough! On Thursday afternoon, Wynn Resorts (WYNN) reported their earnings; the numbers were good with a huge beat of 91 cents per share versus 66 cents expected. The stock initially popped but slowly began coming in. With the stock in a range of up about 2 to about 4 after-hours, I shorted it with it up 1.90 on the after-hours session. It rapidly fell with me garnering 1.20 per share on the first half of my position in a few seconds and the rest for about 75 cents average in pieces. But then the stock began to fall anew and someone suggested that it was a short through unchanged (albeit with no consolidation…but this is not the point…maybe. I think. See. Told you it may become incoherent.). My response was “If I was still in the position, I’d be holding at least a fraction of my position but I would not enter into a new position.” I was up almost all night on Friday night letting that question settle in my mind. I still am not sure I have an answer as you can tell by my babbling. In any case, it’s the same exact thing- it’ll either keep going or it wouldn’t. What is the difference if I have a position with the aim of making money if I held it versus entering a new (exact same) position with the same aim? What is the psychological hang-up? All I can come up is that consolidation issue, i.e. in entering a new position, I’d be nervous that I could lose very fast since the stock was hurtling lower. Conversely, if I was in it, the mindset would be “well, I’ve taken a little off…let’s see how far this can go just in case it keeps on falling.” Thus, the psychology (well, my psychology) is that if already in the position, it’d be doing what I wanted yet if I wasn’t in it, I’d let fear trump greed. At first, I was annoyed with that answer but I am increasingly OK with it. It’s not exactly that it’s ‘house money’ per se if already in the position because, hey, it’s real money in your possession. But whereas I’ve attempted to make entering a trade as close to a science as I can, exiting a position is and likely always will be an art (for me). I let the market tell me where to exit a position as noted in Friday’s piece. I need a trigger with defined characteristics as noted on Thursday’s piece. Maybe it’s best to keep those two separate. So, I am not sure if that answers the question, but I think it goes back to the theme of discipline. See, if I’m right, I want to let my winners ride. However, when I seek to enter a position, I have certain characteristics that I desire. And those two innate mindsets directly conflict. My goal therefore as time progresses is to try to bridge those two mindsets- if it is even possible.
Markets in Asia were mixed overnight with Tokyo up 0.2% but Hong Kong down 1%. In Europe, prices are mixed as well with Paris up 0.2% but London down 0.2%. The dollar is stronger against the euro and the yen. Oil is up 1% with gold up a bit as well. Bonds are down slightly. There was a slew of economic data out this morning with retail sales coming in worse than expected, the Empire Index just under expectations, and export/import prices both indicating higher numbers than expected. Net Long-Term TIC flows are out at 9AM, Business Inventories (0.7%) at 10AM, and the NAHB Housing Market Index (16) at 10AM as well. Futures have been a bit weaker all morning. This particular day feels a bit different even with the Bernanke put seemingly at the market’s tailwinds. I am looking for the relatively weak tone to maintain itself throughout the day- nothing dramatic, but stocks aren’t acting as they have the last few mornings in terms of reacting to news. The focus will be on the many earnings plays out, the transports, the smallcaps with momentum from yesterday, and the refiners off of yesterday’s strength.
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
GMCR- closed near a high amid rumors of an impending partnership with SBUX
KV/A- closed near a high after placing a private placement of shares and boosted senior secured facility to $130 million
TSO, MRO, COP- closed near their highs
PAY- closed near a high after a boost in guidance by HYC
CLF- closed near a high
NYX- closed near a high on rumors of a hostile takeover by CME; NDAQ closed near a high as well
CTXS- closed near a high
NFLX- closed near a high after a brokerage upgrade
FCX- closed near a high
RIG- closed near a high
WBC- closed near a high
IPGP- closed near a high
XOM- closed near a high
LLNW- good earnings
MAR- decent earnings and announced plan to spin off timeshare business
THOR- share repurchase program now in place
PKT- closed near a high after partnering with FFIV
TPI- closed near a high after posting earnings
GSIG- closed near a high
BWLD- closed near a high
HEES- closed near a high after a positive mention at UBS
TNGN- closed near a high
NSIT- good earnings
MERC- decent earnings
DGIT- good earnings
NVMI- decent earnings
SF- decent earnings
SPPI- good earnings
MMC- decent earnings
Bad-The following stocks have bad news and/or a weak technical pattern
UCTT- bad earnings
A – poor earnings
DCT- share offering
CLI- share offering
FDX- lowered earnings guidance
AUTC- closed near a low
GFC- closed near a low
ANIK- the FDA failed to inspect the company’s facility which delays its plans to move its manufacturing equipment from another site
NLY- 75 million share offering
CIT- poor earnings
PMI- poor earnings
NFLX- cut at Morgan Stanley
SIRI- poor earnings
UTHR- poor earnings
HST- poor earnings
WLT- terrible earnings
Earnings:
TUES FEB 15 BEFORE
CIT CPLA CTL
FOSL HCP HST
MMC OMC PMI
Q SIRI UTHR
WPI
TUES FEB 15 AFTER
ADI CENX DELL
FRT GPRO MASI
MDRX NBR PAAS
ROVI TSLA VCLK
Epiphany Trading, LLC
www.epiphanytrading.com
Erik R. Kolodny- Chief Markets Strategist
Brendan P. Byrne- President
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