Every so often, I write about a variation of a theme simply because what I am about to denote is one of the most important things to understand in trading. Yesterday, I wrote this on our chat room: “I'm in-between errands/deskwork but just want to make sure to reiterate what I've said several times today- the bulk of activity for the day volume-wise is likely over now. And reiterating what I say continuously- if you cannot get at least 20 cents in something easily and you have an immediate-term time horizon, particularly now, expect to lose net-net. If you're trading things like CSCO or MSFT or YHOO, expect to lose net-net. It's mind boggling to me how people can have good mornings on days like this yet lose because they try to scalp as the day progresses- despite me sayin non-stop to not scalp. I learned the hard way. I don't want anyone repeating my past mistakes. If something springs up (like NFLX maybe perhaps in time), sure...but to trade stuff like MSFT or CSCO or YHOO- in size- you are looking for trouble.” There are several tenets I want to expand upon. First, Wednesday was a very active day. Well, as I warned in Thursday’s blog post, trading activity slowed dramatically as Thursday progressed due to the parade and the basketball games. It was a different market. I guarantee there were traders out there who lost their otherwise good morning by trying to create something out of nothing. It is of utmost importance to let the action come to you- particularly on days like Thursday when it slows dramatically. I alluded to a NFLX trade in the above passage. That was the first trade (NFLX) I eventually did…in 1 ½ hours. Second, I consistently and repetitively note the utmost importance of trading things that can move rapidly if your time horizon is for the immediate-term. In a ploddy market, if you try to scalp things, you will lose time and again simply because there is slippage and the stocks don’t move fast. Finally, one must adapt to conditions by, say, not doing many of the same things done one day previous. Every day is different. This is a good thing. But the bottom line remains the same: maintain your basic trading tenets but adapt to the changing circumstances of the market on an intra-day basis with those rules.
Markets were strong throughout the world last night as news seeped in that the G-7 is staging an intervention on the yen. Combined with no major headlines coming out of Libya or Japan, the stage was set for some continued short covering. Tokyo rallied 2% with Hong Kong up fractionally. In Europe, the bourses are all up about 0.5%. Oil is up 1% again with gold up ½%. The dollar is up 2 full yen…but notably getting hit to a multi-month low versus the euro which is a bit out of the ordinary. Current Account (-$110 billion) is due out at 8:30 and the recession risk index (19%) at 9:45. Futures are about 150 Dow points off of their low as of this writing indicating an up 85 open. Today is a quadruple expiration day with many S&P 100 index changes on the close. Volume/activity will be very heavy in the first hour. It’ll rapidly slow down on a 70 degree Friday with more basketball on. But it’s folly to leave before the close as a dearth of participants may well set up quite an opportunity on the bell…there’s a 98% shot nothing will happen but a 2% shot that one’s month can be made due to all of the noise with the illiquidity. Expect a strong open with some likely give back as the morning progresses. My focus will be on selected earnings plays (NKE), big cap tech (AAPL), and relative weakness plays particularly off the open especially if in the news (NFLX).
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
INTU- decent earnings guidance
JVA- closed near a high after posting good earnings
FTK- closed near a high after posting good earnings
CVS- featured on “Fast Money” last night
GLNG- closed near a high
MNTX- closed near a high
FEIM- closed near a high
CNX- closed near a high
Bad-The following stocks have bad news and/or a weak technical pattern
NKE- bad earnings
AFFY- share offering
PLX- share offering
LDK- poor earnings
CCJ- closed near a low
DANG- closed near a low
AMZN- closed near a low
GES- closed near a low after posting awful earnings
SANM- closed near a low after posting awful earnings estimates
CPWM- poor earnings
PPO- share offering
HOGS- 5 million share offering at $14.10/share
Earnings:
None today
Epiphany Trading, LLC
www.epiphanytrading.com
Erik R. Kolodny- Chief Markets Strategist
Brendan P. Byrne- President
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