What a day. We had a massive rally due to positive commentary regarding the portfolio insurers. GOOG misses earnings after hours and ISRG soars.
My longshot personal theory is that BIDU will overtake GOOG in stock price some time this year. Chances are slim but you learn eventually that anything can and will happen in the market. The catalyst might be BIDU's earnings report coming on February 13th. Remember, marketcap wise, BIDU is a $9.5 billion dollar company. GOOG is $170 billion - approximately 18 times as large. If BIDU can prove that it continues to grow at a much faster clip than GOOG, even at $500 a share, BIDU is still valued at 1/10th of GOOG's market cap. Understandably, revenue estimates at BIDU are about $500m for 2008, while GOOG's revenue is almost $17 BILLION, almost 34 times a large, so definitely there is some catching up to do and valuation is definitely the biggest risk factor here. However, BIDU's is estimated to grow at twice the growth rate of GOOG, and may still be accelerating, while GOOG's slope may finally be coming down a bit, as the US becomes saturated. China's internet user base is still in its fledgling stages as a proportion of population, and BIDU's search capabilities are still preferred by the chinese as BIDU continues to gain marketshare. This will continue to be an extremely interesting story to watch.
Thursday, January 31, 2008
MBI ABK and Update
Seems like they are the heartbeat of the market right now.
I couldn't resist picking up some ICE this morning at 132.42.
UPDATE
Out ICE 138.01 +$5.59
Looks like we're having another "delayed" FOMC reaction haha. We'll see if it can hold. Continue to hear positive comments on MBI as well.
I couldn't resist picking up some ICE this morning at 132.42.
UPDATE
Out ICE 138.01 +$5.59
Looks like we're having another "delayed" FOMC reaction haha. We'll see if it can hold. Continue to hear positive comments on MBI as well.
Update
Out MA 205 +$8. Amazing - will probably move higher today but had to take the profit.
Still Holding GOOG, BIDU, FMCN - will most likely exit FMCN and BIDU early.
UPDATE
Out BIDU 350.51 -$-1.61
Out GOOG 338.25 -$.57
Out FMCN 44.13 -$.22
The MA gains well surpassed the losses, must be nimble on a day like this. We also have the PMI report due out.
Still Holding GOOG, BIDU, FMCN - will most likely exit FMCN and BIDU early.
UPDATE
Out BIDU 350.51 -$-1.61
Out GOOG 338.25 -$.57
Out FMCN 44.13 -$.22
The MA gains well surpassed the losses, must be nimble on a day like this. We also have the PMI report due out.
Thursday, January 31st Premarket
Ouch on the initial claims - 375k vs 319k. Dow futures plunge 100 points on the news. Picked up some MA $197 on the dip. MA blew away earnings as usual. Another volatile day coming up.
Also, MBIA announces $2.3B in write downs and worse than expected loss.
Also, MBIA announces $2.3B in write downs and worse than expected loss.
Wednesday, January 30, 2008
Wednesday January 30th, Evening Update
Should've held the AMZN puts, but I make it a rule not to be net long or short before an earnings report. I picked up some GOOG at $538.82 average after hours due to the AMZN mess. I also picked up some BIDU at $252.12. Was able to grab some FMCN at 44.35. All are going to be overnight scalp trades for tomorrow morning. Near term I'm bearish on all of them actually.
We have GOOG earnings tomorrow night. Also ISRG, which has recently suffered a fairly massive selloff. I like the company due to its proprietary technology, but it seems the market is taking anything with a high valuation to the woodshed. AMZN had decent earnings and guidance, but still sold off.
We have some economic data tomorrow morning so watch out for that. Otherwise, I'm curious as to whether we're going to see another delayed FOMC reaction like we've been experiencing (fall on the rate cut first, then rally). I must say that even though the 50 bp cut was largely expected by the market, I'm still actually glad to see it happen!
We have GOOG earnings tomorrow night. Also ISRG, which has recently suffered a fairly massive selloff. I like the company due to its proprietary technology, but it seems the market is taking anything with a high valuation to the woodshed. AMZN had decent earnings and guidance, but still sold off.
We have some economic data tomorrow morning so watch out for that. Otherwise, I'm curious as to whether we're going to see another delayed FOMC reaction like we've been experiencing (fall on the rate cut first, then rally). I must say that even though the 50 bp cut was largely expected by the market, I'm still actually glad to see it happen!
Was so busy trading BIDU after FED
Did not initiate the AMZN straddle. I had some of the $70 puts but sold them at the closing bell for a tiny profit.
Wednesday January 30th, Morning
The GDP report had a limited effect on futures. The market is mainly waiting for the Fed meeting and I expect to see a 50 bp rate cut. How the market reacts is still going to be interesting, as this is largely expected.
Tonight I'm looking to play the AMZN earnings report by using options to obtain a Straddle position. With most Fed meetings, we get a whiplash effect after the announcement is made, so hopefully I'll be able to pick up some cheap puts when the market rallies, and some cheap calls when the market drops. As always, depends if the conditions are correct - if I don't see any opportunity to establish both positions I won't be participating at all.
Tonight I'm looking to play the AMZN earnings report by using options to obtain a Straddle position. With most Fed meetings, we get a whiplash effect after the announcement is made, so hopefully I'll be able to pick up some cheap puts when the market rallies, and some cheap calls when the market drops. As always, depends if the conditions are correct - if I don't see any opportunity to establish both positions I won't be participating at all.
Tuesday, January 29, 2008
Scoring Big is BAD
I'm sure a lot of traders would respond to that statement with a "what are you nuts??". I will repeat - going for the big win and scoring massive profits is NOT good for trading. But let me clarify that.
I can tell you for a fact that many "traders" score big one day gains, by taking oversized positions outside of their normal trading routine. I've experienced that a few times myself. But in the early days of my trading, I would generally find a way to end up trading away practically the entire profit within a short period of time. The reason for this is that generally speaking - for novice traders, a big score only creates a false sense of confidence, often leading them to scale up their trades and lose all sight of risk management in subsequent positions. I'm sure many of you can completely identify with what I'm saying. In fact, I would even go so far as to say that any trader that in the course of a normal day ends up making an enormous profit 5-10x beyond their "average" daily gain is NOT managing risk well and will most likely blow up. I encourage traders to actually be concerned whenever they see such a large (yes, even positive) fluctuation in their portfolio.
As I continue to reiterate time and time again, trading is not a game of playing the lottery. CONSISTENCY and the ability to crank out an expected gain with each trade. If you find that your trades constantly take your portfolio to unexpected levels (up or down), you're probably taking positions too large for your trading tolerance.
Make your trading boring. The best traders will tell you that trading is a boring activity. They see setups come and go all day long and will even pass them up on a regular basis. The only way to make trading boring is to take positions of a small enough size. This is the first step. As I read in a book by Jesse Livermore, if you're having trouble sleeping due to the size of your positions, "sell to the sleeping point". That point is actually quite distinct for each person depending on their individual capitalization, etc. Make yourself comfortable in the market. If you're in the market to "have fun", be prepared to lose.
Jesse Livermore was a great trader back in the early 1900's. He made $100 million in 1929 by shorting the market during the crash. It's hard to imagine how much that would have been worth in today's dollars. However, within 20 years, his wild trading led him to lose the entire amount. His life ended when he shot himself. He obviously did not follow his own advice. If you ever get the chance to read his book "Reminiscences of a Stock Operator", you will notice that his method of building astronomical positions placed him in extremely precarious situations. By the way, if you'd like to read his book, do a search for "Jesse Livermore" at http://www.wikipedia.org/. I think the book is free. It's an intriguing read, but I beg to differ when it comes to his trading style. However, the book is filled with amazing insights into the world of large traders.
"Big" gains and "big" losses are one in the same. They have no place in the portfolio of an experienced trader. There are a number of people who have recently blown up their portfolio with the hiccup we experienced last week. You often hear of a trader suffering a big loss and then subsequently go "all or nothing" in an attempt to recoup their losses. And we know how that can turn out. Large positions tend to give rise to larger positions and so on. When you score "big", ask yourself - how did this happen? Were you trading within your limits? Often you'll find the answer to the question is no.
As a note of encouragement to anyone who experienced major losses last week: Even if you suffered a major haircut in your portfolio, you will be surprised just how quickly small, consistent gains can add up to big gains in a very short period of time. Make your trading boring - it's a good thing. In fact, it's probably the only way to stay around. Unfortunately many traders do not survive this part of the learning process.
I can tell you for a fact that many "traders" score big one day gains, by taking oversized positions outside of their normal trading routine. I've experienced that a few times myself. But in the early days of my trading, I would generally find a way to end up trading away practically the entire profit within a short period of time. The reason for this is that generally speaking - for novice traders, a big score only creates a false sense of confidence, often leading them to scale up their trades and lose all sight of risk management in subsequent positions. I'm sure many of you can completely identify with what I'm saying. In fact, I would even go so far as to say that any trader that in the course of a normal day ends up making an enormous profit 5-10x beyond their "average" daily gain is NOT managing risk well and will most likely blow up. I encourage traders to actually be concerned whenever they see such a large (yes, even positive) fluctuation in their portfolio.
As I continue to reiterate time and time again, trading is not a game of playing the lottery. CONSISTENCY and the ability to crank out an expected gain with each trade. If you find that your trades constantly take your portfolio to unexpected levels (up or down), you're probably taking positions too large for your trading tolerance.
Make your trading boring. The best traders will tell you that trading is a boring activity. They see setups come and go all day long and will even pass them up on a regular basis. The only way to make trading boring is to take positions of a small enough size. This is the first step. As I read in a book by Jesse Livermore, if you're having trouble sleeping due to the size of your positions, "sell to the sleeping point". That point is actually quite distinct for each person depending on their individual capitalization, etc. Make yourself comfortable in the market. If you're in the market to "have fun", be prepared to lose.
Jesse Livermore was a great trader back in the early 1900's. He made $100 million in 1929 by shorting the market during the crash. It's hard to imagine how much that would have been worth in today's dollars. However, within 20 years, his wild trading led him to lose the entire amount. His life ended when he shot himself. He obviously did not follow his own advice. If you ever get the chance to read his book "Reminiscences of a Stock Operator", you will notice that his method of building astronomical positions placed him in extremely precarious situations. By the way, if you'd like to read his book, do a search for "Jesse Livermore" at http://www.wikipedia.org/. I think the book is free. It's an intriguing read, but I beg to differ when it comes to his trading style. However, the book is filled with amazing insights into the world of large traders.
"Big" gains and "big" losses are one in the same. They have no place in the portfolio of an experienced trader. There are a number of people who have recently blown up their portfolio with the hiccup we experienced last week. You often hear of a trader suffering a big loss and then subsequently go "all or nothing" in an attempt to recoup their losses. And we know how that can turn out. Large positions tend to give rise to larger positions and so on. When you score "big", ask yourself - how did this happen? Were you trading within your limits? Often you'll find the answer to the question is no.
As a note of encouragement to anyone who experienced major losses last week: Even if you suffered a major haircut in your portfolio, you will be surprised just how quickly small, consistent gains can add up to big gains in a very short period of time. Make your trading boring - it's a good thing. In fact, it's probably the only way to stay around. Unfortunately many traders do not survive this part of the learning process.
Cautiously bought GOOG at 541.25 After YHOO Earnings
I didn't see anything in the YHOO press release regarding a slowdown in the internet used as an excuse for poor performance. But the conference call is still upcoming so I'm looking for a scalp trade again.
YHOO Earnings tonight GDP Tomorrow
So all traders who are holding BIDU, GOOG be aware. I have a feeling YHOO will trade up tonight after earnings, but if it drops for any reason, watch the announcement. If they announce any type of apparent slowdown in internet usage due to the "economy", the internet sector could get rocked. I'm sure today's selling in GOOG and BIDU are reflecting some risk reduction ahead of YHOO's earnings.
Also GDP is tomorrow - 8:30 am ET sharp.
Also GDP is tomorrow - 8:30 am ET sharp.
ICE Sold at 139.95 and Comments on Buyouts
+$1.30
Looks like we have a seller keeping us around 140. Once the selling is done, it could move higher, however, I'm not going to go up against someone with more money than me.
As bullish as I may be about a buyout of ICE, it doesn't mean I become a holder of the stock until the price becomes favorable. Experienced traders know that often times a stock can move much lower during the "rumor" period, and even with a buyout announcement, if you got in too early, the final offer price could be lower than what you initially paid. NMX is the perfect example. Many buyers were sucked in between 130-150 the entire "rumor" period over the last several months. The buyout value announced yesterday is $119, basically lower than anyone who bought on the hype, sealing in the losses.
Looks like we have a seller keeping us around 140. Once the selling is done, it could move higher, however, I'm not going to go up against someone with more money than me.
As bullish as I may be about a buyout of ICE, it doesn't mean I become a holder of the stock until the price becomes favorable. Experienced traders know that often times a stock can move much lower during the "rumor" period, and even with a buyout announcement, if you got in too early, the final offer price could be lower than what you initially paid. NMX is the perfect example. Many buyers were sucked in between 130-150 the entire "rumor" period over the last several months. The buyout value announced yesterday is $119, basically lower than anyone who bought on the hype, sealing in the losses.
Monday, January 28, 2008
Low Priced, Dollar and Penny Stocks
As you may have noticed, most of my trading involves higher priced stocks - many are over $100/share and I have no qualms with regularly trading stocks such as BIDU/GOOG, which are 200 and 500 dollar stocks. I am also a buy-side investor (I prefer going long rather than short selling).
When I started trading years ago, I learned many a lesson by attempting to trade penny stocks, dollar stocks or other names which were around the $5 level. Now I'm not saying that you can't make money off these names, but there are some intrinsic qualities of these names that make them surprisingly dangerous, regardless of their low price.
1. Low Priced stocks attract poorly capitalized traders and often lure them into accumulating large positions. Basically the crowd consists of a fairly large number of "lottery ticket" buyers, hoping to double or triple or quadruple their money in short order. "Its only 2 dollars! How much could I possibly lose?" or "It's only 2 dollars, if it only goes up 2 dollars I've doubled my money!". So when the novice trader begins by buying 500 shares of a 2 dollar stock for $1000, they quickly double their bet when it falls to $1.90. When it rises back to 2 dollars, they suddenly feel that their position was in fact too small, and they buy another 1000 shares. Before you know it, you have a position of 5000 shares of a $2 stock, and every dime loses you $500.
1b. In fact, low priced stocks which have come down from higher levels are generally held by "bagholders" who have accumulated the stock with each downward move, further exacerbating the fact that it is a crowd of unhappy investors.
2. Low priced stocks are in fact much more volatile than high priced stocks. Consider this: when a $2 stock drops to $1.90, it has in fact dropped 5%. The seemingly "small" drop of 10 cents, can wipe out 5% of any investment within 1 day. Comparatively, it is the equivalent of a $200 stock dropping to $190. And to imagine that they drop and rise by 10 cents or more, several times a day, and within a matter of minutes! Combined with the fact that many traders are holding large accumulated positions and it's a recipe for disaster.
3. Low Priced stocks are easily manipulated. It doesn't take much capital to actually account for the entire day's volume in a dollar stock. Many $2 stocks have total daily volumes averaging 1 million shares. Which means that any boiler room or manipulative fund with $2 million in capital can effectively control that day's share volume.
4. Very few dollar stocks ever break out of their range and truly demonstrate "lottery ticket"-like gains. One in a thousand? Scoring a 10 bagger is not the goal of trading. You simply cannot rely upon that for your living. What about the other 1000 stocks that never go anywhere, and in fact disappear into oblivion? Many of these names end up being delisted and or end up in bankruptcy.
5. Low Priced stocks are low for a reason. They are simply unloved and should essentially be viewed that way. If we have been in a bull market for the last 6 years and your favorite stock is still at $3.50 .... need I explain further? Basically if we've been in a bull market for 6 years, a strong stock better be expensive by now. We haven't seen many stock splits in a while either.
So what do we do with low priced stocks?
1. If you want to participate in the "lottery" - View them as long term options contracts. ie. Biotech companies. Only invest what you don't need, don't consider them as trades.
2. View every large move with suspicion
3. They are better treated as short selling targets
4. simply avoid them?
Once again, as a disclaimer, I'm sure there are great traders who only trade these stocks and they do well. I would venture to say that these traders are extremely skilled and experienced. I would also bet that they are most likely NOT purely long biased.
Instead, I urge traders to move decimals when viewing stock prices. When GOOG moves from $565 to $550, (During times of volatility), it essentially is the same as a $5.65 stock moving to $5.50 (which happens in a matter of minutes or hours). Depending on how you look at it, GOOG is the safer trade! Ie. Google at $550 can be viewed as a $5.50 stock, if it makes you feel better, you simply adjust the number of shares you would purchase. The difference is that GOOG is actually a valued company in the eyes of shareholders, and has much more favorable ratios when compared to the "beloved" dollar stocks. High priced stocks are generally owned by a happy and content crowd - as a majority of holders are most likely profitable during the course of the stock's rise. They actually hope for dips as opportunities to accumulate more. And they won't disappear into oblivion any time soon.
When I started trading years ago, I learned many a lesson by attempting to trade penny stocks, dollar stocks or other names which were around the $5 level. Now I'm not saying that you can't make money off these names, but there are some intrinsic qualities of these names that make them surprisingly dangerous, regardless of their low price.
1. Low Priced stocks attract poorly capitalized traders and often lure them into accumulating large positions. Basically the crowd consists of a fairly large number of "lottery ticket" buyers, hoping to double or triple or quadruple their money in short order. "Its only 2 dollars! How much could I possibly lose?" or "It's only 2 dollars, if it only goes up 2 dollars I've doubled my money!". So when the novice trader begins by buying 500 shares of a 2 dollar stock for $1000, they quickly double their bet when it falls to $1.90. When it rises back to 2 dollars, they suddenly feel that their position was in fact too small, and they buy another 1000 shares. Before you know it, you have a position of 5000 shares of a $2 stock, and every dime loses you $500.
1b. In fact, low priced stocks which have come down from higher levels are generally held by "bagholders" who have accumulated the stock with each downward move, further exacerbating the fact that it is a crowd of unhappy investors.
2. Low priced stocks are in fact much more volatile than high priced stocks. Consider this: when a $2 stock drops to $1.90, it has in fact dropped 5%. The seemingly "small" drop of 10 cents, can wipe out 5% of any investment within 1 day. Comparatively, it is the equivalent of a $200 stock dropping to $190. And to imagine that they drop and rise by 10 cents or more, several times a day, and within a matter of minutes! Combined with the fact that many traders are holding large accumulated positions and it's a recipe for disaster.
3. Low Priced stocks are easily manipulated. It doesn't take much capital to actually account for the entire day's volume in a dollar stock. Many $2 stocks have total daily volumes averaging 1 million shares. Which means that any boiler room or manipulative fund with $2 million in capital can effectively control that day's share volume.
4. Very few dollar stocks ever break out of their range and truly demonstrate "lottery ticket"-like gains. One in a thousand? Scoring a 10 bagger is not the goal of trading. You simply cannot rely upon that for your living. What about the other 1000 stocks that never go anywhere, and in fact disappear into oblivion? Many of these names end up being delisted and or end up in bankruptcy.
5. Low Priced stocks are low for a reason. They are simply unloved and should essentially be viewed that way. If we have been in a bull market for the last 6 years and your favorite stock is still at $3.50 .... need I explain further? Basically if we've been in a bull market for 6 years, a strong stock better be expensive by now. We haven't seen many stock splits in a while either.
So what do we do with low priced stocks?
1. If you want to participate in the "lottery" - View them as long term options contracts. ie. Biotech companies. Only invest what you don't need, don't consider them as trades.
2. View every large move with suspicion
3. They are better treated as short selling targets
4. simply avoid them?
Once again, as a disclaimer, I'm sure there are great traders who only trade these stocks and they do well. I would venture to say that these traders are extremely skilled and experienced. I would also bet that they are most likely NOT purely long biased.
Instead, I urge traders to move decimals when viewing stock prices. When GOOG moves from $565 to $550, (During times of volatility), it essentially is the same as a $5.65 stock moving to $5.50 (which happens in a matter of minutes or hours). Depending on how you look at it, GOOG is the safer trade! Ie. Google at $550 can be viewed as a $5.50 stock, if it makes you feel better, you simply adjust the number of shares you would purchase. The difference is that GOOG is actually a valued company in the eyes of shareholders, and has much more favorable ratios when compared to the "beloved" dollar stocks. High priced stocks are generally owned by a happy and content crowd - as a majority of holders are most likely profitable during the course of the stock's rise. They actually hope for dips as opportunities to accumulate more. And they won't disappear into oblivion any time soon.
End of Day Trade Update
Ok, closed out FMCN at 48.73 for a +$.64
Closed out AAPL at 129.45 for +$.65
Closed out ICE 140.89 - lost 1/2 position to 136.2 essentially for -$2.34
Due to position sizing, my gains in late day trading in AAPL and FMCN made up for my loss in ICE. Decided not to re-enter ICE at end of day. Cash is king in this environment.
Overall quite happy with today's performance. Late day surge in the markets definitely helped. We'll see how VMW's earnings are tonight. FYI i'm a bear on VMW. We also have SNDK coming out tonight.
Closed out AAPL at 129.45 for +$.65
Closed out ICE 140.89 - lost 1/2 position to 136.2 essentially for -$2.34
Due to position sizing, my gains in late day trading in AAPL and FMCN made up for my loss in ICE. Decided not to re-enter ICE at end of day. Cash is king in this environment.
Overall quite happy with today's performance. Late day surge in the markets definitely helped. We'll see how VMW's earnings are tonight. FYI i'm a bear on VMW. We also have SNDK coming out tonight.
ICE update
out 1/2 position at 136.2, re-enter at end of day
UPDATE
as soon as I sold my 1/2 position, ICE starts moving back up and is now at 137.50. Which is exactly why I suggest not going "all in" or "all out", holding a 1/2 position has kept me in play, while decreasing my overall exposure. I still intend to re-enter the full position at the close of trading.
UPDATE #2
ICE is now back at 140.35. Glad i'm still holding a 1/2 position. Picked up some AAPL shares on the dip at 128.80 as well. Still holding FMCN from 48.09. I might liquidate these position at the close actually, as they are doing fairly well with the overall market strength.
UPDATE
as soon as I sold my 1/2 position, ICE starts moving back up and is now at 137.50. Which is exactly why I suggest not going "all in" or "all out", holding a 1/2 position has kept me in play, while decreasing my overall exposure. I still intend to re-enter the full position at the close of trading.
UPDATE #2
ICE is now back at 140.35. Glad i'm still holding a 1/2 position. Picked up some AAPL shares on the dip at 128.80 as well. Still holding FMCN from 48.09. I might liquidate these position at the close actually, as they are doing fairly well with the overall market strength.
ICE, CME and NMX
This morning CME confirmed talks to buyout NMX at around $119/share. ICE gapped up premarket in sympathy up to 154 or so. It's currently trading at $140. There is fear that:
1. since CME is working with NMX, there won't be an acquisition of ICE by CME.
2. CME and NMX poses a competitive threat to ICE.
My theory continues that ICE will be acquired by another player sometime this year (once we get some credit stability). NYX or even a foreign exchange could be a likely acquirer. ICE is still the better exchange, in my opinion. Don't trust everything you see. I've gone long a few shares of ICE at 140.89, but there is a lot of risk in this trade, as obviously someone wants ICE lower it seems.
In addition, an additional risk is to note that the buyout terms are:
$36 in cash, and .1323 shares of CME/share of NMX
The market may also be reacting negatively due to the share portion of the buyout. Most shareholders obviously want cash for the transaction, but in this credit environment, this is going to be rare/nonexistent. The realization of this truth is also dampening ICE, as I suspect a good portion of the stock's valuation was based upon investors betting on a majority cash buyout.
In other words, be careful.
1. since CME is working with NMX, there won't be an acquisition of ICE by CME.
2. CME and NMX poses a competitive threat to ICE.
My theory continues that ICE will be acquired by another player sometime this year (once we get some credit stability). NYX or even a foreign exchange could be a likely acquirer. ICE is still the better exchange, in my opinion. Don't trust everything you see. I've gone long a few shares of ICE at 140.89, but there is a lot of risk in this trade, as obviously someone wants ICE lower it seems.
In addition, an additional risk is to note that the buyout terms are:
$36 in cash, and .1323 shares of CME/share of NMX
The market may also be reacting negatively due to the share portion of the buyout. Most shareholders obviously want cash for the transaction, but in this credit environment, this is going to be rare/nonexistent. The realization of this truth is also dampening ICE, as I suspect a good portion of the stock's valuation was based upon investors betting on a majority cash buyout.
In other words, be careful.
Comments on First Hour Volatility
I think it is important for all traders to keep in mind that the first hour is always quite volatile. The reason for this volatility includes repositioning by many traders from overnight as well as digestion of economic and corporate premarket news. Mini "panics" often occur as well as the volatility tends to shake out unprepared traders. In addition, since the first hour tends to "set the tone" for the rest of the day, it is also used as a tool for manipulation by institutional traders. For example "pump and dump" and "dump and pump" schemes generally occur during this hour (for purposes of accumulation or distribution). Many traders will simply avoid trading at this time due to the lack of visibility and trending. Although great opportunities can be had, I generally recommend avoiding the fray, and only trade when there is a good amount of evidence to support your position.
Monday, January 28th, Morning Update
Even with overseas markets posting large losses, we've managed to hold up. One thing to always remember is that the US usually, and I mean usually, leads the rest of the world's markets. We've only had a few instances where overseas markets had a large impact on US indexes, including the large China drop last year, and last weekend. In addition, US markets are usually the most stable in comparison to the rest of the world. Take for example the Nikkei 225 - from high to low it has gone from 18000+ and has gone as low as 12,500 recently, a fall of about 30%. Whereas for the Dow, we've gone from 14,200 to around 11,600, about 18%.
This morning, I placed a few trades, including taking a large position in AAPL at 127.61, and selling at 131.63, for a gain of +$4.02. I also went long BIDU a small position at 287.23, sold at 293.34, + $6.11.
I am holding a long positon in FMCN currently at 48.09.
This morning, I placed a few trades, including taking a large position in AAPL at 127.61, and selling at 131.63, for a gain of +$4.02. I also went long BIDU a small position at 287.23, sold at 293.34, + $6.11.
I am holding a long positon in FMCN currently at 48.09.
Friday, January 25, 2008
Some thoughts on the "Stimulus Package"
I know that I've openly bashed the government stimulus package - which is to give away $150 billion to taxpayers. I was thinking about it again today and thought I'd give it a positive light as well. I would say I'm neutral now. Lets think about what this package means:
When every taxpayer/couple receives a check for $600/$1200 (and those with children, even more), what are they going to do with it? Spend it immediately? Pay back some debt? Keep it in the bank? The answer is - "all of the above". What does this mean for the economy? Does it mean that consumer spending will suddenly start uptrending again? I don't think so. But there is a caveat - What the government is doing is practically giving away $150 billion back to the nation's banking system. All within the next couple of months. Because when you give money away, where does it go? Under the mattress? (maybe) - but most likely the bank account. In addition, given that most of our population is in debt (credit cards, etc), a good portion of the stimulus package will go towards paying down debt, which basically means what? Once again the money returns to the lenders - who are also called the Banks. Thirdly, if the consumer ends up spending this rebate on goods from your neighborhood store, where does the neighborhood store end up putting the money? I think I've made my point. And the government is doing this without calling it a "bailout". The only question is, how significant is $150 billion of liquidity? I'm not sure - maybe someone who has done a quantitative assessment of our banking industry can answer that. But if liquidity for the financial sector is the issue here, I would say this at least tries to address the issue.
So while on the surface I think the "stimulus package" sounds fairly foolish - maybe there is something to it.
When every taxpayer/couple receives a check for $600/$1200 (and those with children, even more), what are they going to do with it? Spend it immediately? Pay back some debt? Keep it in the bank? The answer is - "all of the above". What does this mean for the economy? Does it mean that consumer spending will suddenly start uptrending again? I don't think so. But there is a caveat - What the government is doing is practically giving away $150 billion back to the nation's banking system. All within the next couple of months. Because when you give money away, where does it go? Under the mattress? (maybe) - but most likely the bank account. In addition, given that most of our population is in debt (credit cards, etc), a good portion of the stimulus package will go towards paying down debt, which basically means what? Once again the money returns to the lenders - who are also called the Banks. Thirdly, if the consumer ends up spending this rebate on goods from your neighborhood store, where does the neighborhood store end up putting the money? I think I've made my point. And the government is doing this without calling it a "bailout". The only question is, how significant is $150 billion of liquidity? I'm not sure - maybe someone who has done a quantitative assessment of our banking industry can answer that. But if liquidity for the financial sector is the issue here, I would say this at least tries to address the issue.
So while on the surface I think the "stimulus package" sounds fairly foolish - maybe there is something to it.
Midday Update
It almost seems to easy for the market to give us a textbook pullback on higher volume... but sometimes the expected DOES happen! Looks like they are going to want to post a loss for the day. Things are getting quite interesting going into the final hour. Unfortunately I have a lunch meeting (i'm on the west coast) and won't be able to participate much in this afternoon's action.
Friday, January 25th, Market Update
We had a nice fade of the gap up this morning from about +100 on the dow, went as low as -60, 160 point swing. We're currently back in the mid range. My expectations are that the market closes higher again today. A lot of traders are probably rushing the short selling a bit here, and they will continue to buoy the market. I think the market obviously needs to retrace a bit of the 800 point rally low to high we've seen, but don't think today will be the day quite yet. Patience is key. Still a trader's market though. Placed a couple trades this morning for some quick profits, all cash again. I'll be back in the last hour.
Thursday, January 24, 2008
Thursday January 24th After Market
The markets have now worked their way back to a trendline. In addition we have decent earnings out from MSFT after hours. I sold my CLWR holdings at 12.16 from my purchase at 11.15 for +$1.01. I also ended up going long MA at 187.07 and sold at 188.71 for +$1.64. Not a bad day today going with the trend. After hours I also scalped a short on BIDU at 315 and covered at 311.6 for a +$3.40 after the MSFT spike occurred. BIDU has now rallied about 80 points off the low around 235!
All cash again and ready for another day.
I'm liking what we see here, but this rally needs to retest some previous levels.
All cash again and ready for another day.
I'm liking what we see here, but this rally needs to retest some previous levels.
Some Tips on Position Size and Watch lists
Position Size
A lot of traders are probably blowing up their accounts right now by not adjusting to the
volatility correctly. When I say adjusting to volatility, the key is to decrease position size. When stocks start to swing 20-30 dollars in one day, even 100 shares can be quite damaging to performance (depending on your level of risk). A trader who continues to trade with their normal position size on each trade (ie, 1000-2000 shares) will probably be experiencing gargantuan swings in portfolio value, leading to emotional trading and possibly major disappointment. I've been initiating positions at approximately 1/5th my usual size. In addition, it is a very good idea to never take a full position from the outset. I recommend splitting up your buys/sells into 3-4 entries. Even if you complete all your trades within 10 minutes, it is still a good practice. In fact, it's good to buy and support your buy by placing another order with a bid slightly below your purchase price. For example, if I buy 100 shares of BIDU at 281.5, I'll follow it up with another 100 share buy order at 281, and so on (this is assuming my final position amount is 400 shares for example). Even if the stock starts moving higher, you can always continue to stay on the bid, thereby supporting your position, and conserving your powder. If you're on the right side of the trade, it should go a lot further than you imagine. And I can't stress how important it is to respect your stop orders during times like these.
Watch Lists
I also think it's a good idea to organize your stock watch lists very carefully. Always keep stocks divided by sectors (ie Solar, Materials, Retail, Financials, etc). In addition, have your watchlist clearly defined on a daily basis as to which sectors/stocks you are bullish on (want to buy), and which you are bearish (want to short). I would also encourage the creation of a "buy" list and a "sell" list on a daily basis. Organization is absolutely key in being able to have a clear view of how the market is behaving every day.
A lot of traders are probably blowing up their accounts right now by not adjusting to the
volatility correctly. When I say adjusting to volatility, the key is to decrease position size. When stocks start to swing 20-30 dollars in one day, even 100 shares can be quite damaging to performance (depending on your level of risk). A trader who continues to trade with their normal position size on each trade (ie, 1000-2000 shares) will probably be experiencing gargantuan swings in portfolio value, leading to emotional trading and possibly major disappointment. I've been initiating positions at approximately 1/5th my usual size. In addition, it is a very good idea to never take a full position from the outset. I recommend splitting up your buys/sells into 3-4 entries. Even if you complete all your trades within 10 minutes, it is still a good practice. In fact, it's good to buy and support your buy by placing another order with a bid slightly below your purchase price. For example, if I buy 100 shares of BIDU at 281.5, I'll follow it up with another 100 share buy order at 281, and so on (this is assuming my final position amount is 400 shares for example). Even if the stock starts moving higher, you can always continue to stay on the bid, thereby supporting your position, and conserving your powder. If you're on the right side of the trade, it should go a lot further than you imagine. And I can't stress how important it is to respect your stop orders during times like these.
Watch Lists
I also think it's a good idea to organize your stock watch lists very carefully. Always keep stocks divided by sectors (ie Solar, Materials, Retail, Financials, etc). In addition, have your watchlist clearly defined on a daily basis as to which sectors/stocks you are bullish on (want to buy), and which you are bearish (want to short). I would also encourage the creation of a "buy" list and a "sell" list on a daily basis. Organization is absolutely key in being able to have a clear view of how the market is behaving every day.
Thursday January 24th, Morning Update
Okay here's the deal. Now that interest rates have fallen - companies which were rumored for buyouts are now in play. For example - ICE, CLWR. In addition, this is very bullish for Blackstone (BX), as they might be able to pull a few deals through that have been suffering. I can't reiterate how important the drop in retail interest rates is to the economy and the market. Not saying it's all clear from here though. We are extremely oversold and need to hit some moving average lines.
I had a surprisingly great morning
FSLR in 157.55 out 169.20 for approx$12/share profit
WFR in 67.82 out 71.8 for $4/share profit
ICE i'm in at 145.16
FMCN i'm in at 48.36
CLWR i'm in at 11.15
Update
ICE Out at 147.53 +2.37
FMCN out at 49.45 +1.09
Holding CLWR
I was blown away that FSLR went as low as 149 after I sold at 169 - classic pump and dump scheme. SPWR guided revenues lower than expected... the shorts were waiting for this day. Still bullish on solar though - we'll see how they fare today. SPWR's forward PE is around 30 now - for a sector that's growing at 100% yoy, seems fairly undervalued. Also, as the cost of polysilicon begins to stabilize/drop, their margins should greatly improve. We have earnings from WFR tonight.
I had a surprisingly great morning
FSLR in 157.55 out 169.20 for approx$12/share profit
WFR in 67.82 out 71.8 for $4/share profit
ICE i'm in at 145.16
FMCN i'm in at 48.36
CLWR i'm in at 11.15
Update
ICE Out at 147.53 +2.37
FMCN out at 49.45 +1.09
Holding CLWR
I was blown away that FSLR went as low as 149 after I sold at 169 - classic pump and dump scheme. SPWR guided revenues lower than expected... the shorts were waiting for this day. Still bullish on solar though - we'll see how they fare today. SPWR's forward PE is around 30 now - for a sector that's growing at 100% yoy, seems fairly undervalued. Also, as the cost of polysilicon begins to stabilize/drop, their margins should greatly improve. We have earnings from WFR tonight.
Wednesday, January 23, 2008
January 23rd, After Market - What a day!
What a day! Unfortunately or not, I was busy with meetings at work and was not able to participate in much of the action at all. The nasdaq 100 names looked like they were taking some serious damage - including GOOG which remains quite beaten down even on the +300 point dow close. For a while there it seemed like the market was about to completely go under.
I glanced at newswires and noticed that mortgage rates have finally come down to record levels due to the rate cut, and I'm quite surprised and optimistic. I'm not sure if that was the actual reason for our 600 point rally off the lows, but my personal opinion is that if mortgage rates are finally down (5.31%?), it will help a lot of things. If homeowners can finally refinance their homes and stop the foreclosure rate, the credit quality of assets held by banks can finally stabilize. That in turn will seriously help alleviate the liquidity crisis we've been experiencing. Does that mean I'm completely bullish on the equity market? Not sure yet, but this was a pretty convincing day that we may have put in a near term bottom. In addition, the market seemed to recover without any real other news - correct me if i'm wrong.
I was able to pull off a nice trade on BIDU and FMCN into the close, which I've liquidated by now. 100% cash and ready for tomorrow. The market will always be here.
I glanced at newswires and noticed that mortgage rates have finally come down to record levels due to the rate cut, and I'm quite surprised and optimistic. I'm not sure if that was the actual reason for our 600 point rally off the lows, but my personal opinion is that if mortgage rates are finally down (5.31%?), it will help a lot of things. If homeowners can finally refinance their homes and stop the foreclosure rate, the credit quality of assets held by banks can finally stabilize. That in turn will seriously help alleviate the liquidity crisis we've been experiencing. Does that mean I'm completely bullish on the equity market? Not sure yet, but this was a pretty convincing day that we may have put in a near term bottom. In addition, the market seemed to recover without any real other news - correct me if i'm wrong.
I was able to pull off a nice trade on BIDU and FMCN into the close, which I've liquidated by now. 100% cash and ready for tomorrow. The market will always be here.
Wednesday, January 23rd, Premarket
Futures are currently down 240 points on the dow. I'll reiterate again, if this market takes another dive, especially today, what could possibly save it? The fed isn't about to cut rates another percentage point. In fact, I think yesterday's rate cut effect is actually partially responsible for this morning's losses. The Yen is currently trading at 105.16 and the Euro went from 1.44 to 1.46 - Anytime we see a rally in the yen, it reflects an unwinding of the carry trade.
To find a POSSIBLE area of support for the dow and S+P, I would look at yesterday's futures - they essentially were trading as low as 11,400 on the dow, and 1256 on the S+P. Which represents a drop of 500+ points on the dow and another 60 points on the S+P. Not saying we'll get there today, but it doesn't look too difficult given the futures we're seeing. Even at that level, I wouldn't call us anywhere near a bottom - the futures only stopped falling because of the fed rate cut.
I will probably short any sudden signs of strength we see today - i'll keep u posted.
To find a POSSIBLE area of support for the dow and S+P, I would look at yesterday's futures - they essentially were trading as low as 11,400 on the dow, and 1256 on the S+P. Which represents a drop of 500+ points on the dow and another 60 points on the S+P. Not saying we'll get there today, but it doesn't look too difficult given the futures we're seeing. Even at that level, I wouldn't call us anywhere near a bottom - the futures only stopped falling because of the fed rate cut.
I will probably short any sudden signs of strength we see today - i'll keep u posted.
Tuesday, January 22, 2008
January 22nd Market Update After Hours
The rest of the world must hate us. Many markets dropped over 10% - ie Hang Seng fell almost 3,500 points in 2 days due to a "US recession". Meanwhile we had a holiday and today we dodged another bullet with an emergency fed rate cut to close 1% lower only. Sorry world. But look at the bright side - we'll most likely help global markets stabilize at least temporarily tonight.
We had a short covering rally most of the day from the big morning gap down. I sold most of my holdings early for some losses, only to watch them rise throughout the day. However, as a trader, I could care less. As I mentioned before, consistency is key, and I had to manage risk, even if it means taking a loss. That is one discipline that must be kept by anyone who calls themself a trader. Learning to take a loss is one of the hardest lessons to learn. Survival is key - the market will always be there, bad traders and bagholders will not. In fact, I was able to recoup some of the losses by other well timed daytrades throughout the day (besides my failed attempt at shorting BIDU).
My assessment of the current situation? The market was due for a crash this morning, which was only averted by a large fed rate cut in the early morning. My personal opinion is that the market must complete its natural course, regardless of any external intervention. We may see some stability here, but remember this:
The next time we fall, the fed is running out of juice and will not be able to "save" the market. In fact, we didn't even close green today after a 75 bp cut! What "would have happened" today is still bound to happen to us IMO. The fed really botched it up this time by cutting rates only after a worldwide collapse. In fact, the sheer enormity of this cut may be interpreted as a loss of control by our monetary system. I also don't believe that this rate cut will actually help our frozen financial system. There simply isn't any liquidity - we really need to keep our fingers crossed and borrowers need to show some integrity. Lets hope the defaults don't keep rolling in.
Short term, I think today's recovery and "mere" 1% losses will greatly boost the global market's confidence level. I expect to see a rally in overseas markets, which will then possibly spill over into tomorrow's open. AAPL guided lower and is trading down 11% after hours btw.
Keep gathering your list of loved stocks. Get ready to buy when they are completely hated. I honestly think that time is coming soon.
We had a short covering rally most of the day from the big morning gap down. I sold most of my holdings early for some losses, only to watch them rise throughout the day. However, as a trader, I could care less. As I mentioned before, consistency is key, and I had to manage risk, even if it means taking a loss. That is one discipline that must be kept by anyone who calls themself a trader. Learning to take a loss is one of the hardest lessons to learn. Survival is key - the market will always be there, bad traders and bagholders will not. In fact, I was able to recoup some of the losses by other well timed daytrades throughout the day (besides my failed attempt at shorting BIDU).
My assessment of the current situation? The market was due for a crash this morning, which was only averted by a large fed rate cut in the early morning. My personal opinion is that the market must complete its natural course, regardless of any external intervention. We may see some stability here, but remember this:
The next time we fall, the fed is running out of juice and will not be able to "save" the market. In fact, we didn't even close green today after a 75 bp cut! What "would have happened" today is still bound to happen to us IMO. The fed really botched it up this time by cutting rates only after a worldwide collapse. In fact, the sheer enormity of this cut may be interpreted as a loss of control by our monetary system. I also don't believe that this rate cut will actually help our frozen financial system. There simply isn't any liquidity - we really need to keep our fingers crossed and borrowers need to show some integrity. Lets hope the defaults don't keep rolling in.
Short term, I think today's recovery and "mere" 1% losses will greatly boost the global market's confidence level. I expect to see a rally in overseas markets, which will then possibly spill over into tomorrow's open. AAPL guided lower and is trading down 11% after hours btw.
Keep gathering your list of loved stocks. Get ready to buy when they are completely hated. I honestly think that time is coming soon.
Covered 1/2 position at 266.82
After seeing it rally as high as 274, time to take some risk off the table..
This volume is anemic and the price/volume pattern continues to look weak, so continuing to hold 1/2 position short.
This volume is anemic and the price/volume pattern continues to look weak, so continuing to hold 1/2 position short.
BIDU update
BIDU never saw 235 again premarket so I did not execute a long side trade. However, I actually opened a short position at 265.5. It looks like the mythical PPT (Plunge Protection Team) is in full force, but I simply cannot believe that we can cheat death so easily. We rallied about 400 points off the lows now which I suspect is a short squeeze as mentioned earlier. Volume does not seem like it's there to really make this a meaningful rally.
Okay here is the plan
Now that futures have deteriorated to -470, I will re-establish my long position in BIDU if it approaches 235 prior to the open- a very small one. I expect a fade of the gap down as we approach the open.
Update:
Okay, if we can see a continued deterioration, I can envision a quick gap fade after the open, which will be good for a few points. The rate cut can fuel a short squeeze if the market appears to be stabilizing itself. This is an extremely short term play.
Update:
Okay, if we can see a continued deterioration, I can envision a quick gap fade after the open, which will be good for a few points. The rate cut can fuel a short squeeze if the market appears to be stabilizing itself. This is an extremely short term play.
Just Liquidated on the Fed Rate Cut
Even with relatively small position sizes, I was in pain this morning. However, I could not believe my eyes when the Fed cut rates by 75 basis points
Liquidated BIDU at 261.44 - from my buy at 255.77 for +$5.67
JRJC at 11 from buy at 12.8 for -$1.80
EJ at 17 from buy at 18.88 for -$1.88
MELI at 43.75 from buy at 45.74 for -$1.99
I liquidated SPWR at 64.75 from 73.77 prior to the cut, due to major solar weakness overseas in QCE.DE and SWV.DE. It popped to around the 68 level, but I'm not complaining.
Regardless of any rate cut, it's important to cut losses on a day like this to regain a balanced view throughout the trading day and I consider it fortunate to have been able to escape my largest holding which was BIDU with an actual gain.
Even as I type this, reversing my positions and going short would have been a good move. I'll be on the sidelines however. It is important to note that the Fed has essentially used up all of its powder this morning... as I've been mentioning repeatedly, it will be very interesting to see if this rate cut has any lasting positive effect.
UPDATE:
Immediately after this post was placed - futures have not been able to sustain the rally - BIDU is now trading at 238 - a full 23 points below my sale price! whew.
Liquidated BIDU at 261.44 - from my buy at 255.77 for +$5.67
JRJC at 11 from buy at 12.8 for -$1.80
EJ at 17 from buy at 18.88 for -$1.88
MELI at 43.75 from buy at 45.74 for -$1.99
I liquidated SPWR at 64.75 from 73.77 prior to the cut, due to major solar weakness overseas in QCE.DE and SWV.DE. It popped to around the 68 level, but I'm not complaining.
Regardless of any rate cut, it's important to cut losses on a day like this to regain a balanced view throughout the trading day and I consider it fortunate to have been able to escape my largest holding which was BIDU with an actual gain.
Even as I type this, reversing my positions and going short would have been a good move. I'll be on the sidelines however. It is important to note that the Fed has essentially used up all of its powder this morning... as I've been mentioning repeatedly, it will be very interesting to see if this rate cut has any lasting positive effect.
UPDATE:
Immediately after this post was placed - futures have not been able to sustain the rally - BIDU is now trading at 238 - a full 23 points below my sale price! whew.
Monday, January 21, 2008
Get Ready for Panic Tuesday!
The capitulation day I mentioned yesterday appears to actually be ready to happen tomorrow. As mentioned earlier I stated that the losses will likely be much greater and higher in volume than experienced back last August. Dow futures are down 540 points, S+P futures are down 60, and Nasdaq futures down 75 as we speak. I haven't seen these kinds of numbers since the crash of 2000! If the S+P were to open down 60 points as futures indicate currently, it will be opening at around 1260, or the 20% loss mark which represents an official bear market. the 20% mark for the nasdaq and dow are 2,288 and 11,424 respectively. I honestly believe we will need to "post" these numbers, which means that the market will need to close at or near these levels. That would signal a closing loss of 675 points on the dow, 60 points on the s+p, and 50 points on the nasdaq.
It will be extremely interesting to watch the world markets tonight, as fortunately (or not), the US markets are closed today. If we see a significant rebound overseas or at least some kind of stabilization, the futures could easily improve prior to the open tomorrow. We could also see some kind of response from the feds today or tomorrow morning. However, if none of this materializes, I expect the market to surpass those point losses at some point during the day (dow -1,000?), but stage a minor recovery by the close of trading as sidelined cash, a fed announcement, or short covering occurs. As for my positions, I expect to lose all of the gains from friday and more, but fortunately my position sizes are small relative to my normal trading size due to caution, so I'm looking forward to liquidating them early premarket especially if we have some positive developments by tomorrow morning overseas or otherwise, and moving forward with what will be an amazing day of volatility. History is unfolding as we speak!
It will be extremely interesting to watch the world markets tonight, as fortunately (or not), the US markets are closed today. If we see a significant rebound overseas or at least some kind of stabilization, the futures could easily improve prior to the open tomorrow. We could also see some kind of response from the feds today or tomorrow morning. However, if none of this materializes, I expect the market to surpass those point losses at some point during the day (dow -1,000?), but stage a minor recovery by the close of trading as sidelined cash, a fed announcement, or short covering occurs. As for my positions, I expect to lose all of the gains from friday and more, but fortunately my position sizes are small relative to my normal trading size due to caution, so I'm looking forward to liquidating them early premarket especially if we have some positive developments by tomorrow morning overseas or otherwise, and moving forward with what will be an amazing day of volatility. History is unfolding as we speak!
Sunday, January 20, 2008
Some Trading Definitions
Okay, I know that some readers may not be familiar with the terminology I use here. Here are a few definitions.
Scalping = taking advantage of extremely short term fluctuations in price (seconds, minutes, etc), to turn a quick profit. Usually involves a larger number of shares than the next longer timeframe usually referred to as "swing" trading (days to weeks).
Shorting = borrowing shares of stock from your broker and selling it. You keep the cash, but you eventually will need to buy back the stock and return the shares to your broker, known as "covering". Therefore, your goal is to "short" a stock at a higher price, then buy it back cheaper when returning it to your broker, keeping the difference. For example, if I short 100 shares of AAPL at 172, then cover it at 170, I've borrowed 100 shares from my broker which I do not own, sold it out to the open market at 172/share, received cash in the amount of $17,200 in my account, and later bought 100 shares back at 170/share, which only costs $17,000, keeping a $200 profit. The broker receives the 100 shares back which you owed, and all is right with the world.
Covering = buying back shares you shorted to close your short sale and return shares back to broker.
Position = owned shares of stock or cash in lieu of stock sold short
Opening a position = initiating a trade which results in ownage of stock or short selling of stock
Closing a position = when stock has been purchased means to sell, which results in no position, or when short a stock, buying back the shares and "covering"
After Hours = after the market is officially "closed" at 4:00 PM eastern time. Some exchanges remain open until 8:00 PM eastern, but trading is much less liquid (the spread between minimum price for purchase and maximum price for sale can be very wide).
Premarket = as early at 6:00 AM eastern time on some exchanges until the market opens at 9:30 AM eastern.
Long = a stock position which was bought, therefore long trades are profitable when the stock rises.
Short = a stock position which was sold short, therefore short trades are profitable when the stock falls.
Fade = going against an upward (generally) market move - for example if the dow opens higher by 100 points when the market opens and loses the gain within 1 hour, the move has been "faded". A fairly common occurrence during the first hour of trade.
Oversold = a stock drops farther than normally observed based on typical price movements
Overbought = a stock rises farther than normally observed....
Gap Up or Gap Down = generally, when the price at market open is significantly higher or lower than yesterday's closing price. For example, the dow closed at 12,300 yesterday, and this morning it opens down 100 points at 12,200, translated "the dow gapped down 100 points this morning".
Trend day = a day when the market is steadily moving higher or lower throughout the day, with no real recovery
Reversal = a price movement that begins to move opposite the previous trend.
PE = Price to earnings ratio - the simplest ratio out there. Higher PE ratios represent anticipated faster growth, but could also represent that price has moved much higher than future earnings, and could generally represent over expectation on the part of investors. Much more than described here, google it.
as I think of more terms, I'll keep adding them to this list. Please note these are very simplistic definitions...
Scalping = taking advantage of extremely short term fluctuations in price (seconds, minutes, etc), to turn a quick profit. Usually involves a larger number of shares than the next longer timeframe usually referred to as "swing" trading (days to weeks).
Shorting = borrowing shares of stock from your broker and selling it. You keep the cash, but you eventually will need to buy back the stock and return the shares to your broker, known as "covering". Therefore, your goal is to "short" a stock at a higher price, then buy it back cheaper when returning it to your broker, keeping the difference. For example, if I short 100 shares of AAPL at 172, then cover it at 170, I've borrowed 100 shares from my broker which I do not own, sold it out to the open market at 172/share, received cash in the amount of $17,200 in my account, and later bought 100 shares back at 170/share, which only costs $17,000, keeping a $200 profit. The broker receives the 100 shares back which you owed, and all is right with the world.
Covering = buying back shares you shorted to close your short sale and return shares back to broker.
Position = owned shares of stock or cash in lieu of stock sold short
Opening a position = initiating a trade which results in ownage of stock or short selling of stock
Closing a position = when stock has been purchased means to sell, which results in no position, or when short a stock, buying back the shares and "covering"
After Hours = after the market is officially "closed" at 4:00 PM eastern time. Some exchanges remain open until 8:00 PM eastern, but trading is much less liquid (the spread between minimum price for purchase and maximum price for sale can be very wide).
Premarket = as early at 6:00 AM eastern time on some exchanges until the market opens at 9:30 AM eastern.
Long = a stock position which was bought, therefore long trades are profitable when the stock rises.
Short = a stock position which was sold short, therefore short trades are profitable when the stock falls.
Fade = going against an upward (generally) market move - for example if the dow opens higher by 100 points when the market opens and loses the gain within 1 hour, the move has been "faded". A fairly common occurrence during the first hour of trade.
Oversold = a stock drops farther than normally observed based on typical price movements
Overbought = a stock rises farther than normally observed....
Gap Up or Gap Down = generally, when the price at market open is significantly higher or lower than yesterday's closing price. For example, the dow closed at 12,300 yesterday, and this morning it opens down 100 points at 12,200, translated "the dow gapped down 100 points this morning".
Trend day = a day when the market is steadily moving higher or lower throughout the day, with no real recovery
Reversal = a price movement that begins to move opposite the previous trend.
PE = Price to earnings ratio - the simplest ratio out there. Higher PE ratios represent anticipated faster growth, but could also represent that price has moved much higher than future earnings, and could generally represent over expectation on the part of investors. Much more than described here, google it.
as I think of more terms, I'll keep adding them to this list. Please note these are very simplistic definitions...
January 20th, 2008 - Some Weekend Thoughts
For those who follow my blog, you probably notice that my trades have been fast and furious lately, and involves a lot of bottom fishing. I must make a disclaimer. Bottom fishing (trying to catch a falling knife), is an extremely aggressive (risky) trading strategy and I don't recommend it for anyone who is just starting out or has limited experience in scalping. My timeframes are extremely short (sometimes buying and selling within minutes, or holding an oversold/overbought position for an overnight scalp). I close out my winners or take losses very quickly. If this is not something you are comfortable with, do not attempt.
With recent developments in the market, many traders are expecting what is called a capitulation day - a day of steep losses on high volume representing panic or "throwing in of the towel" by investors/long traders. If this day comes, and I think it could happen within the next 3 weeks, I expect the extent of the losses to be larger than the capitulation drop we experienced back in August 2007 - which at one point was around a 500 point loss during the day. I also expect the volume to be much higher. Therefore I cannot overemphasize how important it is to NOT leave ANY long side trade unattended for at least the near future. I will also stop buying "oversold" stocks at the close for overnight holdings. In fact, fading any strength will most likely be the best strategy.
One play I might act on this week:
1. AAPL reports earnings on Tuesday afternoon. IF AAPL pops after hours on the news and holds the gains till Wednesday morning, I will buy the February $150 put options at market open. I know a lot of institutions are pretty worried about holding AAPL stock and I'm almost certain they will pull a pump and dump strategy so they can get out. I would not be surprised to see AAPL hold the gains for most of the day on Wednesday either, as analysts will probably be out defending the company. My personal opinion of AAPL? I really don't look at AAPL as a pure "tech" play. If you really think about it, AAPL is more of a retailer. They have a huge brick and mortar presence (hundreds of stores?), and their products are not exactly the most technologically advanced either, not to mention how expensive they are. If this economy goes into a recession, retail is going to get hit hard. But we don't need even an actual recession for this to happen, because even the fear of a recession will decimate shares of AAPL. Even with AAPL $40 off it's high of 200+, I can tell that investors are still in love with the stock, which is only more fuel for more downside.
Solar Analysis
Okay, we've all been witnessing some heavy selling of the solar names. Europe has been leading the world in adopting solar (I believe). I cannot confirm this but also, I think the European solar companies also "lead" the US companies - in terms of price movement. Here's a tidbit from Financial Times:
"German solar panel maker Q-Cells, which soared 186 per cent in 2007, dropped 18 per cent to EU66.44. On Tuesday Société Générale downgraded the stock to "sell" and reduced its target price to EU66 from EU98.
SocGen also cut its rating on rival SolarWorld to "sell" and lowered its price target to EU29 from EU45. SolarWorld fell 17.7 per cent to EU28.95. Norwegian solar panel maker Renewable Energy lost 21.8 per cent to NKr159 on Friday, taking its weekly losses to 27.2 per cent." I think anyone who is trading solar needs to keep those names on their watchlist, since they trade in Europe before the US market opens every day (QCE.DE, SWV.DE). Solar multiples are fairly rich even after this selloff and I think there is more downside to come. I am a long term bull on solar but patience will allow for a more balanced view as well as better entries, I believe. I am still holding SPWR but only for a quick swing.
With recent developments in the market, many traders are expecting what is called a capitulation day - a day of steep losses on high volume representing panic or "throwing in of the towel" by investors/long traders. If this day comes, and I think it could happen within the next 3 weeks, I expect the extent of the losses to be larger than the capitulation drop we experienced back in August 2007 - which at one point was around a 500 point loss during the day. I also expect the volume to be much higher. Therefore I cannot overemphasize how important it is to NOT leave ANY long side trade unattended for at least the near future. I will also stop buying "oversold" stocks at the close for overnight holdings. In fact, fading any strength will most likely be the best strategy.
One play I might act on this week:
1. AAPL reports earnings on Tuesday afternoon. IF AAPL pops after hours on the news and holds the gains till Wednesday morning, I will buy the February $150 put options at market open. I know a lot of institutions are pretty worried about holding AAPL stock and I'm almost certain they will pull a pump and dump strategy so they can get out. I would not be surprised to see AAPL hold the gains for most of the day on Wednesday either, as analysts will probably be out defending the company. My personal opinion of AAPL? I really don't look at AAPL as a pure "tech" play. If you really think about it, AAPL is more of a retailer. They have a huge brick and mortar presence (hundreds of stores?), and their products are not exactly the most technologically advanced either, not to mention how expensive they are. If this economy goes into a recession, retail is going to get hit hard. But we don't need even an actual recession for this to happen, because even the fear of a recession will decimate shares of AAPL. Even with AAPL $40 off it's high of 200+, I can tell that investors are still in love with the stock, which is only more fuel for more downside.
Solar Analysis
Okay, we've all been witnessing some heavy selling of the solar names. Europe has been leading the world in adopting solar (I believe). I cannot confirm this but also, I think the European solar companies also "lead" the US companies - in terms of price movement. Here's a tidbit from Financial Times:
"German solar panel maker Q-Cells, which soared 186 per cent in 2007, dropped 18 per cent to EU66.44. On Tuesday Société Générale downgraded the stock to "sell" and reduced its target price to EU66 from EU98.
SocGen also cut its rating on rival SolarWorld to "sell" and lowered its price target to EU29 from EU45. SolarWorld fell 17.7 per cent to EU28.95. Norwegian solar panel maker Renewable Energy lost 21.8 per cent to NKr159 on Friday, taking its weekly losses to 27.2 per cent." I think anyone who is trading solar needs to keep those names on their watchlist, since they trade in Europe before the US market opens every day (QCE.DE, SWV.DE). Solar multiples are fairly rich even after this selloff and I think there is more downside to come. I am a long term bull on solar but patience will allow for a more balanced view as well as better entries, I believe. I am still holding SPWR but only for a quick swing.
Friday, January 18, 2008
Friday January 18th, 2008 After Market Close
We didn't get any catastrophic moves one way or the other. Of the names I picked up at this morning's lows
1. BIDU 255.77 closed at 272.6 - paper gain of +$16.83 - holding this through tuesday
2. SPWR 73.77 closed at 74.75 +$.98 - holding for a dead cat bounce - we'll see how the other solars fare
3. EJ 18.88 closed at 20 +$1.18 - I like this company, though still not sure if it's a long term hold.
4. MELI $45.74 - closed at $47.05 +$1.31 - probably a broken stock, but looking for a bounce
5. JRJC $12.8 - closed at $12.68 -$.12 - broken and oversold
6. VDSI $17.28 closed at $17.51 +$.23 - broken and oversold
we have a ton of earnings reports next week, but with the market now at extremely oversold levels I expect a lot of traders to look over many names over the long weekend and say "this looks damn cheap". We've had some incredible volume this week, and I know there may be a lot of sellers who will buy back in if the market stabilizes.
EJ stock profile: (E-house China)
This is a great company in my opinion and here are the pros and cons.
Pros: They claim to be the largest real estate development company in China. They may currently be creating what will become China's MLS, and paid subscribers are already onboard. Their strongest quarter is the 4th quarter of the year so the numbers will be pretty impressive IMO for their upcoming earnings report. China is not affected by any subprime lending woes domestically - they have always required a 30% downpayment for all buyers,there is no such thing as an ARM there, so in fact, the lending practices there are extremely conservative. They are diversified geographically - not only focused on extremely high priced areas such as Shanghai or Beijing.
Cons: Although the chinese mortgage industry is still fairly conservative, I hear that prices for housing, especially in the major urban cities, have gotten out of hand as well. This is still good for the company since they make commissions on the selling price, but we may start hearing about china's real estate becoming overheated, which is bad publicity for this company. They also have a secondary offering which was just announced yesterday.
Have a great weekend. I might post some other thoughts throughout the weekend as well.
By the way, one blog I make routine visits to is alphatrends.net (linked on the right). Brian's analysis is simply outstanding and I would recommend everyone who reads this blog to take the time and view his technical take on a nightly basis.
1. BIDU 255.77 closed at 272.6 - paper gain of +$16.83 - holding this through tuesday
2. SPWR 73.77 closed at 74.75 +$.98 - holding for a dead cat bounce - we'll see how the other solars fare
3. EJ 18.88 closed at 20 +$1.18 - I like this company, though still not sure if it's a long term hold.
4. MELI $45.74 - closed at $47.05 +$1.31 - probably a broken stock, but looking for a bounce
5. JRJC $12.8 - closed at $12.68 -$.12 - broken and oversold
6. VDSI $17.28 closed at $17.51 +$.23 - broken and oversold
we have a ton of earnings reports next week, but with the market now at extremely oversold levels I expect a lot of traders to look over many names over the long weekend and say "this looks damn cheap". We've had some incredible volume this week, and I know there may be a lot of sellers who will buy back in if the market stabilizes.
EJ stock profile: (E-house China)
This is a great company in my opinion and here are the pros and cons.
Pros: They claim to be the largest real estate development company in China. They may currently be creating what will become China's MLS, and paid subscribers are already onboard. Their strongest quarter is the 4th quarter of the year so the numbers will be pretty impressive IMO for their upcoming earnings report. China is not affected by any subprime lending woes domestically - they have always required a 30% downpayment for all buyers,there is no such thing as an ARM there, so in fact, the lending practices there are extremely conservative. They are diversified geographically - not only focused on extremely high priced areas such as Shanghai or Beijing.
Cons: Although the chinese mortgage industry is still fairly conservative, I hear that prices for housing, especially in the major urban cities, have gotten out of hand as well. This is still good for the company since they make commissions on the selling price, but we may start hearing about china's real estate becoming overheated, which is bad publicity for this company. They also have a secondary offering which was just announced yesterday.
Have a great weekend. I might post some other thoughts throughout the weekend as well.
By the way, one blog I make routine visits to is alphatrends.net (linked on the right). Brian's analysis is simply outstanding and I would recommend everyone who reads this blog to take the time and view his technical take on a nightly basis.
January 18th Midday Update
The dow is -74 currently. The negative bias will need to continue into the last hour. Any major rally attempts that occur any sooner will most likely not hold. We need some strength to show up into the close. With a long weekend, the dow now down 2000 points from the recent high, and lack of economic data on Tuesday morning, I would bet on an end of day rally. But the market can and will do anything, so stay careful out there. Still holding all long positions.
Friday January 18th, 2008 Trade update
If you didn't sell your overnight holdings into the 180 point gap up this morning you should'nt be trading.
I know a lot of people sold yesterday into the close due to GE's earnings report this morning. On December 11th, GE had already reiterated their earnings and guidance. There was very little risk from that standpoint.
I'm glad the Bush news conference was short and sweet, it was obvious the market would tank on the expected lackluster news. I've repositioned myself back into BIDU at 255.77, SPWR at 73.77, EJ at 18.88, MELI at 45.74, 17.28 on VDSI, and 12.8 on JRJC. Long btw. I might even hold these over the long weekend unless the market decides to crash today down to 11,722 - which is a possibility I do not exclude. We are extremely oversold and with a long weekend for everyone who sold their stocks to think it over, I expect some kind of gap up on Tuesday morning. Next week the economic data is light, and I wouldn't be surprised for us to have a nice week finally. The week after that, I would be very careful - lots of data and the Fed meeting. With the rate cuts expected, I doubt there will be much surprisingly positive reaction.
I know a lot of people sold yesterday into the close due to GE's earnings report this morning. On December 11th, GE had already reiterated their earnings and guidance. There was very little risk from that standpoint.
I'm glad the Bush news conference was short and sweet, it was obvious the market would tank on the expected lackluster news. I've repositioned myself back into BIDU at 255.77, SPWR at 73.77, EJ at 18.88, MELI at 45.74, 17.28 on VDSI, and 12.8 on JRJC. Long btw. I might even hold these over the long weekend unless the market decides to crash today down to 11,722 - which is a possibility I do not exclude. We are extremely oversold and with a long weekend for everyone who sold their stocks to think it over, I expect some kind of gap up on Tuesday morning. Next week the economic data is light, and I wouldn't be surprised for us to have a nice week finally. The week after that, I would be very careful - lots of data and the Fed meeting. With the rate cuts expected, I doubt there will be much surprisingly positive reaction.
Thursday, January 17, 2008
Thursday January 17th After Market Close
Wow, so much for any late day rally.
2008 has been an amazing year so far hasn't it?? Dow is down about 2000 points from the high. Our perspectives are being adjusted quite quickly. A lot of newer traders have probably never seen the market behave like this and I wouldn't be surprised if we've had a lot of people wiped out in the last few weeks. Experienced traders know that this kind of thing happens every once in a while. To be honest, this could easily be just the removal of froth - there may be a lot more pain to come.
Tomorrow we have a bogus "economic stimulus" package from the government. If it wasn't for that pending announcement I'd be more bullish about a rally (dead cat bounce) tomorrow. The only "economic stimulus" the market wants is a phenominally large rate cut.
Nonetheless I had to pick up a few "bargains" at the end of the day - ICE at 133.17, BIDU at 271.21, andFSLR at 173.39. I'm currently down on those names but they are very small positions. These momentum names will most likely rebound sharply if a rally ensues, but only for a trade - they aren't keepers.
2008 has been an amazing year so far hasn't it?? Dow is down about 2000 points from the high. Our perspectives are being adjusted quite quickly. A lot of newer traders have probably never seen the market behave like this and I wouldn't be surprised if we've had a lot of people wiped out in the last few weeks. Experienced traders know that this kind of thing happens every once in a while. To be honest, this could easily be just the removal of froth - there may be a lot more pain to come.
Tomorrow we have a bogus "economic stimulus" package from the government. If it wasn't for that pending announcement I'd be more bullish about a rally (dead cat bounce) tomorrow. The only "economic stimulus" the market wants is a phenominally large rate cut.
Nonetheless I had to pick up a few "bargains" at the end of the day - ICE at 133.17, BIDU at 271.21, andFSLR at 173.39. I'm currently down on those names but they are very small positions. These momentum names will most likely rebound sharply if a rally ensues, but only for a trade - they aren't keepers.
January 17th Midday Update
The market is staging a steady rally back to today's averages. I just closed all my positions as the market turned. I ended up giving back a good portion of today's gains from last night's after market purchases. Although I still believe the market can stage a dramatic end of day rally, I'd rather be on the sidelines until I see it happen.
Bernanke
Getting the feeling the market doesn't like Ben? His basically stated he will continue to put off any rate cut until things get bad enough...
IMO he's calling our bluff - he wants the market to stabilize on its own. Today is critical for the bulls to pull something together. The market is extremely oversold on a short term basis.
I closed out my positions from last night earlier this morning luckily before his testimony. Unfortunately I'm nursing new positions I reaccumulated during the downturn, albeit at a lower price point - FSLR at 178.83 BIDU at 286.71
IMO he's calling our bluff - he wants the market to stabilize on its own. Today is critical for the bulls to pull something together. The market is extremely oversold on a short term basis.
I closed out my positions from last night earlier this morning luckily before his testimony. Unfortunately I'm nursing new positions I reaccumulated during the downturn, albeit at a lower price point - FSLR at 178.83 BIDU at 286.71
Wednesday, January 16, 2008
Wednesday January 16th, After Market Close
I'm glad the market actually closed lower after attempting a rebound. I'm long BIDU, AAPL, WFR, and FSLR (opened at the close of trading). These will most likely be closed premarket tomorrow morning. We have earnings from MER tomorrow morning, and another jobless claims report. If the data isn't catastrophic, I think we might get a trend day up tomorrow and I'll be back in long after the open- lots of rumors of a fed cut on Friday. Not so sure I believe it, but buy on the rumor right?
I'm paying close attention to ICE, MA, FMCN.
ICE (Intercontinental Exchange) is probably the best positioned exchange out there. It's going to get clobbered in this credit environment because it is one of my number one buyout candidates, and buyouts are NOT happening right now. I recommend this as a major buy during the market weakness. I in fact traded this today (picked up at 144.19, incredible), and sold at 150.
MA - I keep reiterating the VISA ipo - MA will rise once news on Visa starts hitting the wires.
FMCN - This is the best positioned China Olympic play IMO. Demand for marketing and advertising on their digital signage is going to skyrocket before and during the olympics. I'm not so sure about timing an entry point but I think this stock goes to 100 sometime this year. $48 is a significant moving average level for FMCN so establishing a small position MIGHT be ok here. 10%?
I'm paying close attention to ICE, MA, FMCN.
ICE (Intercontinental Exchange) is probably the best positioned exchange out there. It's going to get clobbered in this credit environment because it is one of my number one buyout candidates, and buyouts are NOT happening right now. I recommend this as a major buy during the market weakness. I in fact traded this today (picked up at 144.19, incredible), and sold at 150.
MA - I keep reiterating the VISA ipo - MA will rise once news on Visa starts hitting the wires.
FMCN - This is the best positioned China Olympic play IMO. Demand for marketing and advertising on their digital signage is going to skyrocket before and during the olympics. I'm not so sure about timing an entry point but I think this stock goes to 100 sometime this year. $48 is a significant moving average level for FMCN so establishing a small position MIGHT be ok here. 10%?
Wednesday January 16th Market Update
The CPI numbers are showing that inflation continues to be a problem. With the PPI and CPI data we've seen, I don't know how the Fed will be able to deliver the rate cuts that everyone is expecting. This is turning into a pretty nasty situation. I think Bernanke's speech last week was a huge mistake. We now have a scenario of huge rate cut "expectations", which is a no win situation. We saw some pretty serious damage this morning in many of the nasdaq 100 names. These lows will need to be retested. Be careful with the high PE names (ie. BIDU, FSLR, ISRG) - the froth is at risk.
Tuesday, January 15, 2008
Tuesday January 15th After Market Close
This market is getting destroyed obviously - Dow 11,722 That was a significant level last year, can't remember why but that number was imprinted in my memory. We have a gap down after hours with INTC's earnings reaction. We'll have another gap down tomorrow morning unless something great happens overnight. I would not be surprised to see the emergency rate cut come in sometime this week. We have the CPI tomorrow morning. Earnings season is fully underway. Traders need to be nimble here. I don't think I've held any position longer than 1 hour over the last few weeks, and it's been the right thing to do so far.
If you are a long term investor, or are looking to invest long term, now is a great time to have your wishlist at hand. The financials have erased years of gains at this point. I think over the next couple of months some investors will be able to establish themselves a great long term portfolio. Hang tight!
If you are a long term investor, or are looking to invest long term, now is a great time to have your wishlist at hand. The financials have erased years of gains at this point. I think over the next couple of months some investors will be able to establish themselves a great long term portfolio. Hang tight!
aapl short upate
covered at 169.59, reshorted when it showed additional weakness at 169.45, covered at 166.19. This thing could probably go down much further by end of day.
Tuesday, January 15th premarket
Good morning. We've got a tough day ahead of us. Bad economic numbers for retail sales, big earnings miss from C. The yen is at 106.85. PPI not as bad as expected, however. Good data for a rate cut?
Monday, January 14, 2008
January 14th After Market Close
I apologize for the lack of updates this weekend - been quite busy with other things. It appears that the market has been stabilizing on some positive earnings news from IBM, etc (numbers are not showing that the end of the world is coming). I find it hard to believe though, that the market is going to be fine from here. The dollar is absolutely getting hammered - it's currently below 108 yen. Citibank (C) is coming out with earnings tomorrow - the market has priced in $24 billion in write downs... the entire market cap of C is $144 billion? The latest flurry of activity involves possible investments by foreign players. In addition we have retail sales and PPI at 8:30 am ET. The big thing tomorrow for tech is Macworld - AAPL will definitely be a stock to watch. It has been swinging between 168-180 over the last few days. I'll be monitoring that one for some trading opportunities.
Big picture wise, I think the market obviously has a lot fear in it, which may not wash out for at least a few months, but over the long haul, I'm keeping a close eye on finding some real nice long term buy and hold stocks as we go through this mess. I'm particularly looking for some dividend paying names which have been decimated lately.
And continue to pay close attention to MA (Mastercard) - I still believe it will be back near its highs in the near future. I'll keep you posted if I end up opening a position in it.
Big picture wise, I think the market obviously has a lot fear in it, which may not wash out for at least a few months, but over the long haul, I'm keeping a close eye on finding some real nice long term buy and hold stocks as we go through this mess. I'm particularly looking for some dividend paying names which have been decimated lately.
And continue to pay close attention to MA (Mastercard) - I still believe it will be back near its highs in the near future. I'll keep you posted if I end up opening a position in it.
Thursday, January 10, 2008
GS position closed at $197
from earlier purchase $193.28 for a $3.78/share gain. I was going to stay on the sidelines but there was too much going on to ignore the markets today. Thats all folks. Might come back with a market summary later tonight.
As an update also, last night I went long 10,000 shares of Ali Baba (1688.hk) at $22.1 HKD/share. Falling knife style. Probably sell them at the open today as well, if we get a bounce on the Hang Seng.
As an update also, last night I went long 10,000 shares of Ali Baba (1688.hk) at $22.1 HKD/share. Falling knife style. Probably sell them at the open today as well, if we get a bounce on the Hang Seng.
Trade update
Bank of america in talks to acquire countrywide. I saw an immediate spike my gs shares from 193.28 to 195.5. I personally hate news driven rallies, and I don't like that we saw another fadeable spike with 1.5 hours still left to trade. Could they have announced it around 3:15 instead? Still holding the shares... hopefully we can sustain this rally in the financials.
do you know what the fed actually said
absolutely nothing - nothing. They will only cut rates if the market tanks or we get some seriously bad data. What does this mean for the market? If we can close higher today, we are in great shape near term. I'm going to make a bet:
What the market really needs right now is a rotation back into the financials. which means that tech might underperform this afternoon if we are going to have a healthy general market near term. I would watch XLF and i might go long GS if we can get a confirmation here.
UPDATE - going long GS right now 193.28 - moderate position.
What the market really needs right now is a rotation back into the financials. which means that tech might underperform this afternoon if we are going to have a healthy general market near term. I would watch XLF and i might go long GS if we can get a confirmation here.
UPDATE - going long GS right now 193.28 - moderate position.
There goes the US dollar again
Yen just spiked, I also dumped my AAPL 200 strike call options at .7 from .46 - should've dropped them at 1.00 10 minutes ago but missed it - gotta take it when you have it. Btw, as mentioned earlier, i think any major spike from fed action is questionable.
There's the FED
Here's Bernanke saying he might cut rates, without actually cutting them haha. He's squeezing out all he can to pump up the market, while saving his big guns. We just saw the dow pop 100 points. I have to say, nice timing Ben! The market was trading pretty erratically today and needs the support.
Market Open Trade Update - Mastercard (MA)
I absolutely could not resist this trade. One of my "favorite" stocks is Mastercard - MA. It dropped $11 in the first 10 minutes of trading! I had to go long a small position at 185.67, and it was sold within 3 minutes at 189.42, for a $3.75/share profit. The reason for my "small" position instead of a larger one? This was a very risky trade. Any stock that gaps down such a large amount rarely represents a buy signal, contrary to popular belief.
Why do I love MA? Simply put - the upcoming VISA IPO. MA is mainly owned by a large number of banks and institutions who also most likely have a stake in VISA. MA is being used by the big money to set up an easy distribution of VISA IPO shares. What better way to get a premium for the VISA pricing than by pumping Mastercard, it's closest and only competitor? MA has been and will continue to be a great stock until the VISA IPO. MA is a great company for many other reasons as well, but the main catalyst is Visa. Keep an eye on this one people.
Why do I love MA? Simply put - the upcoming VISA IPO. MA is mainly owned by a large number of banks and institutions who also most likely have a stake in VISA. MA is being used by the big money to set up an easy distribution of VISA IPO shares. What better way to get a premium for the VISA pricing than by pumping Mastercard, it's closest and only competitor? MA has been and will continue to be a great stock until the VISA IPO. MA is a great company for many other reasons as well, but the main catalyst is Visa. Keep an eye on this one people.
Thursday, January 10th Premarket
Covered my short on BIDU at $350 for a $12/share profit at $338 this morning. I'm sure it has a great possibility of going lower, but I take the profits as they come in this volatile market. You absolutely need to stay on your toes here. Although it was a "small" position, $12/share is substantial for most traders and I will probably stay out the rest of the day unless something truly substantial shows up. My reasonings for my short sale last night included:
1. after a violent rally occurred late in the day, I continued to see short covering into the after hours market which, at $350/share, was $5.50 over the closing price. On a typical premarket morning, BIDU normally gaps up $5-7, so my typical scenario would have me at an even position to slightly down at worst. I have seen BIDU gap up as much as $8 to 10, but opening a position at 350 simply gave me the odds I was looking for.
2. I don't believe that this market is healthy, despite a late day rally
3. as mentioned earlier, it has been a while since we've had in fact a premarket gap down in the momentum names
(As a side note, I understand that some of my readers may not be familiar with the terminology I'm using here. I will try to post a "glossary" of terms used in trading.)
1. after a violent rally occurred late in the day, I continued to see short covering into the after hours market which, at $350/share, was $5.50 over the closing price. On a typical premarket morning, BIDU normally gaps up $5-7, so my typical scenario would have me at an even position to slightly down at worst. I have seen BIDU gap up as much as $8 to 10, but opening a position at 350 simply gave me the odds I was looking for.
2. I don't believe that this market is healthy, despite a late day rally
3. as mentioned earlier, it has been a while since we've had in fact a premarket gap down in the momentum names
(As a side note, I understand that some of my readers may not be familiar with the terminology I'm using here. I will try to post a "glossary" of terms used in trading.)
Wednesday, January 9, 2008
After hours update
FYI, i noticed the after hours short covering seemed to be getting ahead of itself, so opened an extremely small short position on BIDU at 350 at 7:50 PM ET tonight. It closed at 344.50. I will close that out quick if it gaps higher tomorrow premarket.
Also, strange that the Hang Seng opened up down 160 points after our US market rally.... we'll see about tomorrow.
Also, strange that the Hang Seng opened up down 160 points after our US market rally.... we'll see about tomorrow.
January 9th After Market Close
Hope you're all doing well. As mentioned for several days, a test of 12,500 was in the cards and happened today. With the volatility out there, it has been a spectacular week of trading. I purchased AAPL 200 calls for 46 cents this morning and saw them close at 1.05. Also placed a number of trades in AAPL, BIDU, FSLR, ICE, MA for a good profit. At this point, I don't have much to say about the next couple of days so I'll probably be mainly sidelined until I see something developing. Traders should trade when they at least have some kind of a forecast for the markets. When the market hits your targets, its time to step back. Holding on to my AAPL 200 call options for MacWorld next week. See you tomorrow
Tuesday, January 8, 2008
January 8th After Market Close
I apologize for not posting earlier - got hit by some kind of food infection last night. As mentioned in earlier posts, I was expecting some consolidation in the markets with a retest of August lows around 12,500 on the dow. It looks like this may be happening sooner than later. Although I was sick, I did manage to do pretty well today on a number of very quick trades. I did end up purchasing BIDU after hours yesterday at 344, sold this AM premarket at 349.75. Also purchased AAPL at 177.65, sold premarket at 179.12. I know a number of traders also play these overnight holds with the favorites, but remember we need to be careful. It's been a while since we've had a gap down in the morning. The rest of my trades today were long and short with small positions.
The markets have been extremely sensitive to headlines - including the CFC bankruptcy rumors, T coming out with a slower outlook, and various credit related issues. I would not be surprised to see an emergency rate cut this week if the markets continue their downturn, but as I said, I really wonder if even that can bring stability to this market. Tomorrow we have the weekly initial claims report - I think traders need to be very careful here as any economic data seems to have an overly large effect. Take home message is to stay cash and trade fast. Be careful if you're on the long side - Good luck.
The markets have been extremely sensitive to headlines - including the CFC bankruptcy rumors, T coming out with a slower outlook, and various credit related issues. I would not be surprised to see an emergency rate cut this week if the markets continue their downturn, but as I said, I really wonder if even that can bring stability to this market. Tomorrow we have the weekly initial claims report - I think traders need to be very careful here as any economic data seems to have an overly large effect. Take home message is to stay cash and trade fast. Be careful if you're on the long side - Good luck.
Monday, January 7, 2008
January 7th After Market Close
As mentioned earlier, I felt that the markets would not be making any headway down or up today, and if you traded with that mentality, you would've done well. Looking at the intraday chart, traders that shorted any dow rally at +50 or bought any dow decline -50 resulted in very nice profits within a short period of time. Even with 20 minutes left in the game, the dow was down 55 points, and within 10 minutes rallied to +50. I opened various positions long and short today and must say I'm pretty happy with the performance. Did not open any AH positions yet, but will keep you posted.
Getting Clobberred
Although the indices don't seem to be posting huge losses - individual stocks are simply getting hammered today. Huge volatility out there. FSLR, AAPL, BIDU, other previous market leaders. I've been shorting the rallies, and buying the dips, as I don't expect the indices to finish changed by too much today.
Morning Trading Update
AAPL was sold for 181.06 at market open for a profit of $1.14/share from the purchase at 179.92 on Friday AH. I watched AAPL move as high as 183+ after my sale, but as mentioned earlier, I have no qualms with taking a smaller profit in the interest of risk management. AAPL proceeded to drop as low as $170.23 very shortly. FSLR also fell sharply as well - low of $230 after my premarket sale at $252.50. As expected the market gapped up, but the move was quickly faded.
I repurchased AAPL at 173.24 and sold at 174.45 (once again, "prematurely", as AAPL proceeded to move as high as 177+).
Keep an eye on the Yen, as it has been a fairly correlated indicator for market stability or instability. I don't expect the market to end the day with a major gain or loss today. See you later.
I repurchased AAPL at 173.24 and sold at 174.45 (once again, "prematurely", as AAPL proceeded to move as high as 177+).
Keep an eye on the Yen, as it has been a fairly correlated indicator for market stability or instability. I don't expect the market to end the day with a major gain or loss today. See you later.
Monday January 7th Premarket
Closed out FSLR at 252.5 premarket with that upgrade from Merrill from Friday at 245.36 for a $7.14/share profit. As a very short term trader, I generally take the profits when I see them and also stop out very quickly. Therefore, many readers will observe that I will "miss out" on a lot of further upside on a number of trades. However, my strategy on trading is: trade profusely, and trade on probabilities, while attempting to achieve some sort of consistency on achieving those higher probabilities. I will tell you now that there are too many trades to count where I could've practically retired had I held those positions, but on the same token, as many would have resulted in losses leading to a trading retirement. In trading, risk management is first and foremost.
Lots of chatter about the market opening higher after the steep drop we've seen, but I'm not convinced any rally will hold at this point.On the positive side we've got the CES show in Vegas which might buoy the tech sector briefly. Other than that, earnings season starts anew tomorrow with Alcoa (AA). See you after the open.
Lots of chatter about the market opening higher after the steep drop we've seen, but I'm not convinced any rally will hold at this point.On the positive side we've got the CES show in Vegas which might buoy the tech sector briefly. Other than that, earnings season starts anew tomorrow with Alcoa (AA). See you after the open.
Friday, January 4, 2008
The Market - January 4th After Hours
What a ride on the first 3 days of the new year. We are now officially on recession watch. Major Economic reports will be key in determining the direction of the markets for the near future. A bad ISM manufacturing report on Wednesday, followed by today's jobs report has now left us in a general 10% downturn, and left us in an oversold condition. We may see an attempt to rebound on Monday, due to this oversold condition as well as the absence of any major economic news. There was a large spike in selling pressure in the last 10 minutes of trading as well. Therefore I opened small long positions in FLSR $245.36 and AAPL $180 at end of day today and will close them on Monday.
Near term, I expect the markets to test August lows after some consolidation here. The intraday low on August 16th, 2007 was 12,455. We are entering earnings season again, and I expect most companies to report decent earnings but give poorer than expected guidance. I would not be surprised to see a Fed action (in the form of an emergency rate cut), should the market be testing these levels, or on another series of major downturns/ bad economic reports. So far, the Fed has been able to facilitate some major rallies via various efforts, but it seems their influence is now fading. I will probably short the next "Fed" rally should it fail, as it may represent a loss of trust in the ability of the government to rescue our economy.
See you on Monday
Near term, I expect the markets to test August lows after some consolidation here. The intraday low on August 16th, 2007 was 12,455. We are entering earnings season again, and I expect most companies to report decent earnings but give poorer than expected guidance. I would not be surprised to see a Fed action (in the form of an emergency rate cut), should the market be testing these levels, or on another series of major downturns/ bad economic reports. So far, the Fed has been able to facilitate some major rallies via various efforts, but it seems their influence is now fading. I will probably short the next "Fed" rally should it fail, as it may represent a loss of trust in the ability of the government to rescue our economy.
See you on Monday
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