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...
Sunday, January 20, 2008
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!
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