Friday, May 30, 2008


One of the things lost in the rapid ascent of the price of oil in the last few weeks is the sharp ascent in interest rate yields and the value of the dollar in relation to the rest of the world’s currencies. Much of the climb in oil prices has been due to the weak dollar and rock bottom interest rates as oil is priced in dollars. But, very subtly, the dollar has appreciated more than 10% against the Japanese yen, for instance, since March 17 while the 10 year yield on Treasury bonds has risen about 75 basis points. This indicates a renewed surge of confidence in the financial system as people world-wide buy dollars and sell bonds in order to place their monies into more aggressive investments. It also portends a potential uptick in inflation. As interest rates rise, investors much less consumers seek investments which will give them a greater return. Yet, it also indicates that individual bubbles like oil prices may deflate while the prices of other things that have been held in check (clothes, et al) should rise. For day trading purposes in the immediate-term, focus on the first idea- namely that people are much more likely to seek risk at this point even with interest rates on the rise thus a lot of the plays that have been working on the short side will likely not be as effective. Furthermore, it makes declines a bit shallower in things like financials with rallies in individualized plays much sharper.

Overnight, things were quiet. DELL posted much better tha nexpected numbers so it is trading higher and providing support for a firmer tone to the equity markets. Foreign markets were mildly positive, the dollar is neutral, and oil is up a bit at the time of this writing.

Newsflow is very slow right now; it is going to be 77 and sunny in Manhattan today. So, whatever you do, barring a wild swing in oil, the best time to do it will be in the first hour.

DELL- not looking to trade it, but will monitor as a bit of a proxy for the market.

JCG- way way way down on atrocious earnings. It's the A-B-A2 pattern again. if say it opens at 38.50, rallies to 39, and falls back to 38.50, short a new low.

MRVL- same idea as JCG, but in reverse. if it opens around 16.50, falls back to 16.25, and comes back to 16.50, buy the 16.50.

HXL- announced gigantic contract from Airbus. Same idea as above; if it opens at 24.50ish, sells off a little, and comes back to the 24.50ish, it is a buy on momentum buying.

Solars- all strong as Morgan Stanley said to use yesterday's weakness as a buying opportunity.

SINO- if it opens a little higher, sells back off and holds unchanged, buy it where it opens.

MA- was strong all day yesterday. They received a number of upgrades this morning, but it is not up much. If it gets to unch, it's likely a short.

Relative slim pickings. Summer market. Tread carefully.

Good luck.

Wednesday, May 28, 2008


Summertime. With the exception of seasonal events like earnings season (July 15ish-August 15ish) and of course isolated major financial events like the beginnings of the subprime meltdown last August, the tone of the markets is gentler in the summer. Equities tend not to react as violently to external forces as in the other seasons and this makes intra-day trading much more difficult. Whether one relies on news flow (which is not as heavy in the summertime) or if one relies on wide price swings, day trading is not the same from Memorial Day to Labor Day as a general rule. This is an important point because many people get into exceptional intra-day trouble in the summer. Basically, if one is trading 2,000 to 5,000 shares of a stock and the movement doesn't happen (nor as much movement), the shares are quickly let go at a small loss. This 'death by 11 small losses in a row' is a fast way to lose money net-net day-in and day-out. Thus, the summary is this: 1)if you have an opportunity particularly in the early part of the day, hit it with all you can stomach because there just won't be as many opportunities the rest of the day. This, by the way, is good to keep in your mind the rest of the year also; making a little early money tends to beget confidence and loosen stress. Second, if you're thinking a little more often about the beaches, the weekend in the Hamptons, the barbecue, and the like- realize, most of us are as well. The bright sunshine is a positive force for most people; it puts us in a better mood overall and makes most if not all of us want to be outside rather than staring at a computer terminal. Therefore, it is harder to focus which leads to less volume for the trading community as a whole, but more chances to lose for the day trading community as well. Realize this subconsciously. Trade when needed and when warranted, but don't overdo it when there is nothing to do because moves that often occur from Labor Day to Memorial Day aren't as readily evident during the summertime.

Overnight, the overseas equities markets were all up with Tokyo being the strongest. Oil is down. Bonds are weak (more on this tomorrow). The dollar is up. Basically, a continuation of the general slop from yesterday with light choppy action per the theme above seems to be in full force today- should also note it'll be 73 and sunny today and 78 and sunny tomorrow in New York City.

SHLD- abominable earnings. Was going to say 'buy thru unch,' but it already got above there. So, I'll go the other way...there is no way this stock should be up. if the market sells off, short thru unch. Conversely, it's that old A1-B-A2 pattern anew. If it opens at 90, falls to 89.50, and rallies to 90 (or something like this), buy 90 because it should be down and it is not.

JOYG- great earnings. Right inudstry. Same A-B-A2 thing. If it opens at say 81.50, falls to say 81, and goes back to 81.50, buy 81.50 on the A2 point because more short covering will likely enter.

COST- neutral earnings. Stock traded down 2 pre-open. I actually bought the stock just thru unchanged this morning and made 55 cents on it fairly fast which shows the power of what we are trying to do here. I look for similar action to SHLD...short thru unch, but if not, A1-B-A2 -i.e. open of 73.50, down to 73.35, buy 73.50 if it cannot go down. Something like that with the numbers, but definitely like thta with the pattern.

GNK- odd. They had a share offering at around 75.50 last night. Stock is 70.50. One would think that the stock should trend upward...if it doesn't, short thru unch.

SB- dry bulk shipper going public. If SB weakens from its open, track DRYS, EXM, and DSX among other dry bulk shippers as shrots because they've all been strong.

COP- exploded into close yesterday on buy on close imbalance. Stock should trade down this morning because the only reason it rallied was because of the major buyer. If it opens lower, goes to unch, and oil is rallying, buy thru unch.

SINO- has been pummeled after its explosive post-IPO rally. If it opens down this morning and looks to go thru unch, buy it.

NR/GSI/CF/TRA/MOS/ATI- all strong yesterday...if they open down and go thru unch, look to buy any of them on short covering.

TRN/OTTR/OC/WGOV/TNB/KDN/MTZ- all on Cramer last night...all repeats from previous shows. Look to gently sell into strength post-open.

BIG/DSW/GCO/HNZ- other earnings plays...watching.

solars (FSLR, et al)- FSLR price target downed this morning at Merrill Lynch; others like ESLR cut. Whole sector weak.


Good luck.

Tuesday, May 27, 2008


I've quickly learned in the early goings of this piece that many people are actually frightened/scared to trade most of the ideas I present in this space. I have never advocated buying or selling in anything in this space, but two thoughts keep ringing around in my mind:

First, what I/we have tried to create here is a bit of a planbook for the day with a particular focus on the early going. To me, it makes a lot of sense that if, say, a Lehman Brothers (LEH) falls from 45 to 35 in 10 days on liquidity rumors, the stock gets beaten down in the early going, the market the nrallies, and LEH goes through unchanged, it is going to rally further. People/investors/institutions who are short the stock will not understand why it is down and many will rush for cover. The trick, here, is not to ask "why" this happens ,but to understand that it does happen and to react to it from there. Our job as traders is to make sense of the action in a practical rather than a theoretical sense. Ergo, when this situation presents itself, do not be afraid in trying to figure out why Lehman is rallying...just accept that it does and buy it. In summary, it helps to be thinking to trade mainly from the long side if this is what the factors would indicate rather than haphazrdly shorting andf buying different stocks. Second, what most traders never comprehend is that most of the plays that are found in this blog are 'safer' and have a 'higher likelihood' of working out than the plays many traders attempt (i.e. scalping). To me, a play like LEH is much much safer than trying to buy a significant swath of a stock like CSCO or MSFT in the hopes of making a few cents. If there is a reason to do something, do it. But, again, my point here is that instead of worrying about losing, mkae sure you know where you are wrong but focus on winning. Realize that if LEH didn't quite get through unchanged after trading lower all day long on the news/rumors it endured, you can sell it for a 5 cent loss. But if you are right, you can make a dollar a share in 10 minutes. Do not be so afraid to lose that you cannot win.

Overnight, the European markets were up a bit while oil continued it's afternoon swoon as it is down over two dollars a barrel in the pre-open. The futures are trading higher. Overall, look for slow summer-like trading with a nice open and pockets of strength here and there...should oil accelerate its move one way or naother, the market will act accordingly, but likely on light volume.

SNDA- terrible earnings...looking for the thing to continue to downtrend lower. Would like to short at 33.85ish (which it may be well below by the time this is published).

WX- good earnings. Should hold, but looking to short thru unchanged.

UCBI- broke down terribly yesterday. Looking for more follow through today and specifically, would like to short thru yesterday's low.

JRJC- was very strong yesterday. Looking to short thru unchanged if the market weakens.

KDN/SPW/CTCM- all Cramer stocks...KDN/SPW will track the market in particular.

MXC/PDO/FPP- small oil plays...if oil breaks badly, looking to short these all day long. If market rallies, I like MXC in particular as a buy thru unchanged.

CKXE- received a 12 dollar a share takeover bid. Stock barely moving. Do not know why. Looking to short thru unchanged.

Other entities of note- AEO/CBRL/DAKT/DLTR/RL all reported earnings before open; AINV and MW after-hours. YHOO 'amenible' to a deal. ADm convertible offering. MFA convertible offering.

Good luck to all.