FRI. NOV.14- Who's In Control, Here?

“I will never apologize for changing a strategy or an approach if the facts change.” One can interpret that very positively: it is good to be open-minded, flexible, and ready to admit one’s mistakes. However, one has to judge that statement in context and situation. The person who uttered those words which will undoubtedly be repeated on shows like “Meet The Press” was Treasury Secretary Henry Paulson at a press conference. The situation was the pronouncement that the plan has changed as to what to do with the $700 billion allocated via the TARP. The original plan was to purchase distressed mortgage assets which would theoretically unlock the credit markets. Indeed, LIBOR rates have fallen to their lowest levels in quite some time. However, instead of letting some time elapse, the Fed decided things weren’t progressing fast enough as banks are still hoarding money. The fear is palpable; whereas there was a frenzy at the top of the real estate market, now no bank is willing to lend anything to anyone. So, a mere four weeks after the original announcement, Paulson changed the plan to more of an injection scenario in which companies received bailout funds for capital injections. Yet, the plan changed one more time again this when the Treasury Department said it planned to aid the automobile companies, student loan entities, and even holders of credit card debt. Financial markets abhor uncertainty. Just as in life, it is arguably better to know bad news so one can deal with it rather than be unsure as to the outcome of a terrible situation. Well, this principle goes a long way to explain the weakness in the markets. Nobody is sure of what will happen next in the Obama administration. And arguably more important, when the Treasury Secretary of the United States shifts strategy time and again, the message is sends to the rest of us plebians is as such: “if the Treasury Secretary cannot make up his mind what to do, does anybody knows how to fix this? This is not an indictment of Paulson or Obama per se. However, the performance of the markets these last couple of weeks indicates that the broader investor community is worried that nobody has any idea what the ultimate fix for this crisis will be. For day traders, it just shows we cannot get into work five minutes before the open and expect to be profitable; we must be knowledgeable on the ongoing details of this crisis and be ready to act intra-day appropriately as the news changes – as it did yesterday when the Dow rallied a mere 9.85% from its low to its close as rumors swirled that the G-20 is going to tackle everything together this weekend at their conference- some how, some way.

Overnight, markets throughout the world rallied 2%-3% on the heels of Wall Street’s rally yesterday. State-side, things aren’t looking quite as good this morning with a little giveback likely. The problem, however, is that LIBOR crept up for a 2nd day in a row and the dollar is down very hard against the yen this morning. So, there may be a little follow-through to yesterday’s short covering burst, but if things don’t hold early, it could get messy later in the afternoon.

Reiterating-If the whole story is not there -
If something is good, assume either a short thru unchanged or an A-B-A2 based on direction of the market unless specifiedIf something is bad, assume either a buy thru unchanged or an A-B-A2 (preferably to the downside in a downside market and the upside in an upside market) based on direction of the market unless specified


Good-

MSCC- good earnings

PLD – closed way off of its lows…A-B-A2 would be nice thru yesterday’s high around 7

GS- massive reversal yesterday; looking to buy around 70 if it opens down

AMB- huge reversal; looking to buy above yesterday’s 16.88 high on A-B-A2 of some sort

FCX- closed near a high

POT- closed at a high

LNC- massive reversal; would like A-B-A2 thru yesterday’s 15.25 high

RAS, MPG, NCT- small REIT’s with major short covering yesterday; if they open down, they are all buys thru unch

AMAG- almost doubled yesterday; may get wave of short covering today thru yesterday’s high of 37.50 particularly if it opens down

MBT, VIP- among the Russian ADR’s to rally yesterday; track Russian markets as morning progresses as these may go right back down

GOOG, AAPL, AMZN- among big cap tech with massive reversal; look for money to flow to these two among others if market rallies

RIG, OXY, NE, APA, SLB, MRO- among others, very strong oil stocks yesterday on short covering; they will likely lead oil prices today

Bad-

WYNN- announced 8 million share offering at 43.50; if it opens below 43.50, may be a buy thru 43.50 because the offering may provide extra cash to write down some debt which makes it accretive to bottom line as debt interest decreases

KSS- warned on its earnings outlook

JWN- warned on its earnings outlook

BIDZ- bizarrely weak since its earnings released Monday…look for much more volatility in this issue today and perhaps some major short covering

ANF- warned badly

NOK- terrible guidance

JCP- warned badly on holiday quarter

A- warned on next quarter

Earnings:

FRI NOV 14 BEFORE

A ANF CIG

HEW JCP



Good luck today.

THURS. NOV. 13- Be Flexible

Following up on yesterday’s trading lesson themed blog, let’s do one more. This was a statement made yesterday morning when the blog was posted about 7:30AM ET: “With stocks having closed in the middle of a range and news flow slower, look for today to be a very difficult day trading day…prices will likely be rangebound on both sides of unchanged all day today.” The problem with going out on a limb is that while this blog has thankfully had a track record anybody would be proud of, predictions are certainly not infallible. Furthermore, trades can develop on all of the stocks mentioned in the idea section which one cannot fathom at 7AM much less one cannot predict everything with 100% at 7AM. Or at anytime for that matter! This leads to the point of this piece: the word of this piece is “adaptability.” The prototypical day trader must be ready to change held beliefs at a moment’s notice if the facts/situation deems it prudent to do so. When European markets began breaking, oil fell out of bed, and the currency market got out of whack by 9AM yesterday, it was clear that the situation had changed. One of the obvious yet stunningly incredible things about the practice of day trading is the rapidity with which the parameters of the situations we utilize change. Should one advocate scrapping everything at any point? No, not exactly. But if what one thinks does not seem to be playing out, it is certainly timely much less necessary to reevaluate one’s thinking. This all sounds so very obvious, but we have all been in situations – in trading and in life- where we are convinced something will happen when all the facts change thus proving us wrong yet we obstinately hold on to our incorrect belief. So, be aware when this happens and it’ll often save you a tremendous amount of money.

Overnight, markets in Asia were drubbed- down about 5% across the board. In Europe, stocks are also down, but off the floor. Futures don’t paint too bad a picture in the early going and a few entities out there have begun dipping some toes in; Goldman for instances has upgraded Dell (DELL). With little reaction to the INTC news, we may have a nice reversal day today…look for an A-B-A2 upside morning.

Reiterating-If the whole story is not there -
If something is good, assume either a short thru unchanged or an A-B-A2 based on direction of the market unless specifiedIf something is bad, assume either a buy thru unchanged or an A-B-A2 (preferably to the downside in a downside market and the upside in an upside market) based on direction of the market unless specified


Good-

NTAP- decent earnings

AMAT- beat on quarter, but warned on outlook

MELI- after terrific report, had major downside reversal; looking for A-B-A2 to upside if market bounces

SINA – decent earnings

ECL- doing massive share offering at 30.50…in all likelihood, it is a buy thru 30.75 if it holds 30.50 as it has been beaten down- particularly before 8AM- may be trade of day

Bad-

BXP- announced they are doing a $2 billion share offering

SOL- closed near a low; looking to short thru 3.40 if it opens higher

GAP- closed on a low; looking for renewed weakness

KHD- closed near a low; if it opens down, would like to do A-B-A2 thru 8.25

FNF/LFG- spread between the two stocks continues to widen; looks like deal may be off

GET- closed on its low; would like to short thru 8

USG- closed near its low; would like to short thru 9ish

IPI- closed near its low after earnings report; looking to short thru 15.25

MIC- downtrend continued; closed near a low and would like to short thru 3.90ish

JRCC- its decline continued as well; if oil rallies, look for short covering

CROX- warned, but Bill Gates took stake in company

NTES- earnings not great

GS- offered well down after-hours yesterday; something not right here to put it mildly

GHM- closed near a low

CACB- weakest among the small banks yesterday

WFMI- appears as if their capital raising plan is failing

LULU- among the weakest of the smaller clothing companies yesterday

PETM- WMT may be encroaching on their business; worth listening to WMT conference call this morning to find that out

SBAC- among the weakest of the small communications companies

LCC, UAUA, AMR, DAL- airlines were the worst performing sector yesterday

AMLN- this drug company keeps sinking

HOG- nobody is buying motorcycles right now; another new low for Harley

COP, MDR- among the oils and driller hit as oil prices sank to a 2 ½ year low

DRE- weakest of yesterday’s REITs

EAT- great company, but faces a capital shortage

HOT- among the weakest of the hoteliers; another downtrend low yesterday

CBS- lack of ad revenue leading to multi-year low for what was once the op media company on the planet

STP, LDK- helped to lead all of the solars down hard yesterday

AKS, NUE- among the weakest of the steels

AMB- this financial closed at a multi-year low as well yesterday

WMT- beat on quarter; warned on holiday quarter, i.e. next quarter




Earnings:

THURS NOV 13 BEF

BTE DPS FCSX

FIG MBT MPEL

URBN WMT


THURS NOV 13 AFT

CLNE JWN KSS

MSCC






Good luck today.

WED. NOV. 12- So, What Makes A Good Trade?

As the market chops around in a pretty big subrange in the middle of a broader range as discussed in yesterday’s blog, perhaps now is a good time to clarify four defined characteristics of a good trade. In a market that is ‘acting slower’ for lack of better verbage as compared to recent weeks, these are the four things that one should focus his efforts upon when doing a day trade: First, the market must be moving in the direction of the trade. Namely, if you are long 100 shares of Goldman Sachs, the market needs to be uptrending while you are in it. Second, there needs to be news on the stock in which you seek a position. Trading U.S. Bancorp (USB) in the middle of a day with no significant corporate developments when one can buy or short American Express (AXP) when there is news in AXP is a good recipe for losing money net-net. Third, the chart must be in your favor. Trading a stock at a new high or new low is typically more effective than trading it in the middle of its range. Finally, one must seek to obtain 20 cents easily. If one trades shares of companies like Cisco (CSCO), what often happens is that it goes a little in your favor and you take the quick money…or it goes a little against you and you get out in fearing further losses. That too is a fine mechanism for losing money. When one has a trade that includes all of these characteristics, one tends to do a lot better than when any number less than all four tenets are present. The only exception to this is when the market is moving wildly as it was a few weeks ago; in that case, one does not necessarily need news to trade as more opportunities present themselves. An example of a trade in which everything is put together is Las Vegas Sands (LVS). The company announced a massive share offering at 5.50 with Goldman Sachs as the chief underwriter; the stock should never have traded below 5.50. Once it broke 5.50, it fell 32 cents in four minutes. The market was selling off when this happened. The news was the share offering. The technical pattern was the breaking of the new low. And the reward was at least 20 cents as many longs paniced out versus what would have been a risk of 1-3 cents had you shorted 5.50 with the bid reloading. One has got to exercise caution nowadays and the more refined the trade you do, the higher the quality of the trade- and the higher your paycheck.

Markets in Asia generally finished down, but well of their lows- about 0.5% to 1% across the board. Bourses in Europe are higher by 0.5% to 1%. Oil is down another dollar. Futures state-side are down slightly as of this writing. With stocks having closed in the middle of a range and news flow slower, look for today to be a very difficult day trading day pending extensive movement this afternoon. Prices will likely be rangebound on both sides of unchanged all day today.

Reiterating-If the whole story is not there -
If something is good, assume either a short thru unchanged or an A-B-A2 based on direction of the market unless specifiedIf something is bad, assume either a buy thru unchanged or an A-B-A2 (preferably to the downside in a downside market and the upside in an upside market) based on direction of the market unless specified


Good-

GS very notable turnaround; looking to buy thru 75.42 Tuesday high on An A-B-A2 if possible

CNQR- good earnings

MELI- great earnings

CEPH- going into S&P 500 on close today

EMR, NAT- on “Mad Money” last night

DSX- beat earnings; announced buyback of stock and suspension of dividend

M- decent earnins and outlook

Bad-

CLF –notably weak yesterday; it is a short thru 21.25 (yesterday’s low) or an A-B-A2 buy

USG- closed near a low; looking to short thru yesterday’s low of 11.80

MIC- continued its plunge; looking to short thru yesterday’s low of 4.95

VIP, MBT- among the Russian ADR’s hit very hard yesterday

SWC- closed on the low; looking to short thru 2.46

NTY- atrocious earnings

HOLX- warning slightly on its earnings outlook

CTCM – leading public Russian media company; slammed yesterday…looking to short thru 3.65

JRCC - among the coal stocks rocked in recent days…this one is down more than 50% this month. Looking to short thru yesterday’s 8.67 low or preferably A-B-A2 short covering to upside

LULU- weak on downgrade

DKS- broke to trend low after downgrade; would like to short thru yesterday’s 11.80 low

IPI- terrible earnings

JASO- horrible outlook

TEL- weak yesterday on TYC’s earnings

SFD, TSN- poultry producers weak due to lack of financing; looking to short both thru yesterday’s lows (7.30/4.82 respectively)

BBY- slashed earnings outlook

Earnings:

WED NOV 12 BEF

ACM DSX GU

JASO M PGR

WED NOV 12 AFT

AMAT ANW CHIC

CROX CSC GA

.HTE NTAP NTES

SINA TTEK



Good luck today.

TUES. NOV. 11- Beware The Middle

On October 27, the Dow hit a low of 8144. On November 4, the Dow hit a high of 9654. In the last two days, the benchmark average traded in a range of 8700-9100. A broader range of approximately 7850-9800 is in effect if one goes back a couple more weeks. For day traders, there are two conclusions to draw from these numbers. First, volatile trading continues to rule the roost. Second, stocks are by any reasonable measure in the middle of a wide range. Let’s focus on the latter tenet. Momentum traders- which let’s be honest- all of us at Protrading Network ate glorified momentum traders- tend to focus upon new highs and new lows for their action. When stocks are in the middle of an intra-day range, the good traders tend to stay away and not force things. When the market as a whole is in the middle of an intermediate-term range, action tends to slow. This is yet one more reason why volumes have dropped off significantly in the last couple or three weeks. Namely, traders are not sure with any conviction which way the market will next break. It makes things that much harder for day traders when the market lacks direction because how do we know where the next momentum wave will be? So, particularly as we head into holiday season/holiday trading toward the end of this horrible year for sock market performance, realize that there will be increasingly less to do. Thus, you must must must hit the spots on the trades you want to do and avoid the temptation to push buttons when there is nothing to do. It is the difference between making a paycheck for a day and losing a week’s salary in many cases. This is also why the watch lists and blog lists will likely shrink in coming days so, again, use extra caution and please be prepared to not trade quite as actively if we meander amidst the middle of a trading range on further decreasing volume.

Overnight, markets throughout the world fell on recession fears. Asian and European markets are all down 2% to 3% across the board. Oil is near an 18 month low as the $60/barrel level is encroached. State-side, futures are weak. Volumes will likely be very light today as the Veteran’s Day holiday is a conduit for many closings today, most relevantly the bond market. Basically, look for the markets to stay down much of the day with attention focused upon individual issues like Goldman Sachs (GS). Again, trade will be thin so exercise caution.

Reiterating-If the whole story is not there -
If something is good, assume either a short thru unchanged or an A-B-A2 based on direction of the market unless specifiedIf something is bad, assume either a buy thru unchanged or an A-B-A2 (preferably to the downside in a downside market and the upside in an upside market) based on direction of the market unless specified


Good-

AXP- got ‘bank’ designation from the federal government

PPG- on “Mad Money” last night

OPTR- soaring on positive drug news

VOD- good earnings


Bad-

GS- closed off of its intra-day bottom, but broke to a new downtrend low

ALD- closed near its low on wretched earnings; likely a short through 3.80 when/if

USG- new downtrend low…12.50 may be spot to short

PLD- closed near low; looking to short thru 7.60 if it opens above there

FMCN- abominable earnings

SBUX- missed its estimates and warned

SGMO- issued disappointing drug study results

AMAG – smashed to a new downtrend low yesterday

NNBR- broke to a new downtrend low…down 60% in days…looking to short at 2.15 or below if it gets there

LVS- missed earnings; noted they have new financing coming yet didn’t disclose how they will get it

BIG- very weak yesterday

HCN- weakest among the healthcare REIT’s yesterday

GNW- because their debt ratings were cut, they are not eligible for assistance under the current TARP program.

GGP- says debt maturities are a going concern doubt

Earnings:


TUES NOV 11 BEF

FOSL TJX TYC

UGI VOD



TUES NOV 11 AFT

CNQR HOLX MELI

MSFT NTY PBR

RAH






Good luck today.

MON. NOV. 10- Preperation Is Key

One of the more interesting features of an interesting market in an interesting time is that so many traders tend to pick random times to take random positions in random stocks. The best time of the day for trading tends to be in the pre-hours and in the first 1-2 hours post-open. As stressed so frequently throughout this blog, the well-prepared trader can make most of his/her money during this time. This is because it is rather fascinating to attempt to make sense of complete chaos- yet it can be done very profitably. On Friday morning, Fidelity Financial (FNF) announced it was going to merge with LandAmerica Financial (LFG) for .993 shares of FNF for each LFG share. As LFG closed at 4.75 where FNF was 8.35 at the close on Thursday, this was quite the deal for LFG shareholders. By 7:55AM ET on Friday, FNF was actually trading higher on the morning in a range of about 8.65 to 8.85. LFG was trading about 8.10 – not quite the 8.50ish it should be trading at, but one must leave leeway for time value of the stock (i.e. time is money and a dollar is today is worth more than a dollar a year from now). At 8AM, with the stock trading at 8 on ARCA, LFG suddenly traded around 7.30 on NSDQ yet FNF had not budged. This was just one seller who came in unprepared and dumped about 8,000 shares of the stock. Anybody who bought that stock at that level – a full 70 cents below where it traded one minute prior yet its acquirer was trading even higher- was in line for a nice pay day as that trader could immediately sell the stock at 8 or even better by holding for just a few minutes. But none of this was possible without a little homework. One did not need to know every intricacy of the deal; however, by simply knowing there was a deal and terms of said merger, one could trade accordingly. Day trading is harder, but it is literally impossible if one is not truly aware of the goings-on in not only the markets, but the stocks they trade. Thus, we at Protrading Network preach much less beg all day traders to do basic homework- know what the foreign markets did overnight, know the major stories of the day, and know the stories behind the stocks they plan to day trade - particularly in this environment. There has arguably never been a time since the advent of day trading in which the gulf of the performance between day traders who do some homework versus those who do not has been wider.

Overnight, markets rose sharply worldwide following plans for a huge capital infusion by the Chinese government and the American taxpayer doling out more money to AIG. Futures are sharply higher state-side. Look for a strong open followed by a lot of choppiness. Volumes will likely not be exceedingly high today so pick spots to short in weakness, but if the market can digest its early gains after a little profit-taking post the nice rise on Friday, we’ll probably chop around all day in upside ground.

Reiterating-If the whole story is not there -
If something is good, assume either a short thru unchanged or an A-B-A2 based on direction of the market unless specifiedIf something is bad, assume either a buy thru unchanged or an A-B-A2 (preferably to the downside in a downside market and the upside in an upside market) based on direction of the market unless specified


Good-

CYCL- being bought out for AT&T for 8.50 cash

HUN- trying to renegotiate merger terms according to “The New York Times”

FDRY- accepted a higher 16.50 bid by BRCD

VZ/HLF- on “Mad Money” Friday night

HES- oddly closed strong on Friday in a decent oil sector, but it was among the strongest

WFC- gapped higher on the close on an imbalance; looking to buy thru 29.50 if it gets there

ENER- decent earnings; may get rise on oil surge…but it was also downgraded this morning

PWRD- good earnings

CHDX- good earnings

NRG- rejected buyout bid by EXC

AIG- government loan expanded in size

Bad-

MBI- debt rating cut to junk at Moody’s. MBI insists it doesn’t matter, but if the stock trades down sharply should there a whiff of anyone not be willing to use MBI as a reinsurer, this stock will crater

MIC- closed near a low; looking to short thru 7 on an A-B-A2 in particular should it get there

TC- closed weak on horrible earnings; looking for follow-through yet if selling ebbs early, could be an A-B-A2 short covering upside bounce

ACAS- bad earnings

ALD- bad earnings

ECL- biggest shareholder selling 72.7 million shares of ECL




Earnings:

MON NOV 10 BEF

ACAS AHR ALD

CLWR DISH ENER

NU SRE SUG

TSN



MON NOV 10 AFT

AGM AIG ASCA

CCJ FMCN HPT

HR HRC KFN

LGF MR MRX

PBR REG ROK

SBUX TKTM TMA





Good luck today.