Thursday, January 8, 2009

Stock specific action

When we mention stock specific action we are referring to a name that stands out from its sector and from the market in general.  This is different from the second half of 2008 where we saw a lot of market participation.  (Buying/shorting a specific financial often did not vary from buying/shorting any other financial for example.)  I am going to highlight 2 specific examples from today's action that Trading RM identified and traded. 

The first is SHLD.  What were the signs that SHLD was having a different day? 

1. Strength within its sector: The morning saw weakness across various retail names (RTH, JWN, WMT, TGT, etc..)  The retail sector was weak premarket and initially after the open. Conversely SHLD gapped higher.  SHLD moved higher in the premarket, on the open it continued higher.  It retraced, but not anywhere near its premarket high. 






2. Identified on the Trading RM morning sheet:
  for those that download out Trading RM worksheet every morning, SHLD was identified as possibly being in play on the long side today. You can register at our website to view the morning worksheet and morning trend sheet every day. 

3. Strength in relation to the market - the general market sold off initially, while SHLD made highs.  See the above chart, the grey line represents the S&P. 

4. Breakout to the next level on a daily chart.  Just eyeballing the chart gave us an initial resistance of 43.25.  The next stop up was 50.00, which is where SHLD closed.



Note: none or all of the above lead us to trade a name.  They do however draw our attention to the name at which point we use our skills in timing, stock selection, controls/discipline, and capital allocation to determine how much, if any, to trade. 


The second great stock specific example from today was SGR.  What signs did we have the SGR was having a different day?

1.  SGR is in an uptrend - unlike numerous sectors and the major indices - SGR has not moved back down below the top of its previous range.
2. Unusual volume - note daily chart
3. News - SGR issued reports on its earnings and hosts conference call





Note: none or all of the above lead us to trade a name.  They do however draw our attention to the name at which point we use our skills in timing, stock selection, controls/discipline, and capital allocation to determine how much, if any, to trade. 

















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