Thursday, February 19, 2009

one off vs crowded trades

The past few weeks have shown us the need to be selectively aggressive.   The best trades have been stock specific, without extrapolating anything regarding sectors as a whole.  However, each day throughout the day there have been opportunities that present themselves as profitable set ups. 

Yesterday, while the whole world was looking at DE puts on the open (including myself) and fighting a crowded and difficult trade, UPL was steadily going down.  A few traders on the TradingRM desk were involved, and in a matter of minutes were booking winners and moving on to the next set up.  These are the trades that "feel" easiest and produce the best results.  UPL was highlighted on our morning worksheet, and a quick examination of its intraday chart yesterday shows the steady decline it had off the opening bell.

The same can be said for LDK or HPQ today. It is important in this market environmnet to take these trades for what they are: individual trades and no more. Yesterday's action does not determine todays right now, and an individual name is not justification for a whole sector.  Until the market shows us otherwise, this is the approach the will keep us profitable.