Tuesday, April 21, 2009

Piecing the Day Together

I don't like to make market calls because that is a suckers game.  However, as the day progresses, i like to view the structure of the markets which can lead me to make a working hypothesis. 

Today was similar to yesterday (inverse).  Yesterday we gapped open lower and went lower.  Today was the opposite. 

At 930AM I looked at the TradingRM morning worksheet to see what support/resistance levels we were close to.  824 was a significant support level and ended up being the low for the day and we had a nice rally from there.
Is this enough to get long?  Maybe not.  However, at the same time, I told the TradingRM desk that the small caps were outperforming the S&P.  The Russell and Nasdaq were outperforming its large cap peer.  The ticks at this point were not necessarily that bullish, but they certainly were not bearish.  Many regional banks had earnings before the bell today.  Most opened up lower and then got stronger.  When the entire group reverses, you must pay attention.   This prevents you from getting into trouble and shorting an uptrending market. 

Monday, April 13, 2009

Earnings Season

Companies report their earnings on a quarterly basis.  Earnings season is a great time to trade.  The earnings reports create tradeable events for stocks across the board.  That being said, it is important to approach earnings season in a systematic manner.  Traders who prepare for earnings season will have a distinct advantage as they will see trends and put themselves in position to react quickly.  As short term traders, we are not concerned with predicting whether or not a company will beat the consensus EPS estimates.  We want to pay attention to see patterns in the reports.  If IBM reports a great number, we can surmise that its competitiors will follow suit.  Also, we will want to see how IBM reacts to its earnings announcement.  It is important to have an idea how the street is positioned in the stock going into the announcement.  If traders know that business has been good for IBM, then most likely the street will be long going into the print.  If the report is better than expected and the stock does not go up, then it is fair to say that the report is priced into the stock.  Many times a great trade setup will come from when the stock does not react as we think it might based on news.  Other stocks in the same sector  will often trade in a simiilar manner as it gets closer to reporting its earnings.  Because of this, it is important to know when stocks will report their earnings.  Earnings calendars are available via briefing.com.  Communication during earnings season is also very important because it is difficult to follow all of the reports.  If we prepare, communicate, and review the reports at the end of the day we will put ourselves in position to profit from earnings season. 

Larry Fisher

Earnings Season

Companies report their earnings on a quarterly basis.  Earnings season is a great time to trade.  The earnings reports create tradeable events for stocks across the board.  That being said, it is important to approach earnings season in a systematic manner.  Traders who prepare for earnings season will have a distinct advantage as they will see trends and put themselves in position to react quickly.  As short term traders, we are not concerned with predicting whether or not a company will beat the consensus EPS estimates.  We want to pay attention to see patterns in the reports.  If IBM reports a great number, we can surmise that its competitiors will follow suit.  Also, we will want to see how IBM reacts to its earnings announcement.  It is important to have an idea how the street is positioned in the stock going into the announcement.  If traders know that business has been good for IBM, then most likely the street will be long going into the print.  If the report is better than expected and the stock does not go up, then it is fair to say that the report is priced into the stock.  Many times a great trade setup will come from when the stock does not react as we think it might based on news.  Other stocks in the same sector  will often trade in a simiilar manner as it gets closer to reporting its earnings.  Because of this, it is important to know when stocks will report their earnings.  Earnings calendars are available via briefing.com.  Communication during earnings season is also very important because it is difficult to follow all of the reports.  If we prepare, communicate, and review the reports at the end of the day we will put ourselves in position to profit from earnings season. 

Larry Fisher

Friday, April 10, 2009

Determining what kind of day it is (real-time) is crucial in determining how aggressive we are.  When things are working, do more of them.  When they are not, how do we know when to lay off or when to push the accelerator?



Stocks or futures that make a new low or high from the previous day and then quickly reverse (false breakout) are usually great indications of slow trading day.  This happened yesterday with many stocks. 



Tomorrow is a holiday and the stock market is closed.  Right before a major holiday, traders’ like to take long vacations.  This was definitely true today as volume was very light.  If you are in a winning position, it is prudent to take profits.  Adding to winning positions during light volume days before a holiday is not the best set-up.  I have a tough time trading right before a long holiday because the volume is so thin.  The market can quickly reverse and the paper profits than you once had, are no longer. 



I am fortunate to work with a great bunch of traders (you know who you are).  At 930am (central time) I like to get a feel for what is working.  I usually shout out, “what’s working?”  If nobody answers me, I know it is tough trading.  If every trader shouts out a bunch of names, I know that things are working.



Today we had a 12 handle S&P range.  Small ranges can be the kiss of death.  Little movement in the futures is not usually the best setup for making lots of money. 



Enjoy the long weekend


 

Thursday, April 2, 2009

Short Run vs. Long Term

  As intraday traders we are constantly in the moment and executing trades.  However it is necessary and beneficial to periodically take a step back and look to synthesize our immediate involvement with a long term sustainable approach.
  This past week has provided opportunities in the market.  Over the course of two separate days midweek I noticed a clear distinction in my trading when taking the extra step to think about the current trends and environment and extrapolating that information into my trading. News stories have shown themselves to be profitable (see MLM, CREE, WPI, STAR).  High beta names have been a more difficult trade.  More importantly there has been market activity throughout the entire day.  A patient wait and evaluate approach until something has shown itself has proven to be a good strategy.  Will it stay this way for a week? a month? longer?
Who knows.  The important element is to notice this and be aware of the environment we are in, what trends are paying, and to be involved in them.