Wednesday, September 23, 2009

Today’s trade review focuses on a quick hitter in General Mills (GIS). This trade really emphasizes the importance of pre-market research, having a gameplan, and executing the plan. If you weren’t in GIS within the first few minutes of the day, the trade had already passed you by.

GIS was listed on the Trading RM morning sheet as a possible long in play. The company posted better-than-expected earnings and issued upside guidance, which led to a healthy gap up on the daily chart (see bottom left below-click to enlarge). By performing our morning research, our traders were able to narrow their focus onto select stocks and find profitable opportunities.

Seeing strong buying volume right off the open, our traders got long. Part of our gameplan for each trade is to ask “Is this stock in play?” This spike in volume acts as confirmation to our morning research that GIS is a long in play. The 15 minute chart (bottom right below) perfectly illustrates the significant increase in volume during today’s opening minutes compared to any 15 minute period yesterday. As shown in the Trading RM Real-Time chat window (top left below), multiple traders were in by 8:33 CST.

Another part of our gameplan is to sell when you can, not when you have to. This means scaling out of trades to lock in profits and selling into moves, particularly in an environment with little follow through. As of late, there has been little follow through on price movements and paper profits have quickly disappeared with reversals. The uncertainty leading up to the FOMC rate decision was another factor which told our traders to be opportunistic on sales. As shown by the Real-Time chat, our traders were scaling out by 8:42, but still holding a core position. Around 8:45, the volume began to dry up and GIS showed signs of a reversal, so our traders sold into the move.

After this surge, the market had a small sell off and GIS chopped sideways for some time. If you weren’t in this name right away, the trade was already gone. By focusing on names brought out by pre-market research, judging if those stocks are in play, and selling when they can, the Trading RM traders executed the gameplan perfectly.

For more information on morning sheets or the Real-Time chat list, go to www.tradingrm.com






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