Trading RM, LLC.

I wanted to share some thoughts and notes I have been making to myself lately.  Specifically what has been working and what I am focusing on:

• For my trading I have been having better luck with names that are having "different" days as opposed to high beta names that are "crowded."




• special names lately: CEPH today, Education stocks, MCK & CAH last week
  
• high beta/crowded names that have been hard: AAPL, MET, GS, BAC, PRU, etc...


• Extra focus on timing - it has not been enough for me to trade the right names (above)...I have to have better than usual timing. 




• Getting long CEPH today or getting short education stocks yesterday only worked with great timing. 


• I have been focusing on $TICK.  I have been following Dr. Steenbarger's blog, specifically references to VWAP and $TICK.  The $TICK with a 10 period moving average is one decent indicator of the type of day we are having.  Notice in the picture below that the thin green line (the 10 period moving average) hovered around zero for most of the day - one indication of a range/slower market. 




• Again this emphasizes that I need to focus more on timing and name specific trades

• Lastly "chasing" has not worked.  For example on the open today the steel names and solars were very weak for the first few minutes.  After that it did not pay to pile in short to those sectors.  This morning I did not make a prediction they were not going lower.  But I did look at my notes and say that 1) chasing has not worked, 2) chasing early in day has not worked, and 3) timing is so important.  So I laid off these names only to reevaluate them later and decide they were not good shorts.  It did not seem like good odds to push my chips in.   I posted FSLR and the SLX (steel sector etf) charts below. 

Trading was very different than yesterday.  It is important to reset and get back to ground zero no matter how good or bad the previous day's trade was.  You just never know what the market will give you.   The low of the day, 691.25, was one of the support levels that TradingRM had on the morning worksheet. (You can register for free and print out the morning worksheets before the market open at www.tradingrm.com) At that low, the shorts were working really well, but it became prudent to ring the register on a few things at this level.  The market then rallied 19 handles from that low.  Below you can see the 691.25 level and the rally out of it.  I also drew a nice little triangle pattern, wedge, or whatever name you have for it.  Once the upper band of the triangle was breached, the rally ensued with basically no heat to the downside.  Today we had a 19 handle range on the S&P.  This is below the average for the last 5,50,100 days.  However, technicals can be important during sideways action.

1) Today I was reminded of how many times the SPX bounced off 800 in January before breaking through in February.  We saw our first test of 700 this afternoon.  It is hard to tell if there were serious buyers or we ran out of time.  I anticipate when/if we have a significant/lasting break through of 700 it will be after more than one test of the level and will occur overnight. 



2) Today our desk largely traded from the short side.  However it was not a home run day for me or others by any means.  It seems the majority of money was made shorting quickly after the open.  The weakest stocks did not follow through low in the afternoon.  Below are charts of AET and POT.  The thin gray line is the S&P future.  AET and POT were two of the weaker names to start, then did not make new lows as the SPX tested 700 later. 





3) This never ending news of the bailout/more bailout for AIG and C and others reminds me of a certain movie scene.  "That's as good as money...those are IOUs."

The market was obviously strong today.  The RKH & XLF were up 13% and 12% respectively.  There were a few tells that the market was headed much higher.  Market rejecting the overnite low early in the mornning and the gold sector being weak all day. 

However, at 1pm i saw something that basically blew me away.
I look at the 5-minute Tick chart of the NYSE stocks.  ($tick) on esignal.  There were multiple times when the tick traded above 1200.  Wow!  One time the tick nearly hit +1600.  I blurted out that i haven't seen it that strong in 12 months.  When this happens, you need to pay attention.  I don't like to fret about technicals that much, but i did mention the TICK chart at this morning's meeting because it has been very beneficial as of late.

Does that mean that we will continue higher tomorrow?  I have no clue, but that is the nice part of being a daytrader. 

Congratulations to Bette Lockhart for finishing in 2nd place in the CNBC million dollar portfolio challenge.  Here are some words of wisdom from the Arizona consultant.  (all quote paraphrased from her interview on CNBC)

• "I didn't pay that much attention all day"


• "I do not know a lot about currencies"


• "Do what you think won't work"


• "Do opposite of what everyone else is doing"

I'll let you interpret/use the advice as you see fit. 

A quick poker/trading analogy.  For those poker players out there...a good, or even average, poker player does not go "all in" on every hand.  The good poker player waits for the odds to be in his favor and then pushes his chips in.  As short term traders at Trading RM, we have been experiencing selective trades that are great in 2009.  But much of the day we would be better off "folding."  I am continually fighting between what I want to happen and what is happening.  I am working on putting my chips in the market only when I believe I have good odds...however frequent or infrequent that may be today.