Saturday, April 19, 2008

The Stock Market Is A Blessed Place

On Friday morning, there was strength everywhere in the market. On CNBC, they talked about the great earnings from GOOG, and the upside movement in C (despite their rather hideous earnings) as the main causes of the rally.

Surprisingly, they overlooked the Pope. As my readers know, the Pope was responsible for Friday's rally. Fuck the heathen at CNBC.

Anyway, so the first trade I made was in KEY. I was looking for a break of $25 on the daily graph. Since this is a rather slow-moving bank stock, I wasn't looking for too much of a move, so I had 800 shares to start and would have added.



The stock broke $25, I entered, but exited shortly after as it couldn't find the "juice" necessary for any kind of upward advance. The stock, while perhaps not committing any really bad sins in the past, clearly had angered the Pope somehow... perhaps it was a simple case of surfing porn on the Internet, who knows? Whatever the case, the Pope wouldn't let the stock move, and so I exited with a small loss.

For my second trade of the day, I looked to HON.



I was watching the $60 level on the daily graph, and the stock reported earnings as well, so I was expecting good movement. The stock gapped higher, and consolidated right under $60, in a somewhat convincing way. So when it traded $60, I bought and was filled at $60.05. The stock immediately reversed and dropped a half point in the next 2 minutes.

Now I'm sure there are many of you who read this blog to get some sadistic type of pleasure from my failings. That's fine. If I knew who you were, I'd laugh at you too. But anyway, here's an actual case where I can prove that I learned something... You'll recall that on Thursday, I entered MTL and was "ass-raped" and got all tilty because of it. I entered the position and failed to take my loss quickly, so it blossomed into a large loss, which then led to many, many, bad trades.

In HON, I entered at $60.05 and immediately placed a stop at $59.90. I figured if it worked, it would work, and if not, I'd get out for a quick loss and maybe revisit the trade later. In this instance, the stock reversed and stopped me out at $59.86, for a 20 cent loss, my worst of the day.

Now, had I been all stubborn, this trade could have been much worse. The stock dropped straight down to $59, (clearly, HON slept with his neighbor's wife, or something, causing the Pope to hate it) and didn't recover to my original entry price for another hour and a half, at which point, it WAS a buy, but I was already out in the sun, surfing. Fuck you, HON.

I highlighted the first two trades of my day because I thought it was important that I took the losses and moved on. No revenge, no anger... just let 'em go.

Next, came FLR, a pissy stock if there ever was one.



Here, I was watching $159 on the daily. The stock opened strong and played with that level in the first few moments of trade. When it pulled back, I bid for and received 100 shares of stock at $158.69 and placed my stop at $158. I thought the stock would base for a few moments, allowing me to pick up a little more before $159, but instead, after a quick test of $158, volume moved into the stock, and ran it straight up over $160.

I got stopped out on a choppy move down below $159.50. I was trailing a stop below the previous 5-min candle. Perhaps I need to work on finding better exits while the stock is running, because in this case, the stock ultimately ran to $161, so I left some movement on the table. Still, I took 80 cents out, and that brought me back to feeling good about the day's opportunity.

The next trade I took ended up being my big winner of the day, CMI. I was watching $54 on the daily. So when the stock opened up strong on good volume and then based for a few minutes, I watched closely and began to enter at $53.11. By the time it got up to $53.37, I had 500 shares. As it ran to $54, volume decreased, and so I exited the position around $53.80 or so.

The stock then pulled back, in a fairly orderly way, back to the original breakout area, of $53.25. So I bid for and received some at $53.33 and then picked up a few hundred more at .45. I had 600 shares. This time, I exited most of the position over $54 and then trailed a stop for 200, hoping for a larger move. Unfortunately, I was stopped out just after 11, thus missing the run to $56. Clearly, CMI has been tithing. The stock has been blessed.



Okay, and the last trade I'll highlight is in the lunatic known as MTL. This stock has been on the HCPG watchlist for a run to $152. Indeed, that's why I bothered with it on Thursday when I took a big loss in the fucker. On Friday, however, victory was mine. He had better volume than he had on Thursday, and a long, tight base.

So I entered, (only 100 shares this time, because I was scared) when he emerged from his base on decent volume, at $150.55. The stock ran right up to $152, but instead of showing any signs of stopping, huge volume moved in and the stock vaulted right up to $154.



Kind of as a joke, I put in a sell limit at $153.70 when it traded $152. Given the volatility in the stock I thought he could get there, but I really wasn't expecting it. However, due to an egregious contribution to the Catholic Charities Fund and plenty of volunteer work at its local Children's Hospital, MTL found the power (from the Pope) to power higher and hit my target. As it turned out, it was a pretty good exit.

So that's when I packed it in and hit the beach. And surf was great... there were old guys out in the water hooting like kids and beautiful, long rides on perfect clean waves. I tell you, I don't know if there's anything better that the first days of spring.

Note: no stats because I can't get into my execution system on the weekends...

11 comments:

Dogwood said...

Have you thought about using pivot points to help gauge exits? IB is down this weekend so I can't pull up these charts and plot the pivots to see if they worked on these trades, but pivots seem to work well on index futures and other stocks, such as Apple, RIMM, etc.

Just a thought.

Dinosaur Trader said...

Dogwood,

I'm not sure what a "pivot point" is... I'd love to see an example.

-DT

Dogwood said...

Pivot points are support and resistance levels derived from the previous day's high, low and close. They are used by floor traders to determine general levels of oversold and overbought. I use them extensively in trading the Nasdaq.

Investopedia has background and formulas here.

Pivot points have nine levels, S1-4, which are support, the Pivot Point (yesterday's high, low & close divided by 3), and R1-4, which are resistance.

Markets and stocks tend to ping pong between these levels.

I'll plot pivots to your trades tonight to see how they performed. You can calculate your own pivots using this calculator.

HPT said...

Those "ass rape candle formations" get me every time.

JakeGint said...

Dino, are we supposed to know who Jack the Convict is? Is that a fish or something?

Dinosaur Trader said...

Jack the Convict? I think that was the title of Fly's favorite post from 2007... check here.

-DT

swift_trader said...

hey DT,

i've been reading ur last week posts tonight because i didnt have much time during the week - the market just squeezed out all my power. i saw an example in the metal sector how one stock was the only positive so u shorted it and got smoked. i think the market is in such a phasse that this strategy is almost never working. i've noticed it in the financial sector.

let me give u a short example. one day i saw WB as the only positive shit from all the financials and had some bad news as well. as soon as i shorted it, it made a huge pop ...so i saw it as another opportunity to short more as the market was stable and all other financials going further down. followed another 5 min huge candle up. it blew all my stops but i was so angry and stubborn so i shorted more thinking it would eventually go down. then the market turned and started going up. finally i went out on a pull back losing shit load of money. the stock never came even closed to where i started shorting it.what followed was shit load of revenge trades - long and short making the P&L ugly.

before this type of trading used to work in the market but in the last weeks its just fuckin me up. the correlation (especially in the financials) is totally f%ck up. alot of days one stock is very weak in the beginning while another is very strong and later in the day they change. so i've seen that in this market its better to trade breakouts and reversals with trailing stops than the weak/strong ...positive/negative sector thing. stocks that dont move with the rest and the market i tend to give them a single try with a very tight stop and if doesnt work i just leave them until i see a very clear opportunity.

greets,
ST

Dinosaur Trader said...

@Dogwood,

Very interesting stuff. I'll check into it the next couple of weeks and see if I could use it. Thanks for the info.

@ST,

Thanks very much for that thoughtful comment. I agree, lately it seems best to be with the herd, not against it. I think I'm going to abandon that style for the time being... I'm sure it will work again at some point, but now is not the time...

-DT

Dogwood said...

DT,

Just posted charts w/pivot points of your Friday trades at my blog. Hope you find some of it useful.

themicrokid said...

Interesting analysis on your AR candles.

The market is about continual learning.

Micro
http://themicrokid.blogspot.com/

Dinosaur Trader said...

@dogwood,

Thanks man... great work!

@microkid,

Indeed.

-DT