Wednesday, January 23, 2008

The Who, "Squeeze Box"

The Shorts Get Squeezed

I have a hard time going back on a day like today and making sense of my trades.

I mean it's tough to remember that at 12:30, it felt like we would be dining in hell again.

Just a few short hours later, people are ready to max out their credit cards and buy properties in Florida.

The stock market is filled with humor if you look at it in the right way. Basically, people are silly. "Human nature" is hilarious.

Anyway, the good news for me is that I didn't wait for the big afternoon rally to start making money. I was up $2000 by 10:30 due largely to an unbelievable long in FED.

This was a good and bad trade for me. Good in that I held 200 shares for the full 4 point move. Bad in that I sold out of another 500 shares between $32.40 and $32.80. But looking at the positives, I caught this one right.

You'll recall that a couple of days ago I posted stocks with high short interests. These were the stocks I was focusing on should we get a rally. This strategy really paid off. I know loads of stocks ripped today, but the moves in FED, JLL, CNS and ABK were ridiculous. Just having it in the back of my head that these stocks had heavy short interests helped my confidence level when trading them.

In short, my recent focus on research seems to be paying off in terms of helping my confidence level. I'll keep at it and the lame "good morning" posts.

So I sat on my $2000 early morning gain for the better part of the day. I churned a bit making a losing money, but not too bad. After giving back in the middle of the day recently, I cut my size so I wouldn't get too hurt.

The afternoon rally worked like this. At first, it really started on low volume and I was only a little involved. but take a look at the volume spike at 2:50 or so...

That spike told me not to worry too much about the 1x2 quotes on my screen. There were robots buying the market. They didn't show up in individual stock quotes, but they were there buying stocks with abandon.

So I started buying stocks with abandon. Not really... I'm still taking it easy... but I bought enough for now.

My two best afternoon trades were in OMG and JLL.

OMG was a break of the downtrend play. Here's a 30 minute graph where it shows up nicely.

I picked it up around $51.25 or so. It was a choppy trade, so I got shaken out a few times and had to reenter. It was pretty, but I made $700.

JLL was also a downtrend play, but it had the added benefit of being a short-squeeze play.

Here's the daily.

Unfortunately, I only had a couple hundred shares of this one. This stock trades thinly and frankly, it freaks me out a little. So, I took it easy.

Anyway, like I said in the VO post, I have a feeling trading could relax a bit up until FED day next Wednesday. That's not saying too much though since trade has been absolutely nuts. I just don't think we'll be trading over 2.5 billion on the NYSE again for awhile and I also think the VIX has topped out for awhile.

Still, it's earnings season and there's still lots of uncertainty and headline risk. Should be plenty of opportunities.

Here's the stats:
P&L, $6442
Best, FED, $1677
Worst, MEE, -$119

45,600 shares traded.
34 stocks traded. 25 winners, 9 losers

Virtual Office, $11,247. Dow, +298.98, 12,270.17.

Me, $6442 on 45,600 shares traded.
Sanglucci, $2900 on 39,000 shares traded.
Evolution, $1028 on 12,200 shares traded.
OBAT, $681 on 12,800 shares traded.
Dehtrader, $248 on 7180 shares traded.

Wincity, $18 on 200 shares traded.
Retardo, no trades.
Akalawoo, no trades.
Denarii, -$70 on 1600 shares traded.


The market rallied 600 points from the bottom on unbelievable volume to close up 300 points on the day. This was the catalyst. The bond insurers getting a bailout.

A trader's paradise.

As "obvious" as the rally seemed at 3pm when the robots couldn't hide their volume with diced up 100 share orders, it was nonetheless somewhat hard to hold. Stocks were taking fairly wild swings, shaking traders out left and right. Of course, if you bought early enough, you had an easier time holding... if you missed the early part of that rally it was probably somewhat frustrating.

A short term bottom is in. Unless we get hit with disastrous news, we should be somewhat safe here... if the FED cuts by 50bp next week, we could be off to the races for awhile... if they don't we could revisit the lows. We'll see.

This bonanza may tail off a bit now. Still, with earnings season upon us there should be plenty of opportunities. It's all about January 30th and "Ben the Beard."

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(h/t Kawika)

Good Morning

Time: 6:42
Mood: Good