Monday, January 12, 2009

Blitzen Trapper, "Furr"

I turned a bunch of people onto the Fleet Foxes on this blog... if you're one of them, check this song.

The RO Report, "Who Needs Volume?" Edition

The low volume environment, unfortunately, is continuing. But as a friend pointed out, that no longer seems to matter as far as volatility is concerned. We had about a 175 point range today in the Dow.

Another friend, Jawbreaker, just pointed out in the comment section of another post that he feels we're about to enter a very difficult phase for daytraders. This may be so. In fact, I see what he sees.

However, I've traded 10 years, I believe he's traded 12-15... difficult markets come and go. The thing is, there's always someone making more than you... which means, in essence, that you can always do better. The easiest thing you can do, is defeat yourself. Or, to paraphrase my hero (cough! cough!) Dennis Kneale, let's not talk ourselves into a recession over here!

Anyway, today marked a bit of a change for me, as I officially change my stance back to bearish. I've been bullish since that November low, but I hated the way the bulls just let SPY 89 go. Also, the price of crude is alarming.

Now, I think we can expect something like this to play out... not particularly pretty, but perhaps more realistic than thinking the worst was behind us forever.

In blog news, I'm working hard to have another history post up on Wednesday. I also have a funny story about The Wizard of Oz and looking up the skirt of a model, but I can't work on that until I get the history post up...

Also, tomorrow I'll announce the first book for The Dinosaur Trader book club, soon to rival Oprah's in importance.

Finally, you have just one more day to vote for Jon Swift. Please do.

Okay, now the numbers... out of 27 traders today, 20 were gross positive, or 74%. 10 traders finished up over $1,000 gross and only one lost over $1,000 gross. Those are the best numbers we've seen since the start of 2009... let's hope the worst is behind us. I was #9 of 27, happy to finally make a living wage again.

"Lucky Pierre" - Trader B, $9,850 on 163k shares traded.

2. Trader N, $8,794 on 135k shares traded.
3. Trader C, $6,768 on 161k shares traded.
4. Trader H*, $4,176 on 23,700 shares traded.
5. Trader V, $2,558 on 50,200 shares traded.

"Chambermaid" - Trader M*, -$2,110 on 0 shares traded.

2. Trader J, -$521 on 10,600 shares traded.
3. Trader 6, -$502 on 1,900 shares traded.
4. Trader O, -$323 on 37,400 shares traded.
5. Trader 9*, -$322 on 1,700 shares traded.

Here's your heatmap and technical analysis of the day.

A Trade In SPY

Man, last week was so tough, it was difficult to find a trade that I wanted to highlight.

On Friday, I lost money. However, before I lost money, I was actually up decently. At one point, I was even top dog in the RO.

It was a brief moment.

What got me there was a long trade. I had been watching the $89 level on SPY. It's hard to remember if I came up with this wonderful support level on my own or if it was pointed out to my by the HCPG collective. (As an aside, a bunch of pansies read that newsletter.)

Anyway, not only did this approximate level represent the price on the downtrend line from the late November rally, but, making the support even stronger, theoretically, was the 50dma at $89.07.

So when we moved down to this level in the SPY, I started long positions in SPY and a couple of other names. I'll just highlight the SPY trade, since it was the impetus for the whole trade.

One little caveat... I bought and sold SPY many times trying to jump the gun on this one. And so I was down quite a bit before the support was hit. Looking back, it's hard to know what the heck I was thinking. This market rewards patience.

Things have changed from the gunslinging trade we were enjoying just a few weeks ago... again, adapt or die.

So I picked up all the SPY I wanted, between $89.20 and $89.28. I couple thousand. I only got so aggressive because support was either going to hold and I was going to be okay, or it would break and I would immediately exit. The low of the day at this point was $89.14, so I was realistically risking $250 to $400.

Support held. However, volume didn't exactly flood into the market like I was hoping. Instead, it slackened, so I immediately started to take profits. I sold 1200 of my 2000 share position between $89.43 and $89.57. With some profits locked in, I could now afford to sit back and watch a bit knowing that even if it came all the way back to the lows, the worst case scenario was a breakeven trade.

$89.75 became a sticky area that SPY couldn't fight its way above, so I exited 400 more shares at $89.67. So I had 400 left.

Now, I decided to move this last 400 stop to my entry instead of waiting for a new low. I'm never sure what to do in this situation... keep the stop at my original level, or move it up. Because I was down on the day and unenthused by the volume from a significant support level, I opted to move it up. As a result, at 10:30, I was stopped from the trade at $89.25.

Shortly after, the stock made a new low, but held $89. I thought it could be making a double bottom, so reentered the long and bought 1000 shares at $89.31. I put my stop at $88.99 and told myself to just walk away.

In fact, I didn't walk away. I never do...

I exited 300 SPY when it got up to the sticky $89.75 area just after 11am and then watched the stock slide backwards all the way back to my entry. This action blew. 20 minutes later I had another opportunity to exit and I sold another 200 at $89.90. I was happy the $89.75 level broke but looking back, I should have taken a friends advice and used that level, $89.70-$89.75 to stop the last 500 of my position...

Instead, I ended selling 100 more at .50 and the rest at $89.33.

Going forward, without a significant uptick in volume and volatility, I'll be following more trades like this, where I can put on some size by what I deem to be an "important level."