FRI. OCT. 31 - Don't Try To Fight The Trend

On September 25, there was a blog written about Warren Buffett’s foray into Goldman Sachs:

Sept 25th, 2008 - Buffet 2nd I-Bank Foray

On October 1, Buffett bought a stake in General Electric as well.

Now, the point of this post is not to dump all over Warren Buffett as he is clearly one of the world’s greatest investors. Furthermore, his time horizon for a trade is years rather than the minutes or even seconds in which we trade. But this leads to the point of this piece: Warren Buffett with his style of trading does not care if he gets in or out with precision nor does he care if he gets in and out early. We as day traders cannot simply open our hands to a falling anvil when buying a stock nor can we try to stop a rocketship in shorting a stock as it rallies. We all know this, but it is everybody’s inclination to say “this moved so fast, I am going to (take) or (give ‘em) some here.” It is the absolute wrong thing to do in this volatile environment. On Wednesday afternoon, for instance, day traders buying shares of stock in those last five minutes in which the Dow fell 400 points in waiting for a bounce which did not come until yesterday morning lost significant amounts of money. Traders who shorted stocks such as Intercontinental Exchange (ICE) up 15 yesterday weren’t loving life as it gapped up points in moments (trading to up 23 or so at one point). Preparation and precision are essential –more than ever- to succeed in this profession. If you do not do your homework and/or if you simply buy/short something in hoping for the best simply because something has moved a lot, you will lose net-net. So, follow the Boy Scouts mantra: “Be Prepared;” furthermore, do not try to be the entity which stops a stock’s move because inevitably, you will get run over by the force of said move.

Despite an interest rate cut in Japan, the Nikkei fell 4% in Tokyo with weakness elsewhere. Even more notably is that the bond market is sharply higher while the oil market is 4% lower this morning. This portends weakness for Wall Street. It is the last day of the month so things will likely be very choppy with most of the trading to the downside yet the declines probably will not be overly dramatic.

Reiterating-If the whole story is not there -
If something is good, assume either a short thru unchanged or an A-B-A2 based on direction of the market unless specifiedIf something is bad, assume either a buy thru unchanged or an A-B-A2 (preferably to the downside in a downside market and the upside in an upside market) based on direction of the market unless specified


Good-

AKAM- great earnings

CHK- missed earnings, but beat whisper number so stock up after-hours yesterday

ESRX- good earnings

WYNN- beat slightly, but has had huge run-up…watch this and LVS/MGM

SWN- solid earnings

MFE- good earnings

THOR- outstanding earnings

ICE- rallied tremendously on last tick; should open down…if it opens close to 87, short it; conversely, if stock trends higher throughout the day, buy it thru unch

MIL – good earnings

MALL- huge percentage gain on short covering; closed near a high thus looking to buy thru yesterday’s high around 4.20

LHCG- rallied sharply on upgrade

MBT- has had tremendous rebound last few days; the stock will likely go with the market today, but exaggerate the broader market’s move widely

EYE- beat earnings and raised expectations slightly
Bad-

ERTS- warned dramatically on its outlook

KLAC- bad earnings

PSYS- poor earnings

TSRA- warned in its outlook

BARE- horrible earnings warning

AMP, AIZ, PRU, HIG, CI- among the insurers which declined yesterday on liquidity concerns…looking to short them all through yesterday’s lows and or A-B-A2 to upside if they cannot break initially

SMMX- closed very weak; looking to short thru 4.05

PETM- in “Sell Block” on “Mad Money”

PL- closed very weak in the wretched life insurance group

SHS- closed near a low after poor earnings

HIL- closed very weakly

CMI- missed earnings and cut outlook

GS- notably weak on follow-through from yetserday

Earnings:

FRI OCT 31 BEF

AEP AIV AOC

AXL B BKC

CCC CLX CMI

CVX EYE KBR

MDC MDU NYX

PEG PGN RSG

SMG WY

Good luck today.