WED. NOV. 12- So, What Makes A Good Trade?

As the market chops around in a pretty big subrange in the middle of a broader range as discussed in yesterday’s blog, perhaps now is a good time to clarify four defined characteristics of a good trade. In a market that is ‘acting slower’ for lack of better verbage as compared to recent weeks, these are the four things that one should focus his efforts upon when doing a day trade: First, the market must be moving in the direction of the trade. Namely, if you are long 100 shares of Goldman Sachs, the market needs to be uptrending while you are in it. Second, there needs to be news on the stock in which you seek a position. Trading U.S. Bancorp (USB) in the middle of a day with no significant corporate developments when one can buy or short American Express (AXP) when there is news in AXP is a good recipe for losing money net-net. Third, the chart must be in your favor. Trading a stock at a new high or new low is typically more effective than trading it in the middle of its range. Finally, one must seek to obtain 20 cents easily. If one trades shares of companies like Cisco (CSCO), what often happens is that it goes a little in your favor and you take the quick money…or it goes a little against you and you get out in fearing further losses. That too is a fine mechanism for losing money. When one has a trade that includes all of these characteristics, one tends to do a lot better than when any number less than all four tenets are present. The only exception to this is when the market is moving wildly as it was a few weeks ago; in that case, one does not necessarily need news to trade as more opportunities present themselves. An example of a trade in which everything is put together is Las Vegas Sands (LVS). The company announced a massive share offering at 5.50 with Goldman Sachs as the chief underwriter; the stock should never have traded below 5.50. Once it broke 5.50, it fell 32 cents in four minutes. The market was selling off when this happened. The news was the share offering. The technical pattern was the breaking of the new low. And the reward was at least 20 cents as many longs paniced out versus what would have been a risk of 1-3 cents had you shorted 5.50 with the bid reloading. One has got to exercise caution nowadays and the more refined the trade you do, the higher the quality of the trade- and the higher your paycheck.

Markets in Asia generally finished down, but well of their lows- about 0.5% to 1% across the board. Bourses in Europe are higher by 0.5% to 1%. Oil is down another dollar. Futures state-side are down slightly as of this writing. With stocks having closed in the middle of a range and news flow slower, look for today to be a very difficult day trading day pending extensive movement this afternoon. Prices will likely be rangebound on both sides of unchanged all day today.

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-

GS very notable turnaround; looking to buy thru 75.42 Tuesday high on An A-B-A2 if possible

CNQR- good earnings

MELI- great earnings

CEPH- going into S&P 500 on close today

EMR, NAT- on “Mad Money” last night

DSX- beat earnings; announced buyback of stock and suspension of dividend

M- decent earnins and outlook

Bad-

CLF –notably weak yesterday; it is a short thru 21.25 (yesterday’s low) or an A-B-A2 buy

USG- closed near a low; looking to short thru yesterday’s low of 11.80

MIC- continued its plunge; looking to short thru yesterday’s low of 4.95

VIP, MBT- among the Russian ADR’s hit very hard yesterday

SWC- closed on the low; looking to short thru 2.46

NTY- atrocious earnings

HOLX- warning slightly on its earnings outlook

CTCM – leading public Russian media company; slammed yesterday…looking to short thru 3.65

JRCC - among the coal stocks rocked in recent days…this one is down more than 50% this month. Looking to short thru yesterday’s 8.67 low or preferably A-B-A2 short covering to upside

LULU- weak on downgrade

DKS- broke to trend low after downgrade; would like to short thru yesterday’s 11.80 low

IPI- terrible earnings

JASO- horrible outlook

TEL- weak yesterday on TYC’s earnings

SFD, TSN- poultry producers weak due to lack of financing; looking to short both thru yesterday’s lows (7.30/4.82 respectively)

BBY- slashed earnings outlook

Earnings:

WED NOV 12 BEF

ACM DSX GU

JASO M PGR

WED NOV 12 AFT

AMAT ANW CHIC

CROX CSC GA

.HTE NTAP NTES

SINA TTEK



Good luck today.