4/22/08 Recap & Reflections
Today started off on somewhat of a sour note.
While I'm normally not one to chase trades, the fact that FCX had gotten away from me was a bit disturbing to the psyche. I had a swing position on FCX that I contemplated holding for another night. I had held it up until yesterday's close.
FCX moved up yesterday and closed strong over the 115 level, but I closed out the position as I felt it was getting awfully close to its earnings. Up until today, FCX's earnings were scheduled to come out on Apr 23 (apparently that's now been changed to Apr 30th?!). I knew I didn't want to hold into earnings.
So anyhow, in pre-market I see that FCX is gapping up to the 117-118 range. I'm thinking to myself, great. I didn't take a position in FCX at the time, but what I did do was see that RIMM had pulled back from its break above 125 yesterday.
I picked some up in pre-market around 125.50 and told myself it would be a swing position. After all, volume had picked up nicely over the 125 break out yesterday that was basically vertical. I passed on yesterday's entry as I like to stay away from vertical moves.
So the market opens, and RIMM's sell off starts to accelerate to the downside. There's no news, nothing, but the volumes accelerating. I wanted to give it some room as it was a swing position. My stop was just below Friday's low (120.51), and what do you know, with in a few hours I get stopped out. So much for it being a swing position, eh?
My fear of missing its next big move up had caused me to be a bit over zealous on the entry. As opposed to waiting for a pull back, and entering as RIMM started to find some footing / bounce higher, I blindly entered in the pre-market.
The loss was contained, stops were in place, etc. But none the less, still not a good way to start the day.
From there I took one entry in FCX that didn't even meet my entry criteria, from which I was stopped out on and another in which I failed to tighten stops as it reversed.
The last bad trade of the day took part in RMBS. RMBS had been setting up a nice little bull flag. I entered on the break and tightened stops as the floor was pulled out of under the market at ~11:45/11:50.
From there all I did was scalp VMW's short squeeze and pick up a small call option position ahead of VMW's earnings. It's a setup I've been working on recently, that I'll address in another post. That helped cushion what has been one of the worst trading days for myself in a while.
Lessons:
1.) Don't enter on pull backs during the pre-market. Wait for pull backs to come into areas of support or show signs of firming up &/or bouncing.
2.) Missing a move isn't the end of the world and having a fear of missing the next move can be quite destructive. There's no harm in entering at higher prices, and just like you wouldn't enter a vertical move; you shouldn't enter when no real setup presents itself.
3.) As a stock is showing signs of a potential reversal, you should tighten your stops. I did on RMBS, but not doing so on FCX was a lapse in judgment.
Re: Today's Market action
I can't say I liked what I saw with the transports. They appear to be forming a rising bearish wedge. The railroads and dry shippers can only do so much to carry the weight of the index as the air lines and select truckers break down.
Ditto for the IWM, which was down almost 3% at one point today. It had also broken below last Tuesday's lows.
All things considered, the SMH & XLF held up relatively well (although there was no real bank/broker related news).
The little jabs are started to add up though and if nothing else are a reason to show more caution, especially on swing positions.
The jabs thus far this week:
- TXN's disappointing earnings
- BAC with disappointing earnings and having to increase loan loss reserves
- MCD saying growth was slowing
- UAUA's larger than expected loss / share
- NCC needing a large capital infusion and further diluting share holders
- Oil on a constant tear higher / the weakness of the dollar
- Meredith Whitney saying C will eventually have to cut their dividend
The pressure on the earnings from AAPL, AMZN, MMM, PEP, AXP, and MSFT continues to build.
The market's are still holding up for now, but with enough jabs...
*edit* Re: Tonight's watch list, I'm not seeing a lot of setups I like and probably will just spend the time to further reflect on today's trades. 3 steps forward, 1 step back.
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