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Wagon Wheeled!


Wells Fargo throws a wrench into best-laid plans.

The game plan was sound enough. With one eye on the reverse dandruff in the BKX (and S&P), Minyan Peter's vibe from last month continued to resonate in my crowded keppe. The banks were trying to take their lumps in the fourth quarter so they could "beat" depressed first-quarter estimates. My thought process was as follows - play with a scalpel (such my Apple (AAPL) try) and come in Monday bouncing on my toes and pounding a greasy glove.

Wells Fargo (WFC), by pre-announcing better-than-expected results this morning, threw a wrench into my best-laid plans. The animal-spirit enthusiasm jacked the tape - and, by extension, Apple opened on the other side of my defined risk technical context. Overnight gaps, as we've long discussed, are the fatal flaw of setting stops. It was a risk I assimilated and respected - but an unforeseen catalyst punched me in the ear.

It's not the first time Wells played the foil. Old-school Minyans will remember my infamous Letter I story, when WFC made a hostile bid that turned what would have been a multi-million dollar gain into a 7-figure loss. Just as my thought process was sound -- wrong, but sound -- 10 years ago, I view the mechanics of my recent swing equally stable. That's not post-rationalization, my friends, as these things happen. If there wasn't risk to this business, it would be called "winning," not "trading."

As for my process, I gave my position until after the first half-hour to monitor whether we would see rotation away from extended issues (big beta) into the under-owned financials. When the stock didn't "come in," I dutifully cut my position by 65%, leaving a remnant equivalent to a spare chip. We could see a magnet to $120, but anything over that will see my cut the remaining bait. Either way, it was a losing bet, and I share the process in the hope that my mistakes will be your lesson.

Better me than you, and I mean that sincerely.

Please keep BKX 32.5 on your radar, as a push above that zone will be a technically positive development. Mea culpa on the reverse Newton, and I look forward to making it up in spades.

As always, I hope this finds you well.

In memory of our fallen friend and trusted colleague, Bennet Sedacca, 100% of the donations made to the RP Foundation through April will be channeled to philanthropic endeavors consistent with the RP mission, working closely with the Sedacca clan in the distribution of those funds. We thank you kindly for your support as we strive to effect positive change in the lives of children.

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