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Random Thoughts: Style Leads to Substance


Adapting is a necessity when trading the tape.


Let's Get Technical, Technical

There are four primary metrics that shape the tape-fundamentals, technicals, structural influences, psychology.

The technical metric is a better context than a catalyst but it's a great way to frame risk.

Yesterday, a tug-o-war took place at S&P 1260, the right shoulder of a reverse head & shoulders pattern. "Buy stops" were set on the other side of that level, which was the reason for the afternoon acceleration.

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Past resistance is future support so look for bulls to defend that level, if and when.

The next tangible resistance can be seen through the lens of the financials. BKX 75 is where we broke down from and it's where supply should loom.

Click to enlarge

While I traded the tape (S&P) and financials (JPMorgan (JPM)) from the long side yesterday (a few times, actually), I punted that directional risk (discipline) and went home with a small upside try in Yahoo (YHOO)!

It's the Winky Wright style of trading. Duck, jab, duck... goose.

And what's good for the goose is good for the gander.

A Tale of Two Tuesdays

What's the difference between how I traded last Tuesday and this Tuesday?

You mean, besides the 50% rally in the financials?

Last week, I scaled into large upside bets (in financial stocks) due to the massively oversold condition and layered in as a function of price.

Yesterday, I "bought to sold" with defined risk stops below.

It's a slight-albeit very important-distinction but one that warrants as mention as the onus is always on us to adapt our style to the market.

The Following Buzz took place at 11:00 AM on the Nose…

Sometimes right, sometimes early, sometimes nutty but...

"Pure eyes," I nibbled on some Goldman (GS) puts and tried my hand on some Wachovia (WB) puts, pure trades with a trailing stop.

With a little luck and a bit of give back, I'll be able to set my stop at my entry points and take a swipe with the risk of a push.

Not advice, naturally, just sharing my process with hopes that it helps yours.

Random Thoughts

  • If "Wall Street got drunk," in the words of our President, is it safe to say that the bartender Alan Greenspan?

  • I know, I know, now you've got this song in your head. Sorry.

  • Take a quick look at the SKF--that's the Ultrashort Proshares Financials. It's down 45% from the July 15 close-yes, July 15, 2008-and bounced directly on the 200-day.

    Click to enlarge

    Technicals are but one metric, we know, but oofa...

  • Kevin Depew was talking about Klymaxx yesterday--selling Klymaxxes--in his Five Thangs. If you missed it, it's a pretty important context lest you're getting emotionally tied to your shorts.

  • I would imagine that I--or should I say "we"--are responsible for a large part of this.

  • Uh oooooohhhhhh........

  • Am I going crazy? We flagged Continental (CAL) as a green bean in a red sea yesterday? Yesterday as in... 50% ago? Woof!

  • Jeez, is he married to Bloody Mary?

  • We're not supposed to look back (profits lie ahead) but if wishes were knishes-and I didn't sell a single Wachovia (WB) call- it would have been one of the best trades of my career. The bank bungee worked out just fine, thank you (you're never supposed to lament when ringing the register) but...

  • Wait, let's turn this into something constructive--the only difference between a mistake and a lesson is the ability to learn from it, right? I'm typically early-both on the buy side and the sell side-so perhaps the lesson is... trailing stops.

  • Remember Minyans, the market is never wrong. Our task at hand is simply to catch the disconnect between perception and reality.

  • I can't stop thinking about Sam the Butcher and Alice from the Brady Bunch. Do you think they "made whoopie" under Carole and Mike's roof? What if the kid's heard? Am I saying this out loud.?

Answers I Really Wanna Know…

  • And just like that, the Yanks are three games out?

  • What type of odds could you have gotten last Tuesday that the financials would flip from oversold to overbought in six short sessions?

  • How 'bout some snaps to Professor Jay Shartsis for sniffing out the stealth wink in EMC (EMC) on yesterday's Buzz in front of the 10% pop?

  • Crude down a deuce in the face of a Hurricane?

  • Can you say "coordinated agenda into an election'?

  • Can I share that I "took" my small Yahoo (YHOO) schnitzel? (I am.)

  • Hey, you can try anything as long as you're disciplined, right?


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Positions in WB, GS
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