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Random Thoughts: Style Leads to Substance

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Adapting is a necessity when trading the tape.

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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?


R.P.

Positions in WB, GS

Todd Harrison is the founder and Chief Executive Officer of Minyanville. Prior to his current role, Mr. Harrison was President and head trader at a $400 million dollar New York-based hedge fund. Todd welcomes your comments and/or feedback at todd@minyanville.com.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

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