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Archive for November, 2009

Know Your Sector…

November 30, 2009 Leave a comment

Even when you are trading on an intra-day basis you still need to do your homework in regards to the stocks you are trading, things like: knowing levels of support and resistance on multiple time frames, understanding the direction and flow of the overall markets so you are trading with the wind on your back, and you also need to understand what sectors you are involved in or want to get involved in.

As the Thanksgiving season and Christmas season kicks in – the retail sector has really come into play. Stocks like JCP M SKS GPS BBY WMT have all seen increases in volumes as traders and investors take positions on the seasonal sales expectations. For the most part it felt like most analysts were expecting a better Black Friday than what seems to have taken place. The good thing about this time of the year is that we will be getting plenty of data from this sector well into the start of 2010. We have Cyber Monday data to deal with as well as the pre-Christmas sales. Same store sales, inventories, $spent per customer are all variables that will be batted around on television as analyst try to predict how earnings will do. For us intra day traders, you need to be aware of these variables because they will impact the flow of these stocks. It’s also important to recognize that volatility should increase in this sector and it will therefore be a good sector to be trading.

The Thanksgiving Day news from Dubai World also set the credit markets on fire as risk premiums were recalibrated higher over a very short period of time. By Monday it seems that Dubai World was being more transparent with the restructuring of a portion of its debt – which seems to have calm down the markets. The financial stocks, which had been beaten up on Friday, rebounded today on this news. Once again, as intra day traders you need to be aware of the variables that are moving your sector and as a consequence your stocks. So financial will also be a sector worth keeping an eye on as we come to the end of the year.

Lastly with the US$ making moves it is worth looking at commodities, including energy stocks, as they will be on the move with any change in flow in the currency markets.

Suffice is to say that you need to add another dimension to your homework so you can take better advantage of any shift in order flow in the stocks you are trading.

Ready, Set, Go!

November 25, 2009 Leave a comment

1 day and counting till Black Friday! Retailers like Walmart (WMT) , Kohls (KSS), Sears (SHLD) , Target(TGT) and Amazon (AMZN) wait all year long just for this one day.  It is the day that they are supposed to turn profitable on the year, hence the term “Black Friday”.

With the economy still struggling and in the process of exiting one of the worst recessions in U.S history, many of the retailers have started slashing prices weeks ago and some even in the summer months.  Walmart (WMT) anounced that it will match prices from any one of it’s competitiors. This has fired up the competition, causing Amazon (AMZN) to lower its prices. An estimated 134 million people will shop this Friday, Saturday and Sunday.

This all comes on the heels of last year being one of the worst year’s on record. Will they or will they not come? And if they come will they spend? Well, based on the stock prices of these companies, Wall Street thinks ‘YES”. Walmart (WMT) has rocketed upwards in the month of November. Trading from a low of $49.52 to today’s current price of $55.

Based on this move, sales better not disappoint or we are going to see alot of selling pressure enter into the stock. We believe that Walmart is the leader of the pack and if anyone was to beat expectations they would be the ones to do it. That being said, we would prefer to enter the long side after a pullback of some sort.

I know one thing, you will not see me on line to enter the store at 3am. I will happily wait a few more weeks when the crowds subside.

Happy Thanksgiving to all!

 

Equity markets getting direction from US$

November 23, 2009 Leave a comment

As equity traders, we normally don’t need to be extremely aware of the US $ and it’s relationship with other currency; however, for the last couple of weeks we have seen an increase in the correlation between the $ and the equity markets. A great part of this is the result of the strength and weight of the commodity stocks, which have always had a correlation with the currency markets.

This morning’s large move up in the markets was caused by the sudden weakness in the US$, when the US$ started to strengthen during the late morning, we saw the markets start coming off its highs. We also saw once again a sell divergence develop intra day today as only the Dow Jones made a 52week high.

As intraday traders you need to be aware of what factors/sectors/or markets are moving stocks, so you can be ready and anticipate the next move.

Now that we are done with the earning season, maybe the macro economic numbers will be the only indicators that move this equity market one way or another.

$How does one solve a reoccurring problem in trading?

November 18, 2009 Leave a comment

When I first started learning to daytrade, I used to get evry upset with myself over almost every mistake that I made. Once I realized what a negative approach that was, I identified the one and only time that I would allow myself to be really upset with me.

The time that I allow myself to be upset with me is when I do not follow my plan which is kin to loosing discipline.

This month (Nov.)  has been a very difficult month to trade in my opinion. To date there has been really only one trending day. Now there were two additional days that I will identify as quasi-trending days as they did not meet the typical criteria for a nice, smooth trend in OF or they started out in a definate trend, but then transformed into a range bound day.

For Debbie, months like this are very difficult for two reasons: (1) range bound conditions prevail; and (2) when Debbie finally gets a trending day, all she can think about is what “was” for the past 8 days.

Now, the positive on today was that despite difficult conditions there was money to be made in specific stocks. Debbie had a plan for HIG if it trended. She took a hit trying to get in on the OR break but the hit was not a big one. Finally, she got the right price where risk could be managed and if follow through continued then the potential reward was great.

What happened next was, Debbie got spooked out of the position because HIG was moving contrary to the bias of the order flow in the SPY from the open and the vix was not really making one have confident in long positions. She took a loss.

HIG went on to move higher until about 11:45 ish. with a profit potential of somewhere around .70 cents. Debbie spent the rest of the time trying to get back in and continued to take small losses which added up. Once HIG was not working Debbie switched stocks and made the situation worse.

Debbie is upset with herself, as a trader, for two reasons: (1) she did not stick with her plan; (2) she fell into an old pattern of trying to make losses back and, as a result, lost perspective on what was happening in the markets and on the stock charts.

The result  of the two above problems are Debbie overtraded and Debbie took an unnessasary negative hit on the P/L today.

The only way to solve  reoccurring challenges, or any challenge to ones progress at all,  is to create a rule for the challenge and, more importantly, follow the rule in order to extinguish the problem.

Here is what I am doing tonight.

First, I will write these two problems out a a sheet of paper, crumble them up, throw them away, and they will be gone forever. Second, tonight will be spent revising my trading plan and adding a couple more rules.

Profitable Trading ALL!

Debbie, EdD, MAED, BSED

$Time To Buy E*Trade?

November 18, 2009 1 comment

E-Trade (ETFC) was up 9% today as talk of a possible takeover candidate. These rumors have swirled and swirled again. Each and every time, there is no substance behind the rumor. This time it may be different!  Earlier in the day, E Trade reported October trading volumes for it’s customers, which came in a bit light. However, the latest report showed that they had reduced its bank-related deposit assets. A major reason for the decline in the stock over the last 2 years.

In addition, TD Ameritrade CEO Fred Tomczyk made some comments about a possible M & A activity in the future at a Reuters conference. He said that and acquisition was :the best use” for TD Ameritrade’s (AMTD) considerable cash position. There have been some talk that the buyout price could be as high as $4.

Technically the stock looks pretty good. Currently trading at $1.69, it traded as high as $2.07 in late September.  After the surge today, it closed above the 50 day EMA at $1.66.  Earlier in the month, it crossed back over the 200 EMA. Risk-Reward, we feel this is one to own!  It may take time to play out, but your downside is limited, your upside looks pretty good.

 

$MEE Massey Energy ready for take off

November 18, 2009 Leave a comment

Massey Energy finally caught some institutional buying and pushed above the resistance at $34 with increased volume from the prior week. A hold above this level would give us an initial profit target of $52.46

$ Keystone Morning Quickie

November 17, 2009 Leave a comment
Keystone Morning Quickie     November 17th 2009

Market Commentary

 
Futures are backing of this morning after advancing 9 of the last 11 sessions. The S & P Index closed above the 1100 level for the first time this year. The U.S dollar is on the rise this morning, which means some profit taking should take place in the Gold sector, as well as the overall market.
 
 
Yesterday afternoon, Meredith Whitney was interviewed on CNBC and said “I haven”t been this bearish in a year”. “look for a double dip recession next year”. Whitney had called the downturn in the financials before the worst of the financial crisis took place.
 
The 110  level in the $SPY will be the level today to watch. If we trade below, we will be looking for some support at the $109.47. Below this level, $107.98. We expect a bit of selling pressure at the open, to be met with some buying, as that strategy has worked for some time now. However, we believe that, traders will sell into that rally.
 

 

   
 
 
 
 

Technical Levels
                                                            200                   50

 
 

S&P                                                                      1065                 932
DOW                                                                     9857                8701
NASDAQ                                                               2118                1822

Research Round Up
 

  Goldman Sachs (GS 177.25), long considered the market bellwether, has been underperforming the S&P for a few weeks now. Should we be alarmed? Yet the market seems to be strong enough without Goldman because other sectors are taking the lead.

 

Goldman upgraded Coach (COH 35.99) and Nordstrom (JWN 35.05) to Buy. There are expectations of a strong holiday season for Wal-Mart (WMT 53.16) and it will be a stock that investors will focus on. The market had a lift from strong retail sales (up 1.4%). Consumer credit (AXP 41.44, COF 39.89) has been reported as improving in quality. Affluent consumers and some pent up demand are driving the credit cards.  It is noteworthy that these stocks and the Market continued to rise even though bank analyst Meredith Whitney had some bearish comments.

 

 
Keystone’s Trades

 

 
 Bristol Myers Squibb(BMY) Long Trade- BMY soared yesterday   + 1.16  (+5%)   on news that it is planning
 to split off its nutrition unit Mead Johnson [MJN  43.23    -2.02  (-4.46%)   ] into a separate company.
It traded above and held the 200 EMA on the Weekly chart at $24.04. Technically, this stock could make another big move up, as we do not see any resistance until $26.  Our only concern is that the markets may be ripe for a short term pullback. We will see how the volume looks at it pulls back to the 200 before entering.

 

Closing Price:$24.30

 

Target: $26.04

 
Stop: $23.77
 
20 EMA:$22.83
 
50 EMA: $21.48
 
200 EMA: $24.07 (Weekly chart)


Research in Motion(RIMM) Short Trade –  RIMM has been on our radar for some time now as it has been  relatively weak compared to the major indices. In the month of November, we have seen it bounce from $55 to $65. We see this as nothing more than a bit of a short squeeze as some rumors arose that MSFT might buy them.. On the bounce, it never traded above the 200 EMA. If the markets pull back, as many expect, including us, RIMM should have a hard time holding the $55 level. 


 Closing Price: $61.27
 

Target: $50

 
Stop: $66.10

   
20 EMA: $62.81
 
50 EMA: $69.17
 
200 EMA: $65.98

Tuesdays Economic Calendar 

5:30 Fed’s Yellen: Lessons from the Crisis
7:45 ICSC Retail Store Sales
8:30 Producer Price Index
8:55 Redbook Chain Store Sales
9:00 International Capital Flow
9:15 Industrial Production
10:00 Results of $75B, 28-Day TAF Auction
10:00 Hearing: BofA-Merrill Lynch Merger
10:00 Markup: Investor Protection Act
10:15 Fed’s Lacker: Economic Outlook
11:00 Hearing: Financial Stability Improvement Act
12:30 PM Fed’s Pinalto speaks
1:00 PM NAHB Housing Market Index
3:00 PM Hearing: U.S. and the G-20
5:00 PM ABC Consumer Confidence Index
 
 
Notable premarket earnings: CSIQ, COV, DDS, HD , JEC, MPEL, SKS, TGT, TJX
Notable postmarket earnings: ADSK, CRM, LZB

 
Top News Stories

  • AIG bailout was muffed. TARP Special Inspector Neil Barofsky said in a report Monday that the New York Fed mishandled the AIG (AIG) bailout by paying its trading partners in full, where it would have been possible to negotiate partial payments. The Fed didn’t use its leverage in negotiations, Barofsky complained, including failing to stress that its participation in the process was purely voluntary. In a response letter, the Fed said the terms of the $85B AIG bailout were appropriate given the severity of the crisis, and that leaning on domestic institutions would have been a “misuse of our supervisory authority” and provided an advantage to foreign institutions.
  • Bernanke gives mixed signals. The recent pickup in the economy “reflects more than purely temporary factors” and continued moderate growth is likely, Fed Chairman Ben Bernanke said in a speech Monday, though constrained lending and weak labor market remain headwinds to robust growth. Inflation expectations haven’t responded to upward or downward pressures, he said, noting plenty of resource slack. Bernanke pledged that low-interest, loose monetary policies would continue for an extended period. In a follow-up Q&A, Bernanke said it’s “not obvious” that asset prices are out of line, at least inside the U.S., and that “we can never say never” on using interest rates to deflate bubbles, adding we won’t have a “real market-based financial system until it’s safe to let a financial firm fail.”
  • Smelling danger, banks respond. The Financial Services Forum, a lobbying group for 18 of the world’s largest financial firms, urged House Financial Services Committee Chairman Barney Frank not to pursue big bank break-up legislation, an idea attracting interest in Congress and causing alarm on Wall Street. In a letter a day before Frank’s panel resumes debate on financial reform legislation, the group stressed that size alone does not make firms risky: “The problem is not that some institutions are too large. It’s that there is currently no legal authority to unwind, in an orderly way, a failing financial conglomerate.”
  • UBS urges patience. UBS (UBS) CEO Oswald Gruebel asked investors to be patient, assuring them the bank was on the come-back track. “We have stabilized UBS’s financial condition but we still have some serious topics to address,” Gruebel insisted. The bank has fixed a goal for pretax profit at around 15 billion Swiss francs ($14.89B) in the next 3-5 years. In a reference to the bank’s history of helping rich foreigners evade taxes, which led to a damaging legal tussle with the U.S. government, Gruebel said he was building “a new UBS: one that performs to the highest standards and behaves with integrity and honesty.”
  • Obama and Hu set different priorities. At a press conference in Beijing Tuesday, President Obama and Chinese President Hu Jintao had different priorities for economic action. Obama stressed the need for economic balance: “[We need] a strategy where America saves more, spends less, that reduces our long-term debt, and where China makes adjustments… to rebalance its economy and spur domestic demand,” Obama said. Hu, on the other hand, thought protectionism was a priority. “I stressed to President Obama that under the current circumstances our two countries need to oppose all kinds of trade protectionism even more strongly.”
  • Japan, eyeing bond sales, plans new budget. The Japanese government announced plans for a new budget, seeking to maintain economic stimulus measures to support the economy. But the government may have to cut back on some election spending promises if it seeks to keep bond issuance below ¥44T yen ($494B) in the coming year. There is already pressure on government bond yields as declining tax revenues suggest more extended issuance may be necessary.
  • GMAC chief ousted by board. GMAC CEO Alvaro de Molina was asked to resign by the board after only 19 months at the helm. GMAC had been preparing a request for additional bailout funds from the Treasury. GMAC director Michael A. Carpenter, who will replace de Molina, has said that he will review the need for that request.
  • GM loses $1.5B, but repays loans. General Motors posted a $1.5B loss for Q3, but announced it would repay $6.7B of its $50B government bailout, at the rate of $1B per quarter. Analysts said GM’s results showed a healthier balance sheet, ample cash, and factory production much more in line with consumer demand.
  • BOE director says better keep stimulus. Bank of England director Andrew Sentance, a member of the rate setting committee, said on Tuesday that emergency stimulus measures for the U.K. economy had better remain in place for an undetermined period. “We have to be open-minded” about more quantitative easing, Sentance added, even though he thought that the recession in the U.K. had come to an end.
  • Fed’s Kohn sees no asset bubbles. Fed Vice Chairman Donald Kohn said in a speech Monday that there was no sign of an asset bubble being caused by the low interest-rate policies the central bank was pursuing. Kohn pointed out that the central bank’s loose monetary policies were intended to help investors move into riskier assets.
  • U.K. inflation rises. The U.K. Consumer Price Index jumped to 1.5% from a five-year low of 1.1%, the Office of National Statistics said on Tuesday. Food prices pushed the index higher; economists say it’s likely only a temporary spike.

   news provided by seeking alpha

 

 
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