$NFLX 247.50 Failure.

$NFLX broke through the important 247.50 resistance yesterday, but it failed.

$WFC 32.30 not pierced.

Chart Levels $PCLN $CMG $OPEN $ARUN $WTW $DECK $NFLX $HLF $LULU $SBUX

Levels $SPY $IWM $JPM $WFC $GS

Some levels .

The trade-off between catching the move and being stopped-out. $study

-Very interesting blog note from Mike Bellafiore at SMB Capital. http://www.smbtraining.com/blog/the-direction-and-the-pattern . Basically , for an intra-day trader you must not only know the direction but also how the stock gets there, (basically will the pullbacks be shallow or deep) or else you run the risk of being right but being stopped out.

- What I take from it is: be patient...wait for the pullback or consolidation to determine your stops/breakout levels. The fundamental question is there is a trade-off between catching all of the move and being stopped out, and one has to decide how and where on that tradeoff line one wants to trade. Waiting for a pullback will give you a sounder stop, but the wait will mean you will miss some of the move. Conversely if you go in early you might be handsomely rewarded, but the risk of being stopped out increases.

-Not sure how clearly I am explaining this, but I think it is very crucial for an intra-day trader to be aware of  this tradeoff...I will try to follow with examples/charts in a post over the weekend....

Patience! Wait for it! Mel Gibson "HOLD!" "HOLD!" $bbd $spy $study

-I made an excellent trade...but I lost money in it! I went short $BBD against $SPY as shown in the chart...but it was too early...literally. I established the position between 11.45 and 14.45 . Now I know these type of trades and Brazilian ADRs in particular work best if established late in the day or early next morning...or put another way, the outperfomance usually lasts for at least a day . I had had some good trades and was too confident and anxious to "get some more".

- I was forced to cover the next morning (dollar limit stop loss) as shown in the chart. Had I been more patient when entering the position I would have been able to exit later in the day at a nice profit.

- The lesson , which I should know by now, is best illustrated by Mel Gibson in Braveheart. As the English cavalry attacks he shouts "Hold ! Hold!" (as shown in the video at 1 minute 23 seconds) right until the last moment .



If you like to link trading lessond to films, here is another I did a while ago :on stop losses and Peter Sellers in the film "The Party" .http://jpotrading.blogspot.com/2010/09/link-between-not-using-stop-losses-and.html

A Tale of Two Pullbacks: $LO $INTU $study

-Both $LO and $INTU gapped up today. A common trade is to buy the pullback that inevitably occurs. This worked for $LO but clearly not for $INTU as shown in the charts. Both made clear pullback bases from which one can put a low risk stop, but one worked and the other failed.

-In fact $INTU made it back to the opening price which is very suspicious and probably indicates it has further to fall today.

When in Doubt, Pair Trade. $JPM $WFC $COF $CAT

These volatile last couple of days I have been mostly pair trading. The saying "you have to trade in accordance with your personality" applies here. I do not feel strongly about being long or short here...I cannot predict earthquakes or nuclear developments.

-Above is a chart of my long $jpm short $wfc trades. Other pairs I have been trading are short $wfc against $spy; short $cat against $spy;short $cof  against $jpm ; short $bbby against $spy .

Relative Strength by Joe Fahmy

Interesting lecture on Relative strength by Joe Fahmy.

Short Weak Stocks; Part 2 - Absolute and Relative Weakness $study $akam $klac $spy

In the last post I mentioned the need to short weak stocks rather than strong ones. However maybe I should have said that the really important point is to short relative weakness. Let me clarify with two trades I took yesterday.

-AKAM was basically a weak stock yesterday. It underperformed the SP500 in absolute terms.  However what really made me short it was its behaviour around 14:40 where it began to exhibit pronounced RELATIVE WEAKNESS....the SP500 was making new highs and AKAM was popping up in my daily low screen. So here we have a stock that through its ABSOLUTE WEAKNESS indicated it would be a good intraday short, and that through its RELATIVE WEAKNESS confirmed and triggered my trade.

                                         

-KLAC on the other hand was a very strong stock yesterday...it exhibited clear ABSOLUTE STRENGTH. I was tempted to short it but waited for RELATIVE WEAKNESS to manifest itself, which it did from around 14:00 onwards.

Basically paying attetion to the relative perfomance will give you a hint that its ok to put on a short by showing that a weak stock is not simply establishing the low of a range, and that a strong stock is not simply making a pullback before going higher again.

Short Weak Acting Stocks. $akam $adtn $cree $study

If you are going to short a stock, choose one that shows  weakness during the course of the day. Below are the graphs of three I traded to the short side profitably today.

-What they all have in common is that they start exhibiting relative weakness from the start. On a strong up-trending day they kept making new intra day lows. So again and for my benefit SHORT WEAK ACTING STOCKS NOT THOSE THAT ARE ACTING WELL!.

The Story of Three Gaps. $SLB $GE $MCD ; $study

-SLB posted ok results friday pre-market. The stock gapped up over 2% but did not take out recent highs at 87.70...the opening drive high was 87.56 . The first fifteen minute candle was long and red and took the stock close to unchanged. This all hinted this stock was not going higher today. I waited for a bounce and shorted as shown in the chart.
-I should have shorted a little later, when the stock was falling rather than going up, and thus a clearer pattern established.
-Exit was poor, but I just was desperate to lock in some gains.

-Compare SLB with how GE, which also reported results, behaved. It opened up 4% clearly above recent highs; the first fifteen minute candle was green and never violated to the downside. So whereas the SLB opening hinted "I want to go down" , the opening in GE hinted "I want to go up" .

-Another interesting comparison is MCD which reported yesterday. Its fisrt two hours are almost an exact mirror image of what happened to SLB.
-MCD opened down, but had a nice initial green fifteen minute candle. It then reached unchanged; pulled back; and proceeded in the direction of the initial 15 minute candle.

The Opening Behaviour Gives Clues Again; Gap Direction and Initial 15 minute Range. $AAPL $GS $study

-I have blogged before about the importance of the opening level/behaviour. http://jpotrading.blogspot.com/2010/12/importance-of-opening-level-in-gaps-ccl.html

-Two days ago AAPL had what were apparently stellar results (again), and multiple upgrades. But it was only trading between up 0% and up 3% in pre-market...not impressive. Obviously the great results were competing with the opposing force of Steve Job´s medical leave.

-The stock opened at the pre-medical leave highs and quickly went down. This was a strong clue to the question of whether AAPL  was going up 5% due to results or down due to the medical leave.
- The pullback off the early lows was also instructive...its high coincided almost exactly with the previous day´s high...once this failed...

-GS had results that were not impressive, but far from dismal. It gapped down and the question was now what? It was range bound by the initial 15 minute candle , and one could trade this, but the "real trade" came with the brake of the opening 15 minute candle...and appropriatly the brake came in the direction of the initial gap down.

Levels For Stocks in Play Friday $KLAC $AMAT $NVLS $LRCX $ARMH $ERJ

KLAC

                                                                           AMAT

NVLS

LRCX

ARMH

ERJ