Satuki @ Home

It was a beautiful day(1/26/2010) for day traders of either direction.  We had a decent bull move in the AM and a bear move in the PM.  I have found that the market provides plenty of opportunities 2/3rds of the time. So if you are good, the market is your ATM.

I have been watching ICE for a few days. If you look at its yesterdays chart (1/25/2010), it gapped up and trended lower without any resistance from the bulls. What does it tell you?   It means “weakness”.  How do we take advantage of the weakness?  Short it!   In fact, it also showed weakness in the pre market.  So I watched it like a vulture around a dying animal.

Not long after the market open, you could see on the tape that the sell orders were flooding in. The small candle sticks were jumping up and down so rapidly that you could feel the heat. It is a feeling that you will obtain after so many trades. How long you have been trading does not matter. It is the intensity that counts. My father has been learning Spanish for 30 years. But I think he can say only simple stuff in Spanish because he practices his Spanish 5 minutes a day and 5 days a month.

The 2 setups were pretty much similar with only one difference. They were both breakdowns of a range.  The difference is that the second had slightly higher probability since the range was much longer than the first one.  The longer a range is, the more powerful a breakdown/up is.   When the second breakdown was unfolding, a lot of trapped bulls scrambled to find the exit.  Look at the chart below. The second breakdown did not even a green bar for almost 50 minutes.  This is the kind of moves that we,day traders, would die for.

My first attempt was not very successful. It actually dropped 1%, which did not trigger my profit taking mode. Of course, I would not allow a position like that to bite me either.  So I moved down my stop loss and it was a flat trade. But I nailed the second one.

On a side note, due to the fact that the second ICE short had a higher probability because of the solid range breakdown mentioned above, I was going to hit it with 500 shares. I filled the order ticket with 500 shares and chickened out in the last second. But again, it was still slightly bigger than my first short.

3 min chart [ICE ].  Click to have a better view

Consecutive big drops like the ones in 2008 rarely happen because that kind of moves needs very strong fundamental reasons behind them. The weekly and monthly of the S&P500 are still in an uptrend. There is no need to panic for the time being. Nevertheless, I am expecting a mid term correction.  How is this correction going to unfold is still an unknown. It might be stuck in a range and retrace a bit more from here.

TSL(Trina Solar Limited) was one on my watch list too.  With a beta of 3.6, it was a perfect candidate .I missed the long entry around 11 AM and tried a second time near the close. It ended up a small loser.

As for the other 2 guys, PXP(Plains Exploration & Production Company) and JCI(Johnson Controls, Inc), there is not much to talk about except that both have a decent beta value.