The key to my day today: stock selection.  It was pretty clear this morning that the action was going to be in the financials that had announced secondary stock offerings.  JPM, STI, AXP, and MS all sold stock to the general public so they could pay back the TARP money and get the gov out of their hair.

In our AM meeting I highlighted STI, MS, and JPM as the stocks to watch for the Open.  I actually ranked them.  STI was #1, MS was #2, and JPM was #3 (AXP was recently banned on the desk due to erratic trading).  The rankings were based on premarket action I observed in each stock, where each stock was trading in relation to their secondary price, and their recent price action on their daily charts.

After the AM Meeting our traders spend some time at their trading stations and prepare for the Open.  They set price alerts for key levels in the stocks that we discussed in the meeting.  They also will observe the price action in stocks in the premarket to further gain an edge before the Open.  They then will decide a primary stock to trade on the Open.  This is the single most important decision they will make before 9:30AM.  Choosing well may represent the difference between being up 1K or negative in the first fifteen minutes.

If a trader ends up selecting a stock that doesn’t trade well that is not the end of the conversation.  This morning Gman was caught in the nightmare that was JPM.  He recognized he was writing tickets but not making PnL so he moved on.  By changing to STI he was able to salvage his day.  That is what good traders do.  They listen to those around them and figure out where the money is.

My Open was somewhat easier.  I traded MS which was being bought in the premarket well above its secondary price.  This was a bullish sign.  I developed a trading plan that allowed me to capture one point on the long side soon after the market opened.  This put me in the driver’s seat for the rest of the day.

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