I bought a stock today after it cleared an important resistance level. It was neither strong nor weak. I didn’t sell it. I didn’t buy more. I am still just sitting there holding. I am not confident it will trade higher nor am I concerned I will get stopped out. I am not optimistic nor pessimistic. This trade is a nothing.

RIMM could just not trade above 74.60 the other day, after clearing the important 71.80 and 72 technical levels. RIMM just couldn’t- no matter how many times Steve and I encouraged (screamed?) at RIMM to trade higher.
“Get up you piece of $hit already!”
Yeah that didn’t work. We felt better but it didn’t make RIMM trade higher. So this was our important intraday resistance level. I set an alert for 74.65. We talked about this level on our desk. And I just waited.

Finally RIMM made the journey above 74.65, and the bid was holding as well. I bought a small position. Initially RIMM acted well but then it didn’t. Later in the day it acted well, but then there was no follow through. RIMM is still above my stop. But the market is still below SPY 115 which is an important market resistance level. Maybe RIMM just cannot find 80 if we are not firmly above SPY 115?

I didn’t get stopped out. There were no real buy orders that I spotted in RIMM. It did close higher but not much higher than the 74.65 resistance level. If the market so much as coughs I could envision getting stopped out.

But there is just nothing to do with this trade. I could sell it and wait for the clear buy orders to enter the stock. This is an option. But for my system RIMM is still below my stop so I stayed long. And all day I stayed long for the same reason. This trade is just a nothing.

Hoping you become a better trader tomorrow than you are today!

After the Close we watched video of HRB (H&R Block).   16 was a huge level on our longer term charts.  And HRB found this level.   And a few interesting questions were raised during our Tradecast.  One was: would you buy before you saw strength on the tape at 16 or would you just buy?

There is no right answer to this question.  The answer lies with you.   If you are an aggressive trader then when a stock finds an important support level you ought to buy.   And buy almost every time so your results are consistent.   If you are more cautious then you might wait for confirmation on the tape before entering.  For me I am piecing into a position as HRB trades near 16.   I am an aggressive trader.

Later during our TradeCast Noob Sean asked whether we ought to short when an offer was holding 16.   For me this was not a short.  Perhaps for Sean it was.   I thought this was a failed breakdown below 16.   For me the play was buy 1/2 a lot when 15.92 dropped and allowed for a new intraday low, but then rebid instantly.   And then wait for the 16 offer to lift to increase my position to 1.5 lots, waiting to add size at higher levels, and treating this as a Trade2Hold.   For Noob Sean maybe this was a play both sides (short below 16, long flip above 16) near the 16.   It is entirely up to you.

There are market principles that must be followed however.   And as long as you respect these market principles and then seek to make trades your own that is fine.   For example, shorting strong stocks and buying weak stocks is not a good idea.  We are all wired differently.   We all have different levels of experience, tolerances for risk, buying power, trading skill, etc.   Our trades must make sense to us.

Best of luck with your trading!

Suppose your favorite college team recruited a promising forward.  Let’s call him Franchise. Suppose you learned Franchise showed up 20 minutes before game time, dressed, did some light stretching, and then headed for a seat on the bench.

Perhaps your favorite college team is covered by a terrific beat writer, sharing interesting tidbits via a team blog that reported Franchise dogged it in practice.   And that Franchise did not like to watch film, lift weights nor do much during individual workouts.  Further, Franchise ate whatever he wanted leading the team in late night pizzas, stayed out late and didn’t like talking hoops with other teammates.  Franchise got his twenty minutes a game and then went home.  At times he showed flashes of brilliance but at others he demonstrated sloppy ball handling skills, a lack of strength, mediocre touch with his shooting, and poor passing decisions.

As a fan what would your opinion of Franchise be?  Would you recommend relying more on Franchise?  When Franchise entered the game would you rise from your seat and cheer?  Would you buy tickets to watch him play?  Would you point him out to your kids as an athlete to emulate?  Would you expect Franchise to become an All American?

As traders we must work on our game daily always seeking to improve.  If we don’t, then how are we any different than Franchise?

GMan and the desk was VERY long HAL going into the oil number at 10:30 AM. I would tell you how long but it was probably more long than we should have been. We were in a Trade2Hold and HAL was working. But then most on the desk did something very smart for the intraday trader. They lightened up before the oil number and 32.45ish.

Before an important economic number like the housing number or oil we take our risk off the table or at least a lot of our risk. GMan loved the HAL position. 32 had been a big level. Oil is very strong especially now that it has cracked the $80 resistance level. Oil was at its intraday highs of 81.90 at the time. Above 82 and the price of the barrel and oil stocks probably would find higher ground. But before the number GMan cut his risk by 70 percent.

What happened? That is not really as important as the principle. We have no idea what the oil number would be. We are short term traders. A disappointing number could erase serious intraday gains in a millisecond. In fact a bad number could turn open P&L into a major rip instantly. That is not the type of risk/reward in the self interest of the intraday trader.

For those curious, the number was not so good and HAL slipped to below 32. We rebuilt our position just above 32.

Best of luck with your trading!

Long HAL, GERN, JPM, MS, FDO

My short chop in RMBS got busted. Dov made the biggest chop on our desk and his profits were eliminated. NASDAQ put out this statement. Tough spot for NASDQ.

I am the last person to complain about this stuff. The market is like the Wild West and I have come to accept this. Trade long enough and you will as well. But as a veteran trader I was surprised by the decision to bust these trades. Here’s why…..

RMBS had a sharp move down from 25. This fast down move got our attention. And then from 12:45 PM to 1:20 PM RMBS consolidated. RMBS is often involved in litigation that invites precipitous moves. Our desk wondered if some negative litigation breaking news was about to hit or had hit and this downmove was the result. On the tape RMBS could not trade above 23.40 after the sharp downmove. I got short. Spencer instructed to a few short on the desk,”Give RMBS some time. It might really tank.” This was a classic bearish technical pattern.

So for 35 minutes RMBS consolidated after a sharp downmove. This is why we were all short. And then RMBS collapsed to 15.75 for a few seconds, popped to 19, and then found 22 pretty quickly. I covered near 19.70. With so much time going by and the consolidation near 23.40-23.20 this seemed like a legitimate downmove to me. Obviously the amount it traded lower was highly unusual, but the fact that RMBS collapsed was not.

This was not like the DNDN move from April (DNDN dropped from 24 to 8 in like 90 seconds). I was in that move and those trades were not busted. I ate the huge rip. NASDAQ probably received a great deal of heat for this move and this may have influenced their decision to bust these RMBS trades below 20.73 today.

According to NASDAQ we cannot appeal their ruling.

This was a good short. One I will make again. When you see a stock make a sharp downmove and then consolidate lower, this is an excellent risk/reward short.

Interesting start to the trading year. The action in RIMM, GERN, STEC, SEED, JOYG, AAPL, CHK offered excellent intraday trading opportunities.

Best of luck with your trading! Don’t forget to follow us on Twitter.

Long GERN, STEC

10. The SEC tax declining by about 35c per thousand shares traded.  2009 was a tough year made much tougher because of this tax being raised 400 percent last year.  This will mean a possible extra 17k for some of our traders.

9. Secret Project X.  SMB has developed a practice tool we are very proud to unveil to our in house traders.  Deliberate practice is how you become successful at anything.  This training innovation allows the developing trader the chance to practice.

8. The launch of our new SMB Training website.  We have been working on an improved site for many months.  Roy Davis, our coder and graphics designer are working hard to produce an amazing new product.  I have seen glimpses.  The site design will finally match the quality of the distance learning offered.

7. StockTwits TV 2010. Howard Lindzon and Phil Pearlman have started a killer trading community. The new and improved video for StockTwits TV is so exciting. Can we just fast forward to 1/4/2010 already and launch the new look?

6. SMB Trades2Hold of the Week.  Every Friday we will hold a new session where we discuss the best Trades2Hold intraday from the past week.  This will be an awesome learning session that leverages the trading talent from our desk.

5.  Dov Blogs.  One of our future star traders is starting to get stalkers.  I noticed some google searches directly for his name.  Dov thinks the searchers were his mother and possibly a new young lady seeking to learn if he is out on probation.  See he is very witty.  Much more to come from Dov.

4. The Shark Tank.  They are coming for you market players.  They are hungry.  They prepare for battle.  Stay tuned.

3. Tie: Me losing some weight.  Some jokester sent me an email the other day mocking how much weight I have gained since “Wall Street Warriors.”  I have gained 30 pounds since I started SMB Capital and SMB Training.  Time to take that weight off.

And continuing to exchange ideas with Dr. Steenbarger from TraderFeed on building a world class training program for developing traders.

2. I am about to be an uncle!

1. Watching how much our traders improve next year!

To all of us at SMB Blog thank you for reading.  We look forward to sharing our trading stories and education with you in 2010.

Happy New Year!

Ok so the volume is light.  GMan barked on the Open, “Volume is down 1/2.”  Dovey said about the same just with some streets of Brooklyn color.  On a day like today we must observe this different trading.  But there were still some opportunities.

AJames made a great call in STEC as it made a new important technical high and rode it up a point.  AAPL offered an Open worth playing.  AIG above 32 finally worked, yet lacked the follow through needed for a huge chop.  There was some opportunity in RIMM and IBM as evidenced by our leaderboard.

As I write I am in ESPN/trading mode.  I will watch the markets as I brush up on my Yankee rumors.  AIG will get my interest above 32.50.  AAPL is worth watching above 113.50.  STEC above 17.25 is worth a look.  My alerts are set.  But I am not willing to take on much risk until I see an excellent risk/reward opportunity.

There has been money to be made today.  There might be some opportunities into the Close.  But right now I am in defense mode, attempting to keep my profits from the Open, and forcing the market to show me an excellent risk/reward opportunity.  Till then I will be reading about the Yankees LF situation.

Best of luck with your trading.

With my post nasal drip cough I tucked myself into my trading station ready to perform.  AST who sits to my left was interested in RHT. I didn’t have a stock(s) I needed to trade, so I traded his.  RHT on the Open was a lesson in how not to lose money.

1) RHT first moved higher after its gap up on the open.  60c was cleared for size.  Time went by.  62c was cleared.  Time went by.  65c for size.  It ticked towards 60c, time went by.  68c for size was cleared.  It ticked towards 65c, time went by.  70c got cleared, time went by, 72c got cleared, time went by.  RHT was trading higher but way too slowly.

So we had offers getting cleared that is bullish.  But we had a set up that offers too much risk right on the Open.  RHT had gapped up so there was danger of it dropping out on the Open.  Yes offers were getting cleared but they were not lifting quickly, after they were the stock was not exploding, RHT was not spreading out.  Yes I was still long but for small size, lightening up along the way playing defense.

To me the description above could have been the reverse accumulation set up.  With all that buying and not much of an upmove this breeds risk of a quick reversal.  And then we all saw 41c after 75c would not print much.

There were a few groans on our desk as RHT changed price.  But this was to be expected.  This is a pattern of risk.  This was not a long to load up in.  You needed to be light and flexible.  I took a small loss and moved on.

2) RHT traded in a range between 30c and 73c after the drop out above.  I play RHT from the long side and made the spread a few times.  I did not do so with size.   I said to an inquisitive trader on our audio call, “I am long but I am not that long.  I am not willing to take on much risk with this trade.”  I observed that this was a set up that was not one of my best plays.  It was a C trade.  So I was in the play, but more just to gather some information.

RHT dipped below 30c, and I hit the bids playing the break of the range.  It did not tank so I covered some immediately holding a small short position.  Again this was not a great set up for me, another C trade, so I was not willing to take on much risk.

3) Gold started getting chirped on the desk.  I started a small position in FCX, C trade.  Again small because this was not a trade that highlights my trading strengths.  I took a small loss in FCX and moved on.

4) RHT finally started to trend lower, but the subset for how it was trending was not a favorite trade of mine.  I was short.  I was short small.  I was holding.  But again I was not willing to take much risk in the trade.

How much we take home each month is the result of how much we make MINUS how much we lose.  Staying small in a trade that does not feel right to you is the skill of a long time trader.  Keep your risk minimal and your losses small until you find a play that offers an exceptional risk/reward to you.   Save you risk for your A trades.  Learn to minimize your risk on your C trades.

Best of luck with your trading! Don’t forget to follow us on Twitter.

As a trader our quest is to make trading opportunities our own.  We are all different.  We process information uniquely, have a different tolerance for pain, trade specific set ups better than others, etc.  As intraday traders we must have Trades2Hold, longer term intraday trades in our quiver.  But it is up to find these best ones for us.  Today in RIMM the market offered a trading opportunity, Trade2Hold, for you.

The day after earnings 70.30 and 71.65 were important intraday levels.  To refresh your memory RIMM leaked below 70.30 and then tanked.  But at 68.60 a buyer held the bid.  This became a very important level in RIMM.

On the day after earnings traders become very interested in a stock.  Volume rises.  You learn more about the potential direction of the stock over the next month than ordinary trading sessions.  The Big Boys battle and you can see who has control of the stock and in which direction that is.

Since the day RIMM reported 68.60 was an alert set on my trading platform.  Then today it went off.  I had been keeping an eye on RIMM before this.  I did notice the weakness.

RIMM blasted below 68.60 without hesitation, a sign of weakness on the tape.  I hit the bids and started a short position.  RIMM slowed so I covered.  The offer did not lift, as I spotted a panic sell program led by FLOW, so I reshorted.  RIMM slowed and then I covered again.  Normally I do not cover below such an important level quickly but the downmove had been steep, RIMM has a tendancy to reverse, and I needed more consolidation below the important level to hold the position.

Well I finally got that.  RIMM could not trade above 68.27.  This was below the important level.  I got the consolidation I needed.  The next support level was not until 66.20ish (depends on your trading time frame), with a distinct possibility of finding 65 based upon the steep downmoves.  Trade2Hold.

As I write I am still short.  Perhaps I will get stopped out of this trade.   Perhaps RIMM will find 65 today.  Honestly I really don’t care.  My job is to make these trades when I spot the opportunity.  I cannot control the results.  What I have done is found this Trade2Hold set up that makes sense to me.  And I have incorporated it into my trading with success.

So if you think this trade might work for you have at it.  If not, good job of considering it for your quiver.  This is the type of exploration as traders we must do.

Best of luck with your trading! Don’t forget to follow us on Twitter!

Short RIMM

I am pretty exhausted. 1) I just traded RIMM in the after-hours for 2 hours. 2) I just listened to their CEO (or someone who does most of the talking during their conference call) explain business and trying to understand the guy required all of my mental energy.

What is it with tech types where they think they can just make up their own language and expect the rest of us to understand? Too much “sweet spot”, “apps”, “contextualized.” There were other words but I am so unfamiliar with them I couldn’t remember others. But the bottom line is business is awesome over that at RIMM!

What I spotted on the tape: Below 70.50 and I will focus on being short tomorrow. Above 71.50 and I will focus on being long. Above 72 I will aggressively play the momentum from the upside.

Ok so now I am going to go and close out my platform, get my stuff for the gym, and go work out. For those in tech land that means: I am going to go and close out my platform, get my stuff for the gym, and go work out.

Best of luck with your trading.

Flat RIMM.

Steve will give his take on what he saw in RIMM in a few…….