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!

I know of no more encouraging fact than the unquestionable ability of man to elevate his life by conscious endeavor.
Henry David Thoreau

SMB has a developing trader desperate to improve.  In a merciless 2009 he traded very well comparatively.  This quest to improve is not unlike that of an unprofitable trader hungry to just start breaking even.  This journey is no different than than the average trader desiring to become very good.  So how do you improve?

Let’s start with what doesn’t work.  So you are underperforming and you want to get better.  Too many new traders scrap almost everything they had been working on and try something completely new.  This is the worst thing you can do in most cases.  Let’s break this down logically.  So you are an inexperienced trader and have left one style of trading for a completely new system.  The reason you are most likely underperforming is your lack of skill development for a particular style. Why are you exchanging a lack of experience with some patterns for even less with others?

Those that are underperforming often think if they just learned something new.  Almost always it is- if I just learned some more technical analysis then that will make the difference.  Maybe but probably not.  Trading is about making set ups your own.  For every new play or pattern you learn you must 1) make that pattern your own and then 2) develop the skill to trade that pattern well.  It is better for the new trader to first ask: Am I in all the patterns that make sense to me and I crush ?  Or am I missing some of these set ups?  What can I do to ensure I am in more of the opportunities that are in my sweet spot?  And then how can I trade these set ups with more size?

Often traders seeking to improve should focus on the patterns that make sense to them.  What patterns are best FOR YOU?  Learn the nuances and subsets to these plays.  You will make the most progress by becoming better at these plays and patterns that make the most sense to you.

Now it is true that sometimes patterns that work one month will not the next.  And we must always be searching to add plays to our playbook.  But to do this takes time.  When you spot a new pattern that makes sense to you start trading it with small size.  It will take experience, practice, tweaking, and time to master this set up.  For this new set up there will be subsets and nuances to master.  Keep working on expanding your playbook because one market might overvalue the trading skill for this new set up.  But keep your losses small while you are learning.

Also generally it is not that a pattern that makes sense to you must be scrapped.  Often that pattern must just be tweaked. Focusing on completely new patterns often is an overreaction.

Further it may be the case that your patterns do not work anymore.  Micro-scalping in this present environment may be too difficult for most new traders.  Stepping in front of big bids and offers used to be a go-to-play at some firms and should have been deemphasized in 2004.  Rebate trading, adding liquidity and getting “paid by the market” now is only a sustainable trading style for HFTs.   If your patterns are obsolete as defined by your trading stats, then move on.

Trading is about learning what you do well and leveraging this talent.  How do you find more of these patterns that make sense to me which I crush?  This can increase your results 300 percent,  as opposed to spending an inordinate amount of time learning a new pattern that might add one percent to your P&L after you master it.  Search for these new plays but understand it’s the plays that make the most sense to you presently that will present opportunity for your biggest improvement.

Best of luck with your trading!

For every trading decision we consider three factors: Reading the Tape, Intraday Fundamentals, Technicals.  Let me explain how we do this while discussing RIMM from today.

Tehnicals

GMan has been pounding the table about RIMM 70 for a few days (GMan actually started his position at 70.50 so he was in a position of strength near this level).  We draw all these fancy lines on our charts during our AM Meeting representing trend lines.   Adam and GMan had some lines glittering on our 65inch Flat Screen TV highlighting the 70 level.  The idea was if RIMM trades near 70 than this is a trading opportunity for us.   This is not an automatic short or long.  We focus our attention on RIMM at this moment and look for excellent risk/reward opportunities.

So when RIMM traded below 70 it received our full attention.

Intraday Fundamentals

There was no major news on RIMM today.  Joe P did make the interesting point that EVERYONE has this 70 circled on their charts for RIMM.  So below this level may bring out the selling and shorting. Also since this is such an important level we knew to be careful about the HFT’s playing their games, stopping us out of excellent risk/reward trades just because they can. So we had nothing from this element to aggressively short RIMM.

Reading the Tape

RIMM dipped below 70.  Spencer and I treaded lightly because RIMM was clearly not below this level.  And then we both started saying the same thing with different words.

I began with,”I don’t see the selling below 70 yet.”

And then five minutes later from Steve,”There is no seller below this 70 level.”

We didn’t see the bids getting smacked.  We didn’t see offers holding and then stepping lower.  We didn’t see bids dropping out quickly.  We didn’t see an increase of speed with the order flow.

So we both were short, but not for size since only one of our factors, technicals, called for a short.  We were ready to pounce if we saw selling.  We did try and stay short as long as RIMM was below 70.  But we were not willing to risk significant losses until we saw the tape showing weakness.

These are the three factors that we consider before every trade.  Perhaps some of them can help you.

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

We have a great new training class from September 09.  Some classes for whatever reason can turn out outstanding and others ordinary.  Same teacher, same material, but very different results.  And from my seat very different teaching experiences.  We haven’t held a new training class since September of 09 so lucky for us that they are so enjoyable.   June of 08 was our best class ever.  But our September class is showing signs.

Today after the Close TH (he is TH until he starts making a lot of money and then he will get a nickname like “GMan” or in @howardlindzon’s case “HMan”- you are welcome Howard) showed tape of a trade he made last month in BA (Boeing).  60 was an important level and BA violated this support level.  So TH started a short position- Trade2Hold Below Support Play.  And then we started having fun.

BA ticked quickly down to 59.73 on light volume.

I commented,”She only agreed to a First Date.”

And then BA quickly snapped back to the 60 level.

“She is looking around the restaurant to upgrade potentially.”

And then BA ticked through 60.

“She has gotten up from her seat and smiled at someone.”

TH countered,”She is just going to the bathroom.  She will be back.”

I continued,”If 60 holds the bid up here then she has sat down at another table to talk to another guy.  If 60.10 holds the bid then she has given her number to that other dude.”

We rolled some more tape and BA found lower ground.  50c of a clean downmove followed.

TH grew more confident in his relationship.

I asked,”Did BA go down because it was weak or was it just the market was weak?  Is she just with you because you took her to a nice restaurant?”

We watched some more tape and then BA went down another point.

TH was beaming.   If he was an NBA baller he would have been pounding his fist against his chest.  Clearly BA was weaker than the market.  She liked him.  Or as Trader Chris quipped,”He just hooked up Bella!”

Like those who you might date your stocks send you mixed messages.  Your job is to intake the data and determine if she really likes you.

Best of luck with your trading.

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!

We have been waiting for WFMI to explode for days. Above 34 and then 34.30 were levels to add size. During our AM meeting GMan pounded the table about buying above 34 and then 34.30. One of our developing traders did and posted a personal best. Chop Rosie!

Why did we like this set up? The day after earnings WFMI was strong. 33.55 was a huge level as we spotted an unusual hold on the bid the day of earnings. WFMI could not trade below there for two days, finally did but did not stay below for long. WFMI has room to find 40 as we examine our longer term charts. 34 has been a level it could not clear for days. Above 34 and this was an A trade for us.

Now everyone in our firm had these levels in WFMI. But not everyone was in this trade. Rosie was. I was. GMan was and some others. And there was not much to do save manage our position, look for places to add, and hold. This was a Trade2Hold. At one point intraday I tweeted:

If I was on StockTwits TV Talk Your Book I would be screaming “Watch WFMI” $$ and then I would ask poss tech breakout?

Where was @ppearlman when I needed him? And while most of us lightened up or went out flat WFMI there was not a reason to sell save maybe when WFMI traded below 34.90 into the Close.

Rosie bought and did so with size. Rosie held WFMI for a substantial move. She was prepared and executed. I never understand those who go home complaining about a lack of market opportunity. Stocks go up and down all day long. It takes one stock, with one powerful move to make your day. Your job is to perform. To be in these set ups. To seize the opportunity offered almost everyday to intraday traders.

After the close we met with our new traders and discussed an excellent exercise to improve. I highlighted the opportunity in RIMM below 69, and WFMI above 34, and BRK.B at 80, GS at 160, NVDA below 16.50, AAPL below 199.20, and on and on and on. At the end of the day go find these stocks that offered opportunity. Talk to others on your desk about these set ups. Exchange ideas about how to best trade these plays. And replay them simulating trades that would have made sense TO YOU so that you would have found a way to seize these trading opportunities. So you can be like Rosie!

Best of luck with your trading!

Ok so I was honest and shared that I got ripped in DNDN when it dropped 16 points in 40 seconds.   And I was one the chumps who got their RMBS shorts busted after a huge chop.  But today the trading Gods smiled on me.

There was breaking news in MIL (Millipore Corp).  TMO (Thermo Fisher Scientific) it was reported made a 6 Billion dollar offer (“6 million dollars”).  MIL skyrocketed from 71ish to over 100.  I missed the move scrambling to find out why the sudden spike and partly just being a wuss.  I couldn’t do the math quickly enough in my head figuring what 6 Billion would translate for the stock price, Spencer was on a flight to Singer Island who could have calculated this in a millisecond (he went to Wharton afterall ), but I did sense that everything above 90 was dangerous.  I chose to sit on my hands and wait for a safer trade.

MIL started to trend and trend down.  At 90 there was a nice battle with the sellers victorious.  I started a small short position.  MIL traded down about $1.25, I covered and then waited for my next trade.  MIL didn’t really trade higher and I found a new place to short.  And then something really strange happened.  The bids dropped out in a free fall (I later learned a MIL spokeperson said the bid was just a rumor).

I thought- maybe there is no deal.  And then I sensed-lock it in Bella.  I placed a bid and got hit at 78.82.  A cool ten points lower on 300 shares.  Almost immediately the bid was 85.  So that went well!

I waited for hours to receive a phone call telling me my trade was busted.  Dovey was razzing me to expect a call any minute.  I ate a few of Rosie’s delicious oatmeal, chocolate chip cookies and managed my other positions in AIG, SLB, BRK.B.  My phone never rang.

While this trade was awfully lucky, I was short for a good reason.  I am very fast.  That is why there are speed drills in the training program Noobs.   I did sense the downmove slowing so this execution is partly because of my Reading the Tape skills.  And didn’t I have this trade coming to me after the nonsense in DNDN and RMBS?

On a side note I am about to make a rather large purchase in the near future.  And I learned right after the trade that this large purchase is going to run me an extra 3k.  Typical!  It is like that Seinfeld episode where Jerry throws $20 bucks out the window and then finds $20 in his jacket.  Maybe I should refer to myself as even Bella?

Anyway that is how you make 3k in 30 seconds.  Maybe I should put together an infomercial and hit the road?  And by the way if you are new to this blog and think you can really make 3k in 30 seconds without once in a few years luck, please do not return to read this blog going forward.

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?

Today we met in our training room before the Open and Steve went through our best trading ideas.  There were many.  I narrowed down the stocks I would watch most carefully on the Open to LXK and MYGN.  And both were excellent intraday trading stocks.  But the best part of my day today were call outs from other traders on our desk.  My P&L was improved substantially from the call outs by others on our desk.

I shorted some MYGN and made a chop.  Yada yada yada Bella.  I butchered the open in LXK though it was messy.  But then Carlton one of our hard working new traders called out TM, Toyota.

Quietly he asserted, “Watch Toyota, it is below 75.”

I punched up TM.  Below 75 was broken on the long term and intraday charts.  We had fresh news with their recent large-scale recall.  Spencer chirped 70 was a downside possibility.  I started a Trade2Hold short.  3 points of trending downside opportunity followed.  This was a layup short.

Later in the trading session GMan shared, “WFC near 28.50, I am shorting below!”

WFC dropped 28.50 so I whacked the bids and 40c of trending downside opportunity ensued.  Yet another layup presented to me by a fellow trader.

At the start of the trading session I focused most on LXK.  Patrick one of our traders advised, “MYGN new low.”

I typed up MYGN again.  I saw an intraday downtrend had formed, weakness on the tape and a new downside catalyst.  I whacked the bids and watched MYGN drop 50c.   I felt like I was playing with Steve Nash, the great PG on the Phoenix Suns who makes his teammates better.

Steve and I had a conversation with one of our better traders yesterday.  We started talking about the value of idea generation for an elite trader.  My guesstimate was superior idea generation was worth 20k a month for an excellent trader.  Today was Exhibit A.

Just for the record and to show I do my part, when LXK cleared an important intraday resistance level at 31.30 I communicated, “Watch LXK, I am long and holding above 31.30.”  LXK trended up all day after this call out.  Record that as an assist for Bella.

Also during the Open on the Mush call a handful of our traders started a very large position in WU as 17 would not drop.  Chop for those on the Mush Master call!

Spencer caught a four point upmove in AMZN today and called out his entry and exit step by step.

When PNC found its secondary price numerous traders shared this.  A short below 54 was available.

Ok it’s getting late and time for me to go watch Idol on DVR.  You get the point.  Traders on our desk work together to make money individually.  We are only as good as the stocks that we find.  We can find more trading opportunities for us by sharing our best trading ideas.

Best of luck with your trading!

As we continue to gravitate towards more Trades2Hold, longer holding time periods for intraday trades, we found another excellent set up today in LXK.  This is a simple trade and a pattern you might spot a few times a week.  We will discuss the entry and the exit.  (let me state at the outset that for some reason I can’t type up the correct symbol of this stock.  All day I kept calling it by the wrong symbol and typing up the wrong symbol.  Weird.)

LXK announced positive earnings and gapped up.  It was at a 52 week high which is bullish technically for a stock.  29.80 was intraday resistance and Lexmark cleared this level.  We headed for 30 long and holding.  But then 30 presented the selling of a brick wall.  Hmmm.

30 lifted ever so slightly as SPY popped.  There was little interest to aggressively buy LXK above 30.  And an ARCA seller kept coming back to 30 with more inventory to unload.  Interesting.

The market continued to pop and LXK would not trade above 30.  30.05 was a price it would not trade above as most of the order flow was matched at 30.  With the market ripping and LXK at a 52 week high, why the heck wasn’t this stock finding higher altitude?

This presented a relative strength play.  LXK was much weaker than the market.  Also during earnings the pattern has been to sell the gaps.  Was this stock ready to reverse?

When the 30 dropped the bid LXK dropped out to 75c.

ALJ exclaimed, “What the hell?”

This was a very quick drop.  To me this signaled a failure from 30 and a Trade2Hold candidate as LXK retraced back towards 30.  I started a small position at 29,85c as the offer held slightly.  LXK found a way to touch 30 where I added some size.  I could not get the two lots that I wanted.  My 97c and 99c offers were not executed.  When a 94c buyer dropped I smacked the bids for another lot.

80c held the bid so I covered one lot there a hundred shares at a time as it kept holding and holding.  I held one lot.  After the significant volume at 30 this was a Trade2Hold for me.  I was going to give LXK a chance, even if I couldn’t type the dopey stock up on my Level II.

With a Trade2Hold we develop reasons to cover.  One reason to cover is if a stock breaks the intraday downtrend.  After LXK traded all the way down to near 29 I had lightened up a little.  I still was holding 3/4 of  one lot.

My 5 minute charts indicated above 40c was a break of the downtrend.  I set a stop for 1/2 of my position there.  65c was an important level on the way down so I set another stop to get flat.

Steve mentioned after we reviewed this trade that 20c was an area of consolidation to take some stock off the table.  You could decide to agree with him and exit some there.  My sense was that LXK had some more to fall so I held.

The market rallied into the close and I was stopped out at 41c and 66c.  Oh well.  The market has been weak of late so this gave me more pause to cover at 20c.

Above is my example of a Trade2Hold and my execution to exit.  You could have traded this with more size and covered in a way that makes sense to you.

In my review I should have added one more lot at 30.  I could have covered a little more into the steeper downmove close to 29.  

We received this tweet question today.

SkyTrader @smbcapital you guys trading $LXK at the close? crazy hold on the offer @ $30 (NYSE). wondering how you would play it tomorrow. thanks.

Tomorrow I will use this 30 as a significant level.

Best of luck with your trading!