GOOG announced today that the Nexus 1, their new phone, would be carried on the Verizon network. RIMM started to trade lower. It was already on our radar as a short candidate below 66.50 and 66.20 based on its recent price action. We knew the next major support was not until 65 so it was game on for a short trade.
Once news is released on a particular stock it is the job of the short-term trader to gauge the strength or weakness in the stock by reading the tape. By carefully examining how aggressively a stock is being bought and sold a trader will be able to form a hypothesis as to what price levels the stock will trade. Also, by reading the tape a trader can quickly recalculate in their mind, almost automatically, whether the risk/reward is still favorable for an open position.
When RIMM traded down to the important 65 support level I was hyper-focused on the Level II quote box on my platform. By absorbing all of the information that was being relayed to me via bids, offers, and prints I was able to determine it was time to cover my RIMM position. I watched as a huge number of bids got hit at the 65 level. This was most likely from those attempting to press RIMM further down through this key support level. After all of the bids were hit out at 65 RIMM dropped a WHOPPING seven cents to 64.93. Then in less than ten seconds the bid was above the 65 level again.
Although I covered my short I was not 100% comfortable establishing a long position. I was waiting to see how quickly and how far RIMM would trade above 65 before establishing a long. After It traded up to 65.28 I started to watch the bids very closely. I was attempting to identify a large buyer above the 65 level. At 65.18 I spotted my buyer. Although the 65.18 bid was only showing a few hundred shares I watched as many thousands of shares printed at that price without the bid dropping. I bid for some stock at 65.20 and got long.
RIMM traded up about 50 cents where I sold the final piece of my position. When RIMM started to trade lower I had a great level to re-establish my position at 65.18. This was not a price that was apparent from just looking at the chart.
15 Comments on “Still An Important Skill…”
Great trade on RIMM Steve and excellent “Tips” on how read the tape!
Great trade on RIMM Steve and excellent “Tips” on how read the tape!
First you post Our best AM Idea for today, which we highlighted in our AM Meeting is to buy RIMM close to 66.50. Tgts: 67.20, 68.00
Then you claim it was on your list as a short.
Nice.
First you post Our best AM Idea for today, which we highlighted in our AM Meeting is to buy RIMM close to 66.50. Tgts: 67.20, 68.00
Then you claim it was on your list as a short.
Nice.
Thanks Steve, very informative!
I assume you entered your short around the 66.4 level. I was late to the party and lost some profit on the bounce from 65.72 to 66.05. But was able to re-enter later for more. Did you just hold during this temporary bounce, or trade around a core position? If so, did you use box info to help you negotiate this bounce?
Thanks Steve, very informative!
I assume you entered your short around the 66.4 level. I was late to the party and lost some profit on the bounce from 65.72 to 66.05. But was able to re-enter later for more. Did you just hold during this temporary bounce, or trade around a core position? If so, did you use box info to help you negotiate this bounce?
is it just me or is the new blog VERY slow ????
is it just me or is the new blog VERY slow ????
Can you really enter this stock (or most stocks now) at new highs or lows, really seems like it gets pushed back up 20 cents after it breaks a low before it makes any kind of move down.
I get the feeling you have to anticipate weakness and short much higher than the 66.50 or you will be whipped around after breaking the low and it being bought up 20 cents before it makes a move down.
Thoughts?
Can you really enter this stock (or most stocks now) at new highs or lows, really seems like it gets pushed back up 20 cents after it breaks a low before it makes any kind of move down.
I get the feeling you have to anticipate weakness and short much higher than the 66.50 or you will be whipped around after breaking the low and it being bought up 20 cents before it makes a move down.
Thoughts?
david,
thanks.
steve
gotmo,
when a stock gaps above a key level we look to buy there on a pullback on the Open. once the stock shows weakness below the key level on heavy volume we change our bias. it’s called trading 🙂
steve
tao,
i actually missed the initial entry as i was in a meeting. when i got back to the desk a few guys were already short and i saw the heavy volume that had come in so i joined in but once it failed to hold below 65 i covered.
traded it a bit today but it was actually trickier. but not as tricky as MOS
steve
jacky,
i find that entering stocks at new highs or lows very rarely works in this market. i actually lost my concentration today for a second in STEC and lost money by getting short it when it made a new low. all of my other shorts in it were initiated after significant up moves.
steve
paul,
it does seem very slow. kind of annoying. i’ll give jay the intern who handles the blog an earful about it tomorrow.
steve