Surprise Fed Rate Cut (A Trading Story in BRCM)

BellaMike Bellafiore's (Bella's) Blogs, One Good Trade1 Comment

On this day when the Fed made their expected announcement I thought I would share an old school anecdote about a surprise rate cut from One Good Trade (Wiley Trading).

During 2001, I made a living playing two historic bounces on the
NASDAQ, and grinding it out. On January 3, 2001, the Fed unexpectedly
cut rates 50 basis points. When this news broke, I immediately bought 8,000
shares of BRCM. That was a memorable trade and a fortunate one. BRCM
first ticked down after I bought. A possible 20k plus rip was staring at me.
That will give you an instant shot of adrenaline.

Here’s the exchange between Steve and me at that moment:

Bella: Oh! That is not good.

Spencer: No, just give it a few seconds.
Bella: Ok.

A few seconds pass . . .

Bella: I just got taken on the offer in BRCM 8 points higher!

Soon enough, BRCM popped up immediately, and I was selling on the
offer and reloading 5 points lower (see Figure 12.1). I made more than
$100k in less than an hour. Many guys in our firm made much more in
this bounce. And this was just the first few ticks in that historic bounce.

NASDAQ bounced 14 percent intraday. That is two years of movement in a
few hours.

Excerpt from One Good Trade (Wiley Trading)

One Comment on “Surprise Fed Rate Cut (A Trading Story in BRCM)”

  1. Hi Bella,

    I want to share with similar trade I was involved today. I traded NFLX from the open. It was in play. Fresh news. On the open I saw strong buying on the tape. Stock moved from 113.21 to 114.75 and started tight consolidation between 114 and 114.50sh. Once I saw bids have held 114, I bought 1/2 of my position at 114.08. 115 was a level for NFLX. Once 115 was easily taken on a high volume, I’ve added another 1/2 and have held whole position till 124. 32, when aggressive buying on the tape has been disappeared and trend line has been broken. Stock moved MORE THEN 9 points almost non-stop in less than an hour and I have held position till stock, as you say, “gave reason to sell” .

    I have learned from you not to be a wuss and not to sell stock until in gives reason to. On each pull back, your words were in my head: “Do not be a wuss. Let the stock breath. Do not sell until it give you reason to.”

    I want to thank you so much for such a great contribution into development of new and experienced traders that you do every day.

    PS. Bella, your book is AMAZING. The best book I have read for a long time.

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