Trading Journal Tuesday July 28th 2009

Yesterday I had a feeling that the markets would post a downday today.  This was based on the fact that the price on the S&P 500 were close to breaking an uptrend that began July 10th with the big 2nd quarter earnings coming in.  Also checking the economic calendar on bloomberg I saw that the consumer condence report was going to come back negative.  Thus I entered into some short position since it was an up day.  I chose GE because GE traditionally follow the index movements, AXP because I noticed that the daily chart MACD histogram has begun to reverse confirmed by the weekly chart MACD histogram and the ADX/DIX lines indicate sellers are starting to take over.  I also got some BAC because of the 60 minute chart MACD histogram as well as the four hour one had shown the start of a downward motion.  I took some FAZ overnight to spread out my trade over the whole financial market and finally I shorted MYL because I noticed it had made a major downward spike with some volume reversing an uptrending daily and weekly chart MACD (which is usually followed by continuation in that direction).

Well this morning only about half of what I did worked out.  BAC for one started out by working out and just as soon quickly reversed and began a strong unexplainable upward movement.  The news that was out wasn’t very good – they are closing many branches.  I suppose some investors took a positive spin on that and thought it meant they would be able to post yet another fabricated positive earnings for the third quarter.  Still it was dissapointing.  I waited until it reached it’s R1 pivot to get out, althought it didn’t go much higher than that, it was able to hold that level for a whole selloff cycle on the 5 and 15 minute charts.  Now it’s poised to go higher if the rest of the market follows.

Next up was MYL.  The company came out and said that there will be no repurcussions for the news coming out that it is not following proper procedures in making it’s generic medicine.  Even though the FDA came out and said that there might be, yesterday’s sellers came back in force and forced my short position down over 7% which is past my tolerance level and I covered.  Even though the price came back down afterwards.  If I had paid better attention I would have seen that there was no volume in that upwards move and although with caution I should have waited until the first pull back to cover my short position.  In any case that was my big loss of the day.  I have decided never to short Pharma again.  What with JAZZ and MEDX making insane upward movements, I could get fried permanently from one of these.

Apparently last night our old friend Jim Cramer had people on his show pumping the hell ouf ot GE which drove the price way up against the market movement.  I played it smart and noticed the upwards volume wasn’t very big so I waited until the first pullback and got out for a minor loss.  I learned not to use GE as a index play, it does have it’s divergences obviously.  and if Cramer can cause that, it’s not for me.

Finally my FAZ did pretty well, going up and down I got it right before the market turned back around to the upside and made my most profitable trade of the day.  Unfortunately it was only about 1/3 of what I lost on the bad moves.  I noticed it went up and down quite a few times to the level I bought and sold it at.  FAZ – just like the Direxion website says – is definitely better suited to the day trading platform.  It’s not that often advantageous to holding it.

Finally I noticed the same kind of pattern that I saw in AXP develop in S.  I got into a short position here and let it ride most of the day.  After a little more due diligence I noticed that Sprint was going to have it’s earnings call tomorrow morning.  I learned a costly lesson with messing with earnings not being a fundemental trader with F last week.  So I got out for a mild profit and sure enough S started turning around to the upside afterwards.  The histograms still show a decent setup so after the earnings craziness tomorrow I plan on going short for a mid to long term on this one and AXP.

My AXP short performed as expected, posting mild profits during the day.  I think it’s a market leader as far at the impending breakdown goes.  I then noticed that it has to go through a buying cycle at the 60 minute level before going back down and decided to exit the short position for overnight until that cycle is complete.  Although I got out at breakeven (well not really because of trade costs) the stock did go down mildly after I got out, perhaps I should have just held on.  I’ll be keeping my eye out tomorrow for another entry point.

So I’m still learning, the lessons are painful, but I haven’t wiped out.  I’m down about 2% on my portfolio which is not too alarming.  I decided to concentrate on more day trades until the market gives me some clear direction.   Right now it’s severely overbought, controlled by machines that are designed to rob individual traders and not acting correctly.  I sure picked a tough time to learn trading, but that will make the better times all that much easier.


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