What to trade now - homework

It appears some of us are interested in the business of trading, hopefully for both fun and profit.
Here's a place to talk about that. I suggest two main categories. How to trade (timeless), and what are you trading now, and why, and how it turned out. Those tend to be missing from the pro boards, so pundits can have selective memory....but that's not all that is important. Being wrong is part of the game, and how to handle it and make money anyway is crucial, for just one example.
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What to trade now - homework

Postby Doug Coulter » Tue May 10, 2011 9:45 am

Sergei and I have been discussing some new trading possibilities over in my trading log. We'll move it here so the log stays a log and this is what it is.

It looks like the trade on oil was a little late -- you might have been able to catch it after hours yesterday. I believe I heard about the margin raise on oil futures a couple days back, in articles talking about the impact this had on silver over at Minyanville. But in this case, since oil had already taken a big hit, could be that the high margin guys had already gotten out, so the smaller rise in margin requirements didn't affect things as much. Meanwhile, some outfits that are very oil price sensitive (CCL, RCL) are still catching up to the drop -- we got a heads-up on them for free, once we realized that was how it works.

Someone at MV also noted that this margin business might be construed as an economic control tool by the fed, which started some really ugly comment streams about government trying to control things -- but it makes sense to some people that it would be a way to avoid excessive speculation fueled by QE money from all pouring into "things we need" and driving up their prices, vs "things we want" which have actually been going down a little.

Oil has some interesting other factors. Most of OPEC doesn't like Iran much, and above some price Iran really makes money. They are highly motivated to not have Iran make too much money, which they are pouring into their nuclear weapons efforts. Further, the Saudis have a real crack research team who looks at the ideal oil price to make them the most "real" money without crashing the world economy, or causing the money they get to devalue too much -- and they've said what that magic price is now and then. Oil, outside the blips, tends to track that number fairly well. Till recently that number was 70-80 a bbl, but they've since upped their target to about 100...funny thing, that's about what we see now.

Not all the fundamentals show up on balance sheets...Some is politics.

Out there in woulda-coulda-shoulda land, looks like I should have jumped on the $54 entry on BTE a couple days ago -- the profits there would be pretty sweet.
Screenshot-4.png


Looking at that in conjunction with my own psychology -- I was looking at it at the time, but thought there'd be a better, lower entry point, closer to 50. I've made that mistake a few times of late, which is why I do the woulda-coulda thing -- not to agonize over it, but to get it right next time. Of late, things don't seem to be dropping enough for long enough to get good re-entry points, or as good as one might expect based on somewhat older experiences.
Posting as just me, not as the forum owner. Everything I say is "in my opinion" and YMMV -- which should go for everyone without saying.
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Re: What to trade now - homework

Postby Sergei Barna » Tue May 10, 2011 12:41 pm

Here's another trading idea--CTFO. It's a small Chinese company. It's been trading in a range from $4.5 to about $5 for the last 4 months, and now it's in the middle of the range on the way up. But the most important thing is that it's President, CEO and 10% owner has bought 359,000 shares in more than a dozen transactions since mid February. They are releasing earnings on May 12th (for the quarter ending Mar 31) so it makes me think that he knows that they will be good since he's been buying since about half-way through the quarter.
It's usually pretty risky to buy before earnings, but in this case it seems that the risk is justified. Using your card-game analogy, it's like playing Blackjack with a guy who can see dealer's cards and seeing him doubling down on his bets.
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Re: What to trade now - homework

Postby Doug Coulter » Tue May 10, 2011 1:36 pm

Insider buying is yes, a good sign in general, especially if it looks like the guy is really going all in (can't tell from the data I can find so far).

I do see they announced a nice deal with Nissan to develop a traffic info system to be done this Oct -- though Nissan isn't a front row car company anymore, they are not small potatoes either.
Interesting. I agree -- they're at the bottom of a trading range that they've been in awhile, and going up -- probably good for a short trade at least.

FWIW, PALL is also at the bottom of its recent trading range and turning up, and buying the dips and selling the rips has done me well there. At 72 now, will approach 80 (but probably not quite make it) before the next downturn. It's been a really reliable swinger of late, though in a longer term slow down move, the swings are nice for few-weeks durations. Anytime I can make about 10% in a couple weeks -- yep, that's where the money is.

I'll buy into earnings if everyone else is, get some of the herd thing going for me. But if I'm the least bit nervous -- sell just before them. That's the "buy the rumor, sell the news" saying exemplified.

Lately we've seen some interesting action around earnings -- companies report an almost blowout, better than "analyst expectations" but still tank right after. Or the same, but they then zoom for a couple days after earnings (along with the runup before), then revert. Seems to my gut the best risk adjusted reward is to catch the runup into earnings in that game, at present.
If the company announces at a time I can't trade, and will have to deal with a gap -- probably best to be out at that time.

I and a lot of others suspect that these record corporate earnings in general are going to mean-revert, which will really cause some heartburn as people are used to the real good numbers lately.
Some expect this next time, some a little later. In general, it's been very mean-reverting, as high profits tend to bring in more competition. These days, significant "best laws money can buy" have dampened that effect a good deal -- just try to start a telecom business, or any business where you can be sued out of existence due to all the junk patents, but probably not entirely.
Posting as just me, not as the forum owner. Everything I say is "in my opinion" and YMMV -- which should go for everyone without saying.
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Re: What to trade now - homework

Postby Sergei Barna » Tue May 10, 2011 1:44 pm

Here's the site I like for looking up insider trading: http://www.secform4.com/insider-trading/1081206.htm
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Re: What to trade now - homework

Postby Sergei Barna » Wed May 11, 2011 12:32 am

MCP is down 7% and additional 5.7% in the AH on their quarterly results (even though the loss narrowed to $0.03/share and revenues are up from $3mil to $26.3 mil). Are you thinking of buying in at this level? It seems to me from its chart that unless it holds above $60, it could go down to its next support in the low $40s. What's worrying is all the talk about rare earth prices topping out. Also, MCP's insiders selling over 18mil of their shares doesn't add confidence.
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Re: What to trade now - homework

Postby Doug Coulter » Wed May 11, 2011 10:17 am

MCP is a wild one for sure (and perhaps not as well run as FCX or as well established as an industry in general re constant demand). At any rate, their CEO doesn't impress me as much, not a doofus, but not one of the very best. I'd feel a lot better buying in the 40's -- we agree on that target for sure, but it's so doggone wild, you just have to kinda watch and try and catch the big swings I think. The thing is, we're now at the place where we're not alone in that, a lot of players are doing the same thing, and any trick that everyone knows tends to quit working.

I can't count how many times I've played that thing for 6-8% in less than a week. Usually a positive number, but not always. Heck, it's just fun and exhilarating.

In this case, some insider selling doesn't seem like too bad a sign unless it gets really crazy. Those guys got it at like < a buck a share more or less -- it'd be more insane if they didn't take some profits at this level. No one wants to feel like a fool, and they did take a lotta risks to get here, and have been "in" for quite a long time. I'd be selling some if that were the case for me.

What I see is that they've actually done pretty well, compared to what they were projecting -- they seem ahead of time and ahead of budget compared to their own earlier thinking, and yes, to get there they put in considerable extra money over and above those same projections as well, so there's a question of "was that wise and a good balance"? Prices being whatever they will be, we know the supply from China is constrained and will only get worse. MCP will hit the market with actual product and sales before any other major attempt outside of China -- a near-sure thing.

The fact that they are this high with negative numbers indicates a lot of people think the same. When those first positive numbers show up -- count on a big zoom. Whether that continues is of course always in question, but it could be the trade of a lifetime if done right. So I think it bears close watching, but maybe not buying or holding more than a trivial amount till we get a little closer to those positive numbers. For me, holding a trivial amount makes me watch it better -- skin in the game, plus some features in my trading software encourage that.

The wild swings indicate a lot of impatient money is working them. What I find in general is that if everyone else is using one strategy, you can usually find another one that picks them off and takes their money - the psychology aspect of this game. Haven't worked out what that would be here -- maybe just buy and hold -- but like you, I'd be a lot happier doing that from 40 than where we are now. With the swings, I'd predict we'll have a chance at that before long, and then I may back up the truck so to speak.

Looks like your SCO call was either a day early, or a day late. Good day for it today. And I got burned pretty bad on BTE -- I'll write more on that elsewhere, but crap, trading just to be doing something is more often than not an error, and I just proved it again with a 4% loss in one day on it. I guess I'll now write on how to save a bad trade....if in fact I can save it. It's right back down to the local support - so there's a glimmer of hope I could double down and recover nicely, but it's going to take close watching and some good tactics to pull off.

I do think oil is going to hover around $100 for awhile, and swing both sides of that due to geopolitical issues and others. The real question for me is, is BTE overvalued at that price of oil.
Maybe...maybe not. The ticker will be the truth as always.

What I noticed this AM when I put up my watchlists and sorted them by gain, before and just after market open, was that industrials/metals/commodities are all real down, and what's up right now is tech....sector rotation? Or just that the money had to go somewhere, and people are down on general growth of demand in "hard" things? Can't tell, the first few minutes are always wacky.
Posting as just me, not as the forum owner. Everything I say is "in my opinion" and YMMV -- which should go for everyone without saying.
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Re: What to trade now - homework

Postby Sergei Barna » Wed May 11, 2011 10:51 am

Seeing silver down this morning, I bought some ZSL, in case this is the start of the second leg down in silver correction/bubble-bursting after the "bull trap" if that's what it was. I also opened a sizable (for me) position in CTFO yesterday and today when it fell a little in the morning. The CEO had bought additional 41000 shares last Friday and this Monday.
I'm kind of glad I didn't do anything with SCO yesterday and kept some money for hopefully better opportunities.
Last edited by Sergei Barna on Thu May 12, 2011 2:26 am, edited 1 time in total.
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Re: What to trade now - homework

Postby Doug Coulter » Wed May 11, 2011 11:42 am

I'm so uncertain about silver now I daren't hazard a call. I note two things -- huge negative numbers in OBV, which might indicate a lot of short interest -- or just panic selling at the bid prices, and that super tight set of bars on the "dead cat bounce" if that's what it was. My guess is that bargain hunters are still seeing this as a time to get in, and they're not out of money yet, quite.

But they are a minority everyplace but on the "PM bug" forums and in money, so at some point they'll get wiped out again by larger players. Usually in a major correction there are a few up-blips on the way down due to this, from people who still can't accept a correction is needed and will happen, and isn't over yet. Just look at the market indices during the crash - I got head faked by a few of those bumps on the way down myself. That *could* be what's happening here. Everytime it goes up a little today, it goes right back down - selling or shorting kicks in. So there's more non-bug money playing than bug money, or it'd just be recovering (as it was yesterday and the day before). Somebody big smelled opportunity and jumped back in again.
Screenshot-5.png
Silver over the last month


While this does look different on different timescales, note the two very large volume red bars today in the volume...usually a sign of the big money, and look what they were doing -- some form of selling.

I think "religion" is bad for trading. Believing profoundly that something "must be" such as "gold is money and nothing else is" makes you easy pickings for someone not so tied up in a belief system.
I may or may not have this or that belief system -- but it's best to keep it out of trading from what I've seen. Sure, I like PM's -- because everyone else does and will pay me for them because of *their* beliefs - and I can then use that money to obtain things of more immediate (and even lasting) value to me. On the other hand, I can't shake the picture of a guy starving to death while sitting on a pile of PM's while his city apartment burns around him, because they forgot that it's not the *only* thing you need to do well, and at some point the bread/gold value ratio might go up steeply -- all it takes is a famine. Gold's no good if you can't buy things you need to survive with it. An awful lot of people starved while owning it, or were killed for it in past history, right?

Seems to me, from life experience, that most people have lazy brains, and they constantly search for the "one true thing" so they can stop thinking and be lazy. They don't want their preachers to teach them how to think, they want to be told what to think -- big difference. They want a set-and-forget life, investment plan, you name it, a sinecure job, and a sinecure life. Thing is, when you examine that a bit closer, it's not really a life worth living -- if nothing is going to happen, why wait? (George Eastman's suicide note) A lot of people think I'm nuts, and some of the crazy things I've done have surely bitten me on the ass along the way - but I did them and don't regret it, rather I think it was pretty cool to have tried them. On the other hand, I've also reached heights that they mostly can't imagine, so to me the scars are badges of honor, and most people won't be able to have the amount of life and fun I've had already if they live to be 150 years old and start now really trying hard. Gives me somewhat of a different outlook than most, life to me now is all bonus -- been there and done that with practically everything there is already, and most of it was fun besides. Now, on to the next thing! With gusto!

So, in my "bunker" yeah, there's some gold (and Pd and Ag, and Pt and uranium and....a lot of steel and copper). There's also a year's worth of good food. And oh yeah, I'm a gunsmith, a farmer, an engineer, and a trader, and I have tools galore for all those things and the skills and experience to use them well. Diversification or de-worseification, only time will tell. Mere money is only one thing that helps out in life. Friends might have higher value, all things considered, and I have those too. EG, I'm rich, but also have money. To me, that's the outlook to have, naturally, since by golly, it's the one I have. So, like everyone I have a bias -- maybe not even a unique one, but there it is.
Posting as just me, not as the forum owner. Everything I say is "in my opinion" and YMMV -- which should go for everyone without saying.
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Re: What to trade now - homework

Postby Sergei Barna » Wed May 11, 2011 3:21 pm

Doug, I think US western refineries could be a pretty good alternatives to BTE as energy sector plays (such as HOC, FTO, WNR). Their margins are benefiting significantly from the large difference (~15%) in price between light crude and brent, since they are refining the cheaper light crude pumped from shale in western US, but their products are priced at the levels determined in large part by more expensive Brent.
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Re: What to trade now - homework

Postby Doug Coulter » Wed May 11, 2011 3:54 pm

They might be good, have to check them out. I'm reeling at the moment from being so out of phase with that buying yesterday. Clearly not time to double down, and doubtfully time to lock in some really "to cringe for" losses also. Plenty of cash on the sidelines, due to reasonable (but not great) money management, but....whew, what a bath I'm taking. Guess it's time to play in the lab for awhile, and it looks like my earlier call - stay out for awhile -- was the right one. If you shorted silver today -- good news for you. Still watching that one myself.

The object here of course is to see the waves and surf them, not to get pounded into the beach by them. I'm pounded just now.
Posting as just me, not as the forum owner. Everything I say is "in my opinion" and YMMV -- which should go for everyone without saying.
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