Getting fancy with exotic stock picks has so far not been the best strategy for participating in today’s big move.  Your favorite senator’s bank, Goldman Sachs, and Notorious AIG are ripping in today’s tape.  A simple tech play like Google is crushing.  The non-farm and housing data out this morning was received well by the market and we’re seeing gap-and-go action from the S&P.  The NASDAQ is having a strong day too.

Meanwhile my specialty plays like solar and retail are trudging around, looking like they’re wearing their dad’s trousers.  Overall the morning session has been a progressive one for the bulls with strength in many key areas and a healthy start to February.

The profile today is long and thin suggesting buyers are initiating new trades at these levels.  The VPOC currently resides at 1506 which is a huge jump from yesterday’s at 1494.25.  The ball is in the buyers court going into the afternoon session.

If we see selling enter the tape, look for a fight at Wednesday’s value area high starting at 1504.  If buyers don’t present themselves at these levels we could rotate down through the value area and back below 1500.

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Seasonality data is still new to me, but given the volume of the data available it’s interesting to analyze the distribution to understand what is normal.  If we can define February performance that is normal we can hone in on stocks and industries whose behavior isn’t normal in the wonderful quest to extract money from our markets.

When you put all of the average monthly returns available in The PPT seasonality into a frequency histogram you see a normal distribution which forms the familiar bell-shaped curve.  Most readers of this site made their way through the school system by being massaged into the lower 1/3 of the bell curve.  Good for you.  I know a few of us were up in the 99^th percentile, let us continue.

Once I have the data set I can make some observations which can direct my eye to potential opportunities.  My first observation is the slight upward bias of the distribution.  The highest frequency occurs above the zero line.  This could be attributed to the upward bias of the market during the month of February.  Next I use my eyes to single out where roughly 70% if the data is, much like the value area on a daily volume profile auction.  I’ve noted the range of normal February returns in orange on the following chart:

Much like the value areas from my profile charts, the opportunity lies at the edges of value.  This is where we can focus our attention and do business.  The extremes of the tails are interesting, but they could be erratic, event-driven performance.  If an industry’s stocks moderately outperform a massive dataset, there is a proclivity for repeat performance.

Thus I filtered the data down to stocks that reside in the fat tail of the upper distribution, with performance in the range of six-to-ten percent.  The data returns 187 (buck, buck, buck) stocks.  Finally I see which industry has the most stocks from this sample.  The winner is Industrial Metals & Minerals then gold:

Given Fly’s take on the data and mine [sic] I would say it’s going to be a shiny February.  It’s nice to see Senator Gint rejoining the ranks today.  You should read his post today and run through his entire archive and consider yourself lucky to have that knowledge free at your disposal.

http://youtu.be/oxpcZrQQM-4

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The market has found buyers again today in what has been an interesting morning trade.  The battle lines have been drawn and I spent the entire morning practically sitting on my hands because I wanted to buy more stocks.  I sold out of HOV this morning when it lost a key level for me.  Now it seems the move lower may have been a shakeout and the shares are recovering nicely.  Go figure.  Selling the name for a loss is of no concern to me because it’s on to the next setup (and this market continues to offer plenty).

I really want to see how we close today before allocating capital.  Volume has started to come into a few names I’m stalking so I decided to pick up a ½ position in BBY in case people start pumping this market up while I travel several arctic miles to procure a sandwich.

I like how Fly’s generator pick GNRC is setting up today and it had a curious bit of buying intra-day that has me considering purchasing some shares.  The S&P is still coming to terms with 1500 and I’m hoping to see us stick within a +/- five handle range of this level.  This could allow individual stocks to perform well.  Overall, it has been a healthy auction today.

Facebook was a sale this morning.  Now it’s a matter of perception.  The volume on this methodical move today suggests strong accumulation.  I’m expecting big things from this stock in Q2 and getting my position size back up will be tricky.

Cree continues the comeback.  (Good) tech is working.  My goodness, look at MLNX.  I gave up on the name and now it’s finally catching a bid.  AMZN is run by communists.  ZNGA only dumped lower for two days instead of its usual five.  These are my brief talking points.

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Left for dead big box retailer Best Buy has shown signs of life this year.  They had a decent holiday season and their earnings announcement pumped the share price of BBY out of a nice base.  Since then price has drifted higher along with the rest of the market.

The advertising team at Best Buy is putting out a funny ad during the Super Bowl.  As simple as it sounds, it is an opportunity to reintroduce consumers to the brand.  You nacho chompers love funny commercials. Pair this with the curious business model of their online rival Amazon and we could begin to see money rotate into this name.  It’s beaten down and people love a comeback story.

The daily chart shows price behaving in a way I particularly like.  I would like to see shares of BBY continue to come in and enter the hon3y hole.  I’m always looking to find the first pullback after a stock changes directional trend.  It offers the highest probability and also has the greatest profitability potential.  Of course, the overall market needs to remain constructive for these setups to work, but keep Best Buy on your radar leading into this weekend’s game.

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They pull me back in.  I currently own shares of ANGI, SINA, ZNGA, and the fickle beast FB mother to all.  Their sized in the order listed, largest to smallest.  All the positions are rather small, but together these hacker thieves comprise nearly 20% of my portfolio.  As it happens, I’m juggling these pinless hand grenades into the hooded earning’s announcement tomorrow AMC.

Given the overall gravity of this situation and its potential implications on my wealth, I fancy this the proper time to review their price action.  Let’s have a look:

Before we get to my holdings, check out Zillow:

Now see my notes on all the aforementioned:

Obviously the results out of Facebook could affect the prices of all these names. So it’s all eyes on the social empire tomorrow. And yes, I will be wearing a hoodie.

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There are several cross currents in the market this morning.  Refiners are crushing and other basic materials are holding on right where they need to.  The important matter for this sector is whether they can defend these levels.  Shares of ANR and CLF both were flashing alerts yesterday and today both are catching an early bounce.  How this is treated as the day progresses could be a critical component in eyeing the continued rotation of bulls from more extended sectors (like small caps) to these dicey looking charts.

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Bears appeared to have their tea early this morning and were hungry when the session opened.  They spent the first hour of trading driving price nearly ten handles lower in the S&P, impressive no doubt.  Then, they vanished.  Poof gone.

I put out a twitter update that we must have just seen the day’s range.  Making such an audacious claim after seeing the market rip ten handles higher would be foolish as fading the prevailing trend is a sure ticket to insolvency. But after observing the magical disappearance of the sellers it was a reasonable claim.  At that point the only play was to try and buy or sell the extremes of today’s trade and ride back into the middle.

I was eyeing Zillow early on as it put out an early flag.  I sold out of the name far too early this year and even received a “hate to see you go” tweet from the CEO.  Odd yes?  Nevertheless I took my eyes off the prize for ten minutes and she was gone.  Later in the day it offered a juicy secondary entry good enough for any day trader but the swinger would be left underwater on the name.  I still like the progress bulls made today in Z.  It made holding a large sized position in Zynga that much more palatable.

On the topic of Zynga, how about today’s action?  Can we safely call that a face ripper or do judges require a bit more panache?  What a beast.  I’m targeting the 99ema for my first scale.

I spent a good portion (perhaps too much) of my day watching shares of ANGI trade.  Wow that stock trades in an ugly manner.  A huge amount of volume was transacted in the shares today in a tight range.  The stock looks primed to pump and with the rest of the mobile/social space ripping along I thought, why not?  It still may rip this week I’m certainly keeping it on close watch.

Other action today: TPX has been faded since posting a decent earnings beat.  Today it seemed overdone and I was happy to increase my position to ½ size sub $40.  I also added back shares of APP around $1.33 that I sold a few sessions back for $1.30.   I thought it an excellent lateral move.

Many called the day dull.  I found it to be grandiose.  There was even the surprise announcement that our supreme leaders at the FTC are busy saving us from pyramid schemes.  I can hardly contain myself.  I want to send them gift baskets of MTEX supplies as a sign of my gratitude for their investigative work.

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HIT PLAY to unleash this jam as you read on good people of the internet:

Perhaps I’m being romantic whist envisioning the future and the architectural wonders it holds, but I seem to have caught the LED bug. I like everything I read about them. I like their features and hues.
The industry has the characteristics of a space race. The companies participating aren’t clinging onto old technology, spending millions on litigious hostility to defend their edge. Instead they forge forward casting aside old products at a modern rate and boaster higher performance. Their press releases boast about MORE lumens per watt, longer life, and the race for lowest cost per lumen. They’re creating solutions for businesses as amorphous entities. It’s quite exciting really.

With my mind halfway down the LED rabbit hole as I fired up The PPT this weekend, it was hard to direct my attention elsewhere.  Last week I bought shares of CREE post earnings as they’re clearly the leader in lighting grade LED.  They’re Chuck Yeager and everyone else is a Soviet henchman.  I expect big things from this name both in terms of revenue growth and human architectural advancement.

In an attempt to clear my head of all the excitement I have for LEDs I started running screens.  I see a few good setups but was nearly frustrated to see GTAT keep popping up.  GT Advanced is a sort of a shell of a company that set out to chase the renewable energy dream.  They grow rocks, essentially.  Their crowning achievement in the LED business is growing sapphire.  They will either sell you the sapphire or the machine to grow it yourself.  Seems odd to sell your tools in such a way but perhaps that’s how an outsider sees things.  Cree seems to have done away with sapphire in many of their 2^nd and 3^rd generation bulbs and that can only spell trouble for a lonely little rock grower in New Hampshire.

But of course after seeing GTAT pop up all over The PPT I had to pull up the charts.  I must say this play is a blaring short squeeze opportunity.  Starting first with the weekly chart you can see short sellers enjoyed to nice pullbacks where they sunk their teeth in and drove price lower.  The behavior in 2012 in many ways tells me this company was toast, and likely heading to zero if Obama lost.  The company is behind the curve but having a symbiotic administration in place gives them old fashioned government hope.  That hope may or may not be behind the force that has thus far thwarted the bears onslaught.  Regardless, the “third dip from the well” from a momentum standpoint is the lowest probability.  That also means it’s the highest probability to bet against.  SEE THE WEEKLY NOW:

Then we get to the daily chart.  It’s touting a highly visible inverse head-and-shoulder.  Is it too visible or just visible enough to get skittish bears to cover?  Fly’s out with comments tonight that it’s a kill the shorts type of environment.  I smell short blood in this name.  Stockcharts.com says the VWAP (volume weighted average price) is at $3.30.  Oh how lovely some good threes.  CUE OFF OF IT:

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The market continued its bull run yesterday with an aggressive morning pump.  The rest of the session played out first with the formation of a “P” profile which suggests the action to be temporary phenomena in the market known as a short squeeze.  I’ve split the TPOs from yesterday’s session and split them to the right for you to see.

Notice the letter J TPO which fell out of the developed P and the subsequent auction that occurred afterwards.  We tested the lower extremes of the sessions and the buyers bought the dip, we tried to reenter the upper distribution afterwards (the meat of the P-shaped profile) on to see rejection.

All of that unique auction action at 1494 is why we need to closely monitor how we trade relative to that level, that is where I will decide if I need to reduce cash from 40% to something less into the weekend.

Otherwise I may cut additional weakness and lock in gains to increase cash.

Names I’m watching should I need to add: FLT, CSE, TWGP, HTHT, GTAT, and BTN.

Trade’em well ladies and gents.

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The raging pump we experienced this morning gave way to a nasty little fade.  As much as my stocks participated on the way up, they have decided to participate 1.5x as hard on the way down.  Two of my newer positions have changed their behavior.  They’ve gone from watching my docile niece who enjoys computer games to chasing my barbaric nephew who front flips off furniture and drinks too much Kool-Aid.  I love them the same, but each requires a different approach.

It’s easy to pick stocks when everything goes up 3-5% after a pullback.  That’s exactly what the market has been since we started the year.  Just buy dips, scale your 5% rips, and keep a runner to make the cream.  When the positions don’t work right away it’s a different story.  Or like ANR where I watched a nice gain turn into a loss before I scaled anything off.  Now it’s time to manage a position.  This is where traders are defined. 

A knee-jerk reaction to your position flipping from green to red is to clap the sell button.  The knee jerk reaction when you’re on the roof and suprised by your nephew’s head popping over the edge because he’s climbed the ladder is to run over and grab him.  The better approach is assessing your risk and the options you have.

With my nephew, if he sees my face expression of shock I may scare him.  If I drop the chimney cap I’m mounting it would make a loud noise and could also spook him into falling.  Instead I continued working, quickly pinning the cap in place while keeping him in my peripheral only.

“What are you doing kid?  Did you want to help me?”  He nodded yes.  “Okay let me help you onto the roof, here I come.”  Remember to breath.  Once I had a hold of him I suggested we go check on the dogs instead.  Done.

With ANR it’s much simpler, and much less frightening.  I defined a price before I entered the trade where I determined I’m wrong.  I don’t give the brokerage a hard stop order at this level.  I always have a drop dead stop well out of the way, but I like to watch live how the market treats a level before I decide to close.  Once the position is on, it’s up to the market to decide whether or not I’m right.  It’s a coin flip.  Do you sweat a coin flip?  Perhaps you have too much money on the line.

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