Sat Apr 19, 2014 1:24pm ESTComments Off on A Completely Different Approach
For the past four weeks I have been focusing on the very early moments (minutes, rarely hours) of the marketplace and using it as my “tell” for the day. The efforts have added a layer of auction understanding which aids in my intraday confidence.
However as I re optimize my algos I am noticing my strategy prefers to trade on a very lazy schedule. The algo almost appears to be a slacker of sorts—coming in late and leaving early –all the while respected and left alone since he steady banks coin. More later…
My tech heavy portfolio is earning back some unrealized losses but I expect the ride will not continue to be smooth sailing for very long. After the bell we had soft earnings from big new tech Google and big old tech IBM. Both are lower afterhours. You can read all about these announcements elsewhere, I’m sure, but I want to talk about Alibaba.
If you are in the trades then you have utilized this site. There really is no way around it and without it our world would seem so much bigger than it actually is. I use alibaba to generate 20 offers on a product in minutes. This type of quotation capability is like old school stock market and I personally consider it one of the most interesting tools in my arsenal.
I like LED lighting. So does everyone else in China apparently. I am getting reports from my foot soldiers that there are about 3,385,749 LED vendors at the Guangzhou Canton Fair this year. In market talk, this means there is an overwhelming number of intermediate term sellers in the market. So many, that we are very likely to begin seeing serious incentives offered by these inventory heavy middlemen. The key is to wait for these weak short term hands to become desperate and then begin accumulating an inventory below fair value to then flip onto the eager masses. These supply constraints are pressuring many domestic LED companies who hold aging inventory. Aggravating the situation more is Haitz’s Law which forecasts the steady improvement of LEDs much like Moore’s Law of computing power.
We could write off the entire industry and their stocks based on this fundamental information, or we can take the thought a bit further and consider who is likely to benefit. Foremost, this does not jeopardize Cree. Cree is a driver of innovation, researching and developing on the forefront of the technological edge in LED lighting. They will prosper over the next ten years. But will RVLT?
Revolution lighting is currently a hodgepodge of LED technology concentrated under one Nasdaq umbrella ticker symbol. They offer everything from fabric LED strips for inside your cabinets to municipal grid systems with integrated software and controllers. The problem is the model. They have thousands of products and an untrained distribution force who struggles to properly communicate the benefit of LED lighting. That and their prices are too high.
Hell, all LED lighting prices are too high. This is a big fail for the industry, they need to get the prices down. And whether they like it or not, market forces are hard at work behind the scene massaging price down with their omnipotent invisible hand.
This price drop will drive many business models into a negative cash flow environment, much like a scalper in the futures has seen their edge diminish as algos outperform them. From disruption comes opportunity for leaner organizations to fill the demand void left behind. This is all occurring as we speak.
In summary, Alibaba is making a fortune via shrinking international trade down to a few mouse clicks. LED lighting is one of the most heavily peddled products on their site and it is moving by the container load as prices drop. There is an LED inventory glut and it is nearly obsolete. This is a unique opportunity for a lean organization to swoop up discounted product. Businesses and individual consumers will have the opportunity to update their lighting to energy efficient LED at much better prices soon.
Finally an actionable stock, AIXG. This chart reminds me of FSLR before they released their FY15 guidance and a massive rip ensued. They are German which says precision to me. I have viewed their strategy and what I like most is the clear expectations and measurable goals they have set. They have also made a heavy drive into strengthening their corporate culture. I have seen this type of strategy play out and it can be very potent. I have no position in this stock, but it ranks high on my want list.
In completely unrelated news, my algos are performing well, as am I, in the testing grounds. We will see how the numbers look by month end, but great strides are being made in the race to develop a consistently profitable futures trading hybrid strategy.
And just slightly aside, I cannot believe jackass NY attorney general subpoenaed a number of HFT firms. Prepare to be on the receiving end of a wave of angry algo robots throttled to full speed.
My portfolio continues to eroded with each wave of selling. The upward progress made in the NASDAQ was not reflected in my portfolio, a basket of high spec technology. Instead today’s theme was energy and hourly reminders that Dick Costello has no plans to sell any Twitter shares.
I sold some RVLT today, thinking earnings were on deck. It appears however that was not the case.
A few pieces of the market caught my attention today. First is ONVO which was absolutely crushed today. They are liquidating any 3D printing company as if each was a flaming bag of garbage. As far as sentiment goes, these stocks are incredibly unpopular to the point of excess. Does society no longer stand to benefit from the prospects of 3D printing? I still sense there is something of a breakthrough near for this industry. Second was the neutral print on both the NASDAQ and the S&P. We saw legitimate buying interest today. Perhaps it was the fair weather of the weekend creating a sense of optimism or the illustrious glow of the blood moon. Regardless, we are seeing signs of buyers down here at a potential bracket low for a very large range. Range trade would be a welcomed change for me to unleash my algorithm.
I spent most of the day working out the kinks in my algorithm. I am nearly ready to unleash him back into the marketplace. Futures trading can be stressful if you let it. Often times this is due to position sizes that are too large and stops that are too tight. Testing, lots of testing, can reveal where your stops should be. Then once the conditions merit a given algo, turn it on and let the entry automatically happen. At this point I can adjust targets and stops to logical price levels and mainly stay out of the way.
In summary, we may be entering a trading range here, but that may just be the thoughts of a hopeful optimist.
The NASDAQ cannot find a solid bid as the month of April progresses. Interestingly enough, many people live a grand life outside of the market, sashaying about the globe without much worry about the financial markets. To them, this has just been another month of doing whatever their preferred vocation is. Yet here we are, some of us flexing on the short side and others fighting the tape. I am fighting the tape, the latter party to this fiasco. The one who is being clunked on the head 5-6 times per working day.
I have not put together a winning position once this week. As of the closing bell I was all in. I have a slight shade of old man with one position, LO. The rest is pure momentum crack. I am certain this book would cause a stroke in most:
STOCK: AMBA (-7%) CREE (-9% on my LIFOs) DDD (-8%) ENPH (-13%) IMGN (-25%) OESX (-11%) RVLT (-12% on my LIFO) SINA (-4.5%) TSLA (52.15%) TWTR (-21%) and YGE (-11.7%)
Rest assured, most of these stocks will snap back with great vengeance and vigor. Sadly, all of them will not. But, these are questions for Sunday strategy and decisions for next week. Have a great weekend, rest, get outside, eat a good sampling from Costco, for Monday we must navigate our down dogged market.
Momentum stocks have beat me into a red YTD performance on the year. They beat me good to teach me a lesson, much like the nuns of my youth. Just as the nuns failed to beat their religion into me, nor can momentum stocks beat me into submission. I keep coming back like a good little hellion.
When do they make money? Is this time different?
Momentum stocks make money when they are trending with you. Sometimes (like now) the trend on the daily chart loses its trend. This is when a general upheaval is occurring. Your faith is being tested and the devotees have not buckled yet. Do you believe they have been put through real pain? A real test like honest Job? I think momentum names have gotten off easy so far…some of them.
That’s why I am only looking to buy the very best momentum. I consider names like FB, TWTR, DDD, TSLA, YELP, AMBA and more the finest. AMBA builds tiny state-of-the-art components for gopros and other low energy, high definition cameras. These are great for drones and robots. YELP tells me where to eat and gives me a microphone to blast out my hipster foodie advice. DDD will print drones and robots and give us gadgetry for our homes. TSLA wants to replace side view mirrors with cameras because it improves range on their ELECTRIC luxury cars. Facebook is like a venture capital firm buying anything and everything amazing in California.
That’s all great, great stories and great prospects for the future. LED lighting is more realistic and getting insane traction.
That’s great too but why are we really putting our money in the stock market? To make money.
These stocks will make money on the way up. Some of them will go to new all time highs fast. Not all of them will, such is the game of stock picking.
These are my top momentum picks, right here right now.
#1 Twitter – I am blown away by the pessimism for this one. They are practically ubiquitous in a few short years.
#2 and #3: FB, FSLR
Top positioning pick is still LED lighting. I think there are so many misconceptions and misunderstandings of who is winning the business in this space. CREE, RVLT, AIXG, PHG, and OESX in that order. LEDS is pure jetsam, just trade it when you see fit.
A cocktail of the above will propel my account to new highs. We might as well have some fun while we’re at it.
Mon Apr 7, 2014 5:06pm ESTComments Off on Wanted: a New Broker
Several traders are laying their YTD performance out thus I want to let it be known I am down 9.5% as of today. It could be better, it could even be green, but I have deviated from my plan a few times. A few other times a bit of complacency led to excessive bloodshed.
This market is much less forgiving then the last 18 months or so, therefore when you deviate from your plan you get punished. It’s that simple. Moving on, I continue making mistakes.
I should not have sold out of ZNGA today. The reasoning for selling ZNGA was the NASDAQ getting down into the slip zone I highlighted this morning. I suppose a snapback rally could erupt overnight in the NASDAQ, but I do not like to lean on the lows when we are in these slip zones (single TPO prints). Price tends to slide right through them. Whether or not this derails ZNGA is another question because the chart actually held up really well—even on some heavy volume.
I wanted to buy Z this morning but missed my fill. I few minutes later the option I was stalking had doubled in price. By the end of the day the same price was 40% lower. Talk about ultraviolent…
The LED trade, which hasn’t worked in 3 quarters, still isn’t working. But, it’s not going into a death spiral, yet. RVLT is still my largest position and they dropped a hot new product recently with the 100% plastic fluorescent tube light retrofit. The heat sinks, which are normally aluminum or other expensive and heavy metals, are made from a plastic. Huge news, I love it. Perhaps it will breathe some life into the dead money stock.
I made AMBA and TWTR large today. That was before we entered the slip zone. I thought we had found buyers ahead of the zone. We did, just not enough of them.
The discovery process continues. This is how auctions work.
Finally, if anyone has a brokerage they trade futures through who is simply fantastic, please let me know because I am in the process of leaving Zenfire. They no longer work with my Multicharts interface and my algorithms are raging beasts in this wide-ranged market. It’s time to take them live. Any brokerage feedback is appreciated. I swear allegiance to none.
Fri Apr 4, 2014 4:06pm ESTComments Off on April, Fools
I did one thing well today and that was to trade off my TSLA YOLO runner just in the nick of time. I was pretty astonished to later check back and find the final piece I had sold for over nine bucks was trading for pennies. That is the double edged sword of weekly options friends. You best protect your neck.
Everything else melted on my and I am down back to -8% after being UNCH for a moment this week. That is how ultra violently my book swings, a concocted portfolio not suited for the faint of heart. I am younger then you, remember, I can stomach such madness and then go play Frisbee and pet my dogs, the only other life-beings I am responsible for. To hell with the cats, they can sit in the rain.
Believe it or not, I really liked the NASDAQ this morning. I was buying the blood. I even had a nice trade going in the QQQ options. I scaled 2/3 off for 25% profit, price quickly returned to my entry and then went lower, I reloaded, the pop never came, I bounced. It was very methodical and it helps indicate to me a selling drive was truly taking hold and liquidation was imminent.
I sold off my LULU and GOGO once this became clear.
It should be noted my bastard helper algo Elroi never once considered going long today. Instead he had his best day on record. Have a look:
Finally, anyone interested in intraday trading or the early effects seen in-and-around the opening swing NEED NOT miss this weekend’s edition. I will be introducing a new powerful contextual condition I affectionately refer to as The Doppelgänger. See for your own eyes the condition that precluded this great NASDAQ selloff.
If you’re bloody and beaten like me this week, then find something else in life that you are making progress in and hit it hard to clear this stock business off the mind. I’m off for a swim.
The market made an interesting move this morning after establishing initial balance. We will take a closer look at the specific details later on today but its suffice to say a new trading picture is emerging from the opening swing.
I was down a hefty bit today, led down by the aggressive selling in YELP. I had in mind a stop on this stock but in only a few moments of being away from the computer it blew right through that level. Now I have no choice but to hold onto my nearly worthless option premium.
I still like my changes with LULU going into tomorrow. The yoga pant is looking ready as ever to bust a move. I managed to scale off some of my Z calls at the high of the day early on
Everything else is still in place. Perhaps the market will motivate me to act further tomorrow?
