Today was not necessary, but it is exactly what the stock market does.  When sentiment gets out of whack, either way, the market place corrects the imbalance very naturally.  When it’s all said and done, the sane walk away with a few pesos in their pockets, scratching their head at the mysterious and random acts of violence the market exhibits.

We crazy folk make a month’s pay in 2 hours.

I was mostly selling today, salvaging some the February premium I laid out.  Other bits still fly their pride flag, like FSLR and SCTY, monsters marching together in solidarity.

I finally scaled down to a TSLA earning’s runner.  I think it can keep squeezing ahead of earnings, given the float, but I am not being too greedy.  I booked my 52% gain and left a small piece to keep earnings interesting.

GRPN reporting Thursday afternoon presents a rather unique situation, does it not?  Given the weakness in the name, opex, and the potential for a lovely little lottery trade.  Anyone who is more versed in options that is willing to chime in on this idea please do so, I am all [green] ears.

I bought FIO amidst much fanfare and strength.  It farted and everyone laughed, and now it only smells and everyone walked away.  I am stuck with stinky, hoping for an encore.

I closed my GS calls, it felt like a shake out.

I closed my February Z calls and salvaged a bit of premium.  I still have March calls but this ugly chart may take more than a week to resolve.

I am back to about 10% cash here at the end of the day, after being a tad longer into the weekend.

Top pick into March is CREE.

Elroi is still stuck in the lab.  I can’t wait to see if all this CPU usage will be reflected in my electric bill.  Regardless, when he comes back, it will be with one of those little green hats with a helicopter blade on top used to chop up other algo onslaughts.

http://youtu.be/yuR1rVVf358

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I am feeling the sweat of 1000 eyeballs today while holding onto my harness as the Zill-o-coaster plunges lower.  Just yesterday, I was on top of the world with this trade.  I sold before earnings.  I bought the blood after earnings.  The chart looked ACE HOOD.   I generated a Spencer Rascoff meme, complimenting myself.  It seemed I would surely crush the shorts into month-end.

Nah, Trulia happened.  Unreal, these jokers, are the catalyst for a gut wrenching selloff.  Perhaps I should have just cut my small loss and moved on.  Then maybe I wouldn’t feel like there is someone reading my posts who decided today was the day to correct me.  However I did just the opposite, and bought MOAR Zillow, MOAR!

Since then the stock has triggered a circuit breaker.  The markets are rallying to all-time highs and I am engaged in a bitter fight with a concentrated pack of pissed off bears.  Sometimes, you have to pick your battles wisely.  This may not be the best place for me to make my stand.  Instead I should be dabbling in the nefarious world of OTC penny pot stocks, perhaps.  Oh, wait, I am doing that too.

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First and foremost, if you are selling the TSLA $200 dollar roll, you’re doing it wrong.  Sell it at $225 you goof.  I want to take a quick bow, over here, for sticking through this bad boy all quarter, grabbing the golden ring in the process.  Here we are, at the $200 hundred (extra redundant) handle, wondering if this will be the next asset mania.  I bet it will be.  You are no longer cool in the inner circles of California conservation unless you boss a Tesla through the ungodly herds of traffic.  Everyone knows you love your planet in style when you drive a TESLA, you can’t lose!

I, on the other hand, can lose.  I have proven that to myself recently via a string of errors.  Error one, I got spooked into buying TZA.  Error two, I bought SCTY yesterday knowing it was the stalwart stock during recent weakness.  Of course it takes a back seat once the rest of the market comes ripping around.  Plus earnings are around the corner.  Needless to say, I am working with a red position here.

We are experiencing a violent amount of uncertainty in the market place, even though bulls are presenting themselves as the winners.  This is about the 7^th inning of the ballgame and the buyers hold a three run lead.  It is their game to lose, but the sellers could still pull off a victory here.  Right now they are losing.

My book is almost entirely long, yet my gains today are moot.  Dragging me down are SCTY calls and TZA. Even without these positions, I still would not be having a real humdinger of a day.  My book just isn’t propelling like the indices are.

A few future events can change this.  I still hold OWW calls, risk I laid out on January 22^nd.  They announce earnings on the 13 and I will either lose the rest of my premium or get bossed up.  The risk reward is heavily skewed in my favor so I will let it roll.  I have a large ACAD call position, February expiration, and that chart is more wound up then a nun in a men’s locker room.

The Frank Abagnale trade in FB is still playing out, where panic buying is yet to convince me to sell.

Thus I will sit here, in a bathtub full of land mines, wearing only my TZA g-string to protect my unit.  I have a little less than 10% cash left, and I intend to use it. Soon.

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We started feeling the effects of a macro correction mid-January where stocks to a binary backseat to currencies, volatility, and overall index direction.  I impatiently traded the price action, buying dip after dip, through earnings, and snatching up anything that moved.  The price paid was a both a paper and actual drawdown.  I haven’t really missed a stride though, and I continue taking quality setups in individual stocks.

As I write, I have unleashed a wonderful thought onto two years of intraday data, where a bit of code can determine if an idea is worth financial pursuit.  I will not have an answer until 3.5 days of peak i7 quad core awesomeness optimizes 1.3 million scenarios of the thought to see if we have something to build upon.

A thought is a trading picture, or chart setup, or set of conditions that you see repeatedly before a move you want to trade happens.  This will be different for every trader.  One of the biggest factors you have to determine is what type of trading you will participate in.  For example, I trade swing trades lasting anywhere from 2-60 days in stocks.  An example is this TSLA trade, where I bought the earning’s reaction, rode out some drawdown, and ultimately am deep in the profit ahead of earnings.  This trade lasted an entire quarter, had some adds and scales, and ultimately I have to choose either to close out the position entirely or take a piece through earnings.  The best choice as a swing trade with no fundamental logic behind my position is to get small.  But I have digressed because I want to talk timeframes and styles.  For these swing trades, my decision making is based on daily and weekly charts of price.

For day trading, I get much closer to the action.  I like to use a range bar or a short duration bar from 1-to-5 minutes.  This is hands on trading, and my discipline is put to the test rapidly which can compound mistakes rapidly.  With a swing trade, I can eat some tacos, sleep, exercise, and then refresh the chart and objectively form a battle plan. The day trade needs the same objectivity in seconds to minutes.  Thus your diligent and undivided attention is needed.  I am now using algorithmic entries to enforce discipline.  That leaves the entire trade identification process out, but still requires one to manage the stop loss and exit.  I still find I can see when a trade is wrong sooner than the alogo.  Thus I prefer to trade hybrid where the algorithm puts on a feeler position, one contract, and I use discretion to manage the trade.

Both types of trading require context.  Everyone has their own methods of building context.  Some have powerful contacts in the industry.  Others have large groups of traders sharing their outlook and expectations.  Some measure sentiment on stocktwits and twitter.  For me, it is market profile and volume profile.  They are the auction, the essence of the marketplace.  A market exists to facilitate trade between as many people as possible.  Price is a mechanism for trade as are volume and time.  I spend the most time building context.

I am long, and will be away from my book until the afternoon on a business venture.  I think it is best I ignore the noise ahead of Yellen regardless, this is simply an opportunity to do so.  I am mostly long, a TZA hedge in place, and have new risk in SCTY and ONVO.

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I have not played this correction as well as I know I could.  I tend to compound mistakes.  I think this is how people blow up.  I have enough risk management in place to prevent this from happening, but my performance, the scoreboard, clearly reflects my loose fundamental game play.  In a very boring way, I run through highlight trades thus far this year at the bottom of this post.

I had to override Elroi today.  I simply cannot stand idle and watch the algo be wrong.  It does not have context built in, and a few other very key components that would make him more robust.  The question becomes, is he broken?  To be honest, I do not think he is.  There simply need a few more variables in the code to avoid recurring pitfalls.  I still really like the information the algorithm provides.  I can see him trigger and get pinched and I know other traders are likely in the same position.  It helps me get a sense of order flow.  But it needs to be more robust and amorphous to market conditions.

Do not think that I aim to fail via broken robots that tip me off by being wrong.  Or that I get excited about losing money on a bad trade.  The process, however, the data one gathers from failure is incredibly informative.  A specialist is someone who has made every mistake that can be made in a very narrow field of work.  There are data points baked in that you will never learn unless you go out and do the work yourself.  I am frozen in remember, thus I might as well write trading logic inside the mother ship.  I enjoy the process.

My book is 75% long stocks, 3% February call options, 7% TZA, and 15% cash.  That’s a decent look, in my humble opinion.

It was a great week to trade the market.  Really I have enjoyed the whole year, although my book wouldn’t reflect it.  I am -5% thus far on the year.  To be honest, I am happy to be there.  I have been rolling through earnings season like Wiley Coyote, drunk and shooting at any stock that moved.  This gets kind of boring, but I figured I would share some highlights of the churning I have done year to date:

AAPL, OESX – guillotine

CREE – fake out

YGE – I bailed, not bad

FB – Frank Abagnale

TWTR – was tiny, bought yesterday’s close at 50.02, sold the early prints like a clown baby.  Now I want more, slowly.

GOGO – capitulated Monday

Could be worse, could be better, but we are always moments away from another breakthrough at the Raul test laboratory.

Have a great weekend.

PPT, FTW

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Even I was convinced we would slide right through this volume cave below.  It appears the net inventory became too short, and a squeeze ensued.  We are still trading near the upper end of intermediate term balance, but this environment could squeeze higher.

I have a TZA hedge on, it’s already underwater, but I don’t mind having it into the weekend.  That is, unless we blow out of this intermediate term balance:

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I have been very busy today, busier than most days, thus I must apologize for not being more active in my local feeds.  I have, however, been working on selling down positions all day inside of the pelican room.

I am working down to my favorite positions, after building too many, into a tape I perceive as weak.  I have sold the following:

Scaled some FB for a solid win, stopped out MCP, TRLA AREX, SINA, and GOGO.

There are more names on the chopping block, too.  The above, however, were of no use to me any longer.  With GOGO, it was an emotional decision and I will be the first to admit that.  I have made wonderful gains trading GOGO, and I became complacent.  I bought the earnings dip and have taken heat ever since.  It is nearing a buyable level, but I can always buy it back with a fresh costs basis.

These sales have brought cash to 26 percent.  This puts me in a solid position to buy more of my favorites, like TSLA, FB, YELP, AMBA, FSLR, ANGI, and YGE.

The LED trade needs to turn the lights on.  Believe me, this can turn fast, we are in a seasonality sweet spot with these names through March.  That being said, the CREE chart, my favorite company of the lot, looks like poop.

Elroi took a winner premarket and is thus green for February.  He has done nothing since.

Pot stocks are all the rage, look at PHOT and HEMP go.  Then if you’re feeling left out, consider buying MDBX or MJNA.  Then realize you’re dumb, and should probably allocate said funds to starting your own narcotic venture.  Then realize ultimately that this is all federally illegal and go fuck yourself.

Finally, for anyone saying I was calling for a bottom, please read the following except from this morning’s market analysis:

“The other possibility is we have not even begun to see panic.  If this is the case, the market should accelerate rapidly to the downside, soon, blowing through intermediate term and long term control.  This is very much a possibility and a would be remiss to ignore this possibility.  I have a line in the sand at 3440.50 but should price begin accelerating violently to the downside, I may begin reducing exposure well before then.”

I am bracing for more pain.

 

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“Art washes away from the soul the dust of everyday life.” – “Don” Pablo Picasso

I did very little today, merely observing the tape for the most part.  I bought more YELP.  I did to too early.  My trigger was a bit higher, and when I had the NASDAQ futures pinned down with laser focus I saw the force I thought could propel YELP into my trigger.  Instead it just traded flat while the market went on a rip.

And I am okay with that.

There’s a chance my TWTR weekly calls, the $65 mark, will be lottery losers tomorrow.  It seems the gambling class flooded into the strike via their local gas station clerk, while they bought their cigarettes and dinner.  Fortunately, I hold a modest common position.  Also, I have a little bit of dry powder, should I see fit to buy more time on the play.

Amazon is getting smashed in the mouth (no 90’s) after “missing on the top and bottom” which is fancy talk for people are disappointed.  Usually they miss top and bottom and everyone elates their commerce prowess regardless.   Google is flat but the NASDAQ turned nose down into the close.  Which brings us full circle to something more important than any earning announcement—my PLAN.

You live by your plan, your plan is yours.  But your plan is useless without you.  There are many other plans, but this one is mine, and it is playing out like a etude from Chopin—technical and powerful.  Let’s have a look, shall we?

 

If this plan holds true, tomorrow may be the best buying opportunity of the 1st quarter.  Only time will tell.

Goodnight.

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I bought the new low of the day.  I am about all in.  God save the queen.

More later.

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I bot weekly $TWTR $65s and weekly $YELP $80s.  You only live once, so be careful out there.  NOTE: I am 0-5 on YOLOs

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