I highlighted SEED today during our Stocks In Play meeting. I mentioned a few levels that I thought would be important and how I would trade it from a bigger picture perspective. I talked about how AMZN traded yesterday and the level I viewed as the best possible entry for a long trade. I then discussed AIG and highlighted some key levels.
The discussion of the above three stocks was a starting point for our traders. The second part of the equation involved them going back to their seats and mentally preparing for the trading day. They had to decide where to best focus their attention on the Open and spend time visualizing a multitude of potential trading scenarios. The final piece of the puzzle, and the most difficult for some, was spending time observing the stocks trade throughout the day. By closely watching a stock trade a trader is able to gauge the strength or weakness of the stock from the tape and also identify basic technical setups that lead to easy trades.
Yesterday, AIG was one of the weakest stocks in the market. Today, it gapped up in the pre-market on some news items. I was looking for a short right on the Open based on the magnitude of the selling I saw yesterday. But I was also mentally prepared to trade it from the long side as well. After a quick down move on the Open it was clear that AIG was starting to be accumulated. Watching the tape allowed me to change my initial bias from short to long. I was then able to capture over two points of upside with very minor pullbacks along the way.
I was not watching the tape in SEED as closely as AIG. But I was reviewing its chart every 10 to 15 minutes. I noticed a very unusual down move in the late morning from 14.40 to 14. The “wide range bar” that I observed put me on alert that SEED might be setting up as a good potential short. Over the next three hours a “symmetrical triangle”, a classical chart pattern, was developing. When SEED dropped below the uptrend line of the pattern it became an intraday short. My initial bias in SEED this morning was on the long side but I was mentally prepared to change my bias if the tape or a bearish technical pattern developed. Unfortunately our clearing firm could not locate any shares of SEED so I couldn’t take advantage of a good shorting opportunity. But by observing the pattern and replaying in my mind exactly how I would have traded it I am now more prepared to execute on a similar opportunity in the future.
14 Comments on “Putting the Pieces Together”
Why didn’t you sell some calls or buy puts when you couldn’t borrow the stock ?
Why didn’t you sell some calls or buy puts when you couldn’t borrow the stock ?
Steve,
I notice that you have vwap on the chart. Has that indicator been useful for you of late, particularly in SEED? The stock has been pretty hard to trade, size on the book seems meaningless and it swings 10-15 cents back and forth even when trending upward making it difficult to get in at a good spot. Trades a lot like NLST last week. Has using the vwap indicator helped you at all?
Best,
James
Steve,
I notice that you have vwap on the chart. Has that indicator been useful for you of late, particularly in SEED? The stock has been pretty hard to trade, size on the book seems meaningless and it swings 10-15 cents back and forth even when trending upward making it difficult to get in at a good spot. Trades a lot like NLST last week. Has using the vwap indicator helped you at all?
Best,
James
I was drawing this exact triangle on my SEED chart today. How weird to see it posted up on SMB’s blog… nice confirmation! Of course, I had the same problem getting short locates, and didn’t want to deal with the options spreads. Nice confirmation. I was almost thinking the triangle was too obvious… but hey, it worked.
I was drawing this exact triangle on my SEED chart today. How weird to see it posted up on SMB’s blog… nice confirmation! Of course, I had the same problem getting short locates, and didn’t want to deal with the options spreads. Nice confirmation. I was almost thinking the triangle was too obvious… but hey, it worked.
Steve, I had a short bias too in AIG and am upset that I missed the up move. I assume it was hedge funds that were accumulating the stock. My question is; why didn’t they have a short bias? What made them take the chance to accumulate the stock?
Steve, I had a short bias too in AIG and am upset that I missed the up move. I assume it was hedge funds that were accumulating the stock. My question is; why didn’t they have a short bias? What made them take the chance to accumulate the stock?
Steve, I noticed AIG shorts were not available from LightSpeed in the premarket and then suddenly became available just before the open. Would this be a check in the favor of looking to the long side? Glad you caught that beautiful up-move.
Steve, I noticed AIG shorts were not available from LightSpeed in the premarket and then suddenly became available just before the open. Would this be a check in the favor of looking to the long side? Glad you caught that beautiful up-move.
tao- just my two cents, but don’t get caught too much up in figuring out “who” is behind stock moves. Spend a couple minutes calculating the amount of capital required to absorb all of the sellers, and you’ll see why it probably isn’t just one person. More than likely it is muliple people and multiple institutions acting for reasons that are completely unknowable. Institution selling for an arbitrage deal. Wealthy cavalier buying for fun. Delayed ECN block prints with a delayed timestamped. Specialist book fills. Basement daytraders having fun with daddy’s money. Who knows. Getting caught up in trying to put a face to an entire stock can cause big problems when trying to be objective.
tao- just my two cents, but don’t get caught too much up in figuring out “who” is behind stock moves. Spend a couple minutes calculating the amount of capital required to absorb all of the sellers, and you’ll see why it probably isn’t just one person. More than likely it is muliple people and multiple institutions acting for reasons that are completely unknowable. Institution selling for an arbitrage deal. Wealthy cavalier buying for fun. Delayed ECN block prints with a delayed timestamped. Specialist book fills. Basement daytraders having fun with daddy’s money. Who knows. Getting caught up in trying to put a face to an entire stock can cause big problems when trying to be objective.
james,
i rarely use the vwap unless i see an intraday pattern develop in relation to the vwap or something on the tape happens there.
one of our traders suggested i start using it about 8 months ago so i added it to my charts buy i think i probably use it no more than a few times per week.
the one time it seems to work is in a strong stock that pulls back and consoliates and when the VWAP catches up the stock breaks out of the consolidation.
steve
tao,
i’m not a fundamental analyst. several news items broke on AIG yesterday that may have caused some large players to cover or get long.
don’t really know the answer. all i can do is watch the tape and make decisions accordingly.
steve