Each morning we hold an AM Meeting at SMB to discuss the Stocks In Play as well as the bigger picture including global markets, unusual activity in commodities, and the US markets via the SPY. If a particular type of “day structure” is likely to occur that will be discussed as well. 
This morning with global markets humming and the large gap up overnight in the SPY we were more likely to have an uptrend day than not. Therefore we spent quite a bit of time discussing good entry prices on the long side for many stocks right when the market opened. In an uptrending market if the market gaps up significantly we look to buy strong stocks at key inflection points as they trade lower on some initial profit taking. We will look to hedge our long positions with stocks that have fresh news that are showing weakness in the premarket as well.
The market opened and within the first few minutes many of the stocks we were watching quickly traded down to our buy prices. The SPY stabilized after a shallow pullback and began to move higher. But then something unexpected happened. The SPY failed to make a new intraday high and began to trend lower. Many of the stocks we bought in the first few minutes began to make new lows. Uh oh 🙂
As an experienced trader I knew it was time to quickly exit my long positions and to reassess the situation. I did have a RIMM short that I thought would help erase some of the small losses I took on CRM but unfortunately I had already covered my LVS short from 50.
My next order of business was to move away from market stocks and to find fresh In Play stocks that were moving independently of the market. After quickly scanning the Radar I found MMM, CML and ONXX. Of the three ONXX is the one I have traded most frequently in the past so began to focus on it as my primary.
I called out that CML and MMM were very in play as well hoping to get others on the desk involved in those names, calling out important information that they gleaned from observing them trade more closely. After all, that is one of the primary reasons Mike and I started SMB. We always loved being on trading desks where people were working together to make more money individually.
So flash forward a few hours later and CML, ONXX and MMM did end up offering plenty of good risk/reward trades. Opportunity is far too abundent in today’s market to rip up a lot of money in the first 15 minutes and take yourself out of the game.
6 Comments on “You Gotta Have A “Plan B””
“I called out that CML and MMM were very in play as well hoping to get others on the desk involved in those names, calling out important information that they gleaned from observing them trade more closely. After all, that is one of the primary reasons Mike and I started SMB. We always loved being on trading desks where people were working together to make more money individually.”
I trade alone at home…much more difficult…envy…
This day really shooked my confidence. I was primarly concentrated in trading KSS with some levels to buy either on a pullback or as a buy stop if it moved higher. I ended up with a rip, just for the record: my biggest loss so far. I took some small positions short in other stocks just to cover the mess from KSS.
Same old thing…you have some levels and you’re thinking: this time i’m gonna make some size and give it more room..uh!
I must admit that right now I feel like after the first shots in my first proffesional tennis match: I try to move further and continue playing but I can hardly breath. Well, it doesen’t matter, tomorrow I’ll make a better plan B.
@Jpolive
I also trade alone from home, I learned to do a better stock picking but what I really miss is a critical feedback.
Great analysis on today’s trading action. I noticed ONXX too but didn’t think it was a good risk/reward move to the upside after the morning drive, although the secondary volume pop could have been a good entry.
Thoughts on the risk/reward after the main pop?
Many thanks!
hey oc, when you say “this time im gonna make some size”, if you mean that youre putting on a large position, that could be a problem over the long run (mentally and financially) if youre upping size after losses. sounds like youre just trading strictly to make back what was lost rather than go on to the next great set up.
just my thoughts.
good trading
thanks for the reply 🙂
When I said I’ll add some size it meant that this was my trading plan before the market open – to have some more size at the levels which I thought offered a good risk/reward ratio, and also leave it some room for the good old ‘let’s fade the move before going into the opposite direction’.
The pattern was ‘gap up’ and…: 1) pullback a little to find buyers in the 50ish area and add 1 lot, then when it broke the .72 resistance add another lot/lots; it made a high @.95 (I covered 100 shares @ .94); 2) yesterday was a range day and I was looking for a pullback to the high of the range, and if it didn’t held then I was watching for the support of the prior day. Oh well…
I didn’t make size just to cover the losses, out of contrary I started to be more conservative in my approach as I was loosing, and finally I gave up. But boy, if I was only to make size in the other trades, then the day would have been green.
p.s. should I mention that I tried to buy SWN for a 40c move but something happened with the ticker and the platform gave me an error every time I was buying it and I was only filled for 100 shares? Well, I wasn’t angry, it was a proof that this day had something special in it 🙂
hey oc, sorry for the misunderstanding
good trading