We teach our day traders at SMB Capital to flatten out before the Close. We do so because they are learning how to trade and are not ready to take positions for extended periods of time. At the start of your career you should learn how to trade. Not load up on a position and hope for the best. Well as always sometimes the teacher, me, should listen better to his teachings. I just closed out a loss in CHK because I failed to go home flat.

CHK apparently announced after the Close:

16:01 CHK Chesapeake Energy announces that it intends to commence a public offering of 25 million shares of its common stock (61.63 -2.71)

Co intends to use the net proceeds from the offering to temporarily repay outstanding indebtedness under its revolving bank credit facility which it anticipates reborrowing from time to time to fund its recently announced drilling and leasehold acquisition initiatives and for general corporate purposes.

I was long from the closing price of 61.55. It’s now trading at 59.50. So that is much lower. Ripper. I closed out my loss at 60.10.

Into the Close I was too cute in trying to get a 61.82 sale instead of just hitting the bids at 61.57 and eliminating my overnight risk. The result of failing to go out flat was a big rip.

There used to be patterns into the Close that day traders could game. For example, a stock that printed into the Close often gapped up. But a few years ago the patterns dissipated. And going home with positions only added risk to your trading.

There will be a time again when taking out positions overnight will be profitable for us. And there are some who probably make money taking overnights. But based on the way that we trade, and the market right now, there is no money in taking home positions. There is just risk.

The good news is that I watched CHK trade after the Close and noticed that 60 is an important level. Tomorrow I will use that level to make favorable risk/reward trades.

I hope your trading went better today than mine.

Mike Bellafiore

Partner

SMB Capital