>Today’s Selling Feels A Little Different

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Goldman’s narrow beat wasn’t enough to satisfy market.

Earnings, earnings, earnings was the theme of the morning. Earnings season is my favorite type of year to trade because the action is plentiful. For a momentum trader like myself, there is tremendous opportunity to profit from the emotional price gyrations we see around earnings announcements.

International Business Machines (IBM) and Apple Inc. (AAPL) beat and guided higher yesterday afternoon, and both traded higher this morning. American Express Company (AXP), Goldman Sachs Group Inc. (GS), State Street Corporation (STT) and Wells Fargo Company (WFC), on the other hand, all reported all reported either misses or narrow beats this morning and sold off. Seems like the bears definitely won that battle; it seems to take a blockbuster report to take stocks higher at these levels.

As I write this we are currently down 11.40 on the S&P futures to 1283.10. My morning was made with a few overnight positions and good early shorts. I came in long the rare earths Molycorp Inc. (MCP), China Shen Zhou Mining & Resources Inc. (SHZ) and Rare Element Resources Ltd. (REE) and short Linear Technology Corporation (LLTC).

Little did I know that SHZ would do a private placement at $7.05 and bring the stock down over a dollar after the open. MCP proceeded to do just what I thought it should off the bell: pull back and then run. But with the SHZ news, I guess the bulls got scared and started profit taking. The stock is currently back at $45.50, right in the middle of yesterday’s range.

I don’t know what to expect the rest of the day in MCP, so I will probably sit tight and wait for a range break either up or down. REE worked very well on the downside again. It made an early high of $13.78 and then sold all the way back down to $12.75. I was able to get a nice scalp short when MCP broke thru $46 and REE fell from $13.30.

I also made a nice trade on Rediff.com India Limited (REDF) reversal this morning. REDF looked as if it was going to blast through $10 when it suddenly changed direction. I shorted some at $9.50 and rode it down to $9. It then developed a nice bear flag pattern on the 5 minute under $9 and I shorted it again. It then fell to $8.20. Again, I HAD a long bias, but changed my mind the second the chart and stock started to look different.

I was also able to take advantage on Wells Fargo Company (WFC) earnings. I shorted some right off the bell and made a nice 20 cent profit before the stock reversed and took out it’s highs. I haven’t looked at the stock since then. I know the banks aren’t my strength so I took my money and ran.

Today’s lesson is all about not succumbing to the temptation to average down. This market feels very different to me from other days when we are down this much recently. Lately the afternoons have been met with buying to take the pressure off the market. I’m not sure I see that happening this time around.

History shows us that the last two weeks of January produce selling pressure. We are seeing that play out now on some decent earning reports from leading stocks. I am not looking to be a hero in this market and pick a bottom. If the market tells me to stay short, I will definitely stay short. Good luck trading the rest of the day!

*DISCLOSURE: No positions mentioned

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