Trade That Did Suck and Then Flipped Me Off

Had Monday off but today felt like a Monday so not much gained there.

Trade That Did Suck and Then Flipped Me Off
My buddy BC Lund writes a series of blogs that are titled "Trades That Didn't Suck" and as soon as I get a good one I will rush out a post along that line.

As is, I am sharing a Trade That Did Suck and Then Flipped Me Off from today and I hope you take some value away from it. If not, at least laugh at me a little.

Back on January 31 I opened a position in WTS (Watts Water Tech Inc.) and I have posted the charts of the setup on the blog (search WTS tags). I had the stock just under $38.50. I have been holding this one a while and it has done reasonably well.

I was running through my open positions this morning (AREX, BANR, WTS) and that's really when the fun started. On Finviz I saw the earnings section for WTS read as "FEB 20 AMC" as in YESTERDAY after market close. I was really shocked and consulted my little trading booklet where I keep things I need on hand written down. I had WTS earnings for February 22. Obviously I was wrong and it made no difference at that point in the morning how I had the wrong date.

A few curses later, I looked around for some news on the WTS earnings. Seems they slightly missed estimates (of course) so I was expecting to be taught a nasty lesson about rechecking earnings dates for open positions. WTS is sort of an unknown name and there were no pre-market trades to check this morning before the open until about 9am. This stock is so unfollowed I could not even find solace in a Yahoo Finance message board ultra bull pumper to make me feel any better.

All indications were that WTS would open down about 3-3.5% which would eat up almost all my gains in the name. If you have ever been long into a missed earnings report you know that's not too bad. Down 10-20% is not uncommon. I figured I could wait for a bounce after the open and exit the stock while salvaging a small profit.

Armed with my new plan I saw the stock gap down hard, but then there was a solid bounce taking WTS back over $39 where I exited the trade for a gain of 1.4%. To this point I have made the major mistake of having incorrect information and not being on top of earnings dates for an open position. I walked away unharmed, but that's not a common outcome on a screw up like this. I have February 22nd noted on most of my material for the WTS trade so something got mixed up. My blunder.

And now for the second part of the trade where WTS flips me off.

I was more worried about not getting caught up in a sell off this morning to note the stock action as much as I should have. On my chart for WTS it's clear that $38.30 was the scene of the breakout and even with the gap down this morning, it never broke back below that price. Had I been a touch more calm and had more time to look over the action I would have noticed that huge flag. And then the buy interest came in. Big time. What started off as an earnings miss gap down by day's end had become a monster bullish engulfing candle (click for larger view):

This kind of print is a dream come true for longs. My target was $42 for this name and it may get there this week. Without me.

So I would say WTS is giving me this right now:
┌∩┐(◣_◢)┌∩┐

To recap:
-I had incorrect earnings date
-I failed to keep key support levels for this stock in mind
-I pushed to close a trade more out of rushed fear than a place of calm
-I failed to remember that in 2012 missed earnings are actually a good thing (kidding, slightly)

Poor execution all around and it's probably my worst trade since last Spring (there were a few around that time). If this can serve as a wake up and keep me focused then I will take that as a positive going forward.

Have a good night.

Distribution is the Better Part of Valor

Winter may have a trick or two left, but it's going to be 50 degrees plus over the next two days in the Boston area and that makes winter much easier to deal with.

Distribution is the Better Part of Valor
Note: I sold KFN (-2%) and BCR (+2%) today for changes in my trading account.

Distribution days are one of those market observations than can have hard, set rules but you also need to allow for a little wiggle room. Investopedia tells us that distribution is:
"When trading volume is higher than that of the previous day without any price appreciation."
Simple enough.

On any given day every stock that is bought is sold and vice versa. Price is used to gauge the desire of one side or the other to move a security. Aggressive buyers will push bids up and prices follow. Sellers looking for an exit will take less and less just to off load the position. Volume tells us how many are in the active mode for a stock.

I was thinking about distribution today as it relates to a stock I missed buying, and one I currently hold. Joe Fahmy offered on Twitter that the Nasdaq had it's second day of distribution selling since January 1st today. Here is a chart of the QQQ which shows the two days very clearly and follow the defined rules (click any chart for larger view):

There was a smaller one on January 16, but the overall volume was low. The days of February 16 and February 10 were followed by solid moves up, so there is the chance there is not a severe correction at hand.

The stock I had in mind was a name I was pissed I missed a break out on a few days ago but it was an earnings deal so that's how it goes. This stock will not show the classical distribution rules in play, but tell me this is not an unwind of shares steady and strong over the course of days. SMG:

You can see the last 6 days have now eclipsed the accumulation over 5 days leading up and into the earnings report. The stock has even dropped out of the ascending triangle that made the setup attractive in the first place. Yet only two technical distribution days over the last 7.

Looking over my open 3 positions (AREX, BANR, WTS) I am most concerned that WTS is at a critical junction in the distribution debate. Take a look:

Why didn't I sell if I had qualms about the action? The 20MDA is coming into play tomorrow as possible support. The selling today was heavier and may signal a near term bottom. I also wanted to be in the stock as this plays out so I can react to it. Tomorrow's session is my debate ender.

When you start to see signs of distribution, remember that discretion is the better part of valor. (I played with that line for the title, obviously)

Have a good night.

Position Review and Thoughts on Rotation

Never fond of Monday's but today was not actually half bad. Tonight I can access and use Twitter on my mobile phone but I cannot use any of the buttons or post tweets on my desktop computer. No one seems to have much of an idea about this. If you can help, email me or use the comments section.

Position Review and Thoughts on Rotation
I have been long a few stocks for a while now. After a few down days and some positive market movement today, it's a great time to review all 5 and see where things stand.

AREX
Opened a position on 1/31/12. The setup was a long intact uptrend and a move over the $34 range which was anew breakout area. Today's chart:

AREX had a crazy day on 2/8 and hit as high as $38. Since then it has tailed off and now is retesting the "scene of the crime", the breakout level just above $34.50. A successful touch and hold of the 20 MDA is supportive of this name going forward. That said, the stock has stalled out here.

WTS
Opened a position on 1/31/12. The set up here was a clear move out of a very tight basing channel. The accumulation volume had been excellent as well. $38.50 was key zone to clear. Today's chart:

After touching $40 this name has cooled off a bit. Volume has dried up on the downward move and buyers returned today. This one is still set up nicely for a move higher.

BANR
Opened a position 2/1/2012. To be fair this should have been stashed in my long term account. I have every indication that BANR will cross up and over $20 and run, just maybe not soon! May have been a little early here. Today's chart:

This one actually did close over $20 on 2/3 but since has fallen off. On the positive side the small gap from 1/25-1/26 has been closed and buyers returned today.

BCR
I worked on this one with a friend a while back but I missed the fireworks around 1/20-1/23. After that I was playing resolution of the bull flag as (opened position on 2/8/2012) seen in today's chart:

This one caught a price target upgrade the other day and thus a price and volume spike up. Right now it is facing serious price resistance at about $96. Above that and it's a "$100 Dolla Roll".

KFN
Opened a position on 2/8/2012. I had worked on this chart (and about 10 others) the night before and I just liked the action so I bought a spot. Today's chart:

The buyer accumulation has been outstanding for this name. The price has cleared the breakout level of $9. A bit of a pause here right now.

So all in all the 5 are not bad open positions nor in any real trouble. So what's the problem?

How many times did I use the words "pause", "resistance", "cooling off" in the selections above?

Even on market down days many names have been running well. Granted I tend to stay away from the hottest sectors (biotech, solars, chinese egg rolls) but many other things have been moving. The 5 above had real momentum coming into where I bought them, yet have slowed down.

So it could be benign reloading and the age old "resting, wants higher" sort of thing. Hopefully that is what it will turn out to be.

On the other hand there is another side to rotation of money, especially at the upper ranges of longer rallies. That means when things are moving they gather interest and steam, but as soon an it stops (resistance, news, etc) money moves along.

I think most understand rotation as it relates to sectors. Money leaves bonds say and goes to riskier assets. Buyers may walk away from the utility sector and instead chase semiconductors higher. That's well established.

What I am seeing some signs of (not absolutely, not definite) is buyer rotation from a binary choice: moving vs. non- moving.

There are some good examples in the names above and some others on screening names I have saved. Be aware and keep an eye on your positions. If they have been moving and see a pause, it's important they continue to keep moving. If they are supported by strong technicals and the momentum has been there, a walk away from buyers may mean you are holding a "non-moving" name and money will be rotating out. I may have a few in the above names myself.

Have a good night.