Tuesday’s Trading… Weird But Profitable

This will be short because (1) I’m tired, and (2) Jaiku is down for maintenance, so I can’t link to all the great conversation there.

It was another frankly messed up day in the markets… with a flat open, and an up Dow with a down Nasdaq and S&P. That’s no fun. Like I’ve been pointing out every chance I get, stocks were very brittle near important daily numbers. No one wants to be the first to buy a stock up higher.

Still, the month is drawing to a close, and the bills I need to pay don’t care what kind of markets we’re having! You know, everyone says you shouldn’t trade when you’re focused on needing to make money, but my bills don’t care about that either! So, I tried to stay as alert as possible, and spot ideas (I normally just kinda zone out or take the day off if it doesn’t look promising). I ended up taking 3 scalping plays, for three wins. Feels good!

As usual, I looked for certain factors to line up:

• a stock price leaning against some reasonably important-looking number.
  • I always have some reason to believe the stock will move, and almost always trade in a direction with no daily chart resistance in the way.
  • For scalps, I don’t ask that the chart pattern be perfect… just has to be good enough to create a resistance that the price can burst through for a bit.
• a thick ask at the number
• a fast trade rate as the ask gets eaten up
  • Many times, every day, I pass on perfect-looing trades because prints are not going off fast enough at the time I need to buy in.
  • When trading slows just after a break-out, the people that got in get nervous and dump their shares. The breakout fails.
  • Trade rate is the easiest way to predict whether a move is going to work or not (at least in the short term). People don’t pay enough attention to it, in my opinion. Of course, sometimes a breakout stumbles out of the gate, and manages to pick up speed. No method is perfect!

… and then I buy when the bid and ask are temporarily equal, creating a 0-slippage entry into a trade that starts out 1 cent in the green almost by definition.

Today I got NVDA on break of 32 (which you may know from my jaiku posts that I’ve been waiting for for days). I got SNA on break of 56.25, which was its OR high (thanks to Zoomie for pointing out that SNA looked interesting). I then scalped NVDA again at 32.50.

The charts are pretty uninteresting. In fact, I don’t really look at the chart when I’m scalping… I mainly look at my little L1 quote box (which I showed on my “how I stalk a breakout” video).

I passed on a chance at a box play on IBM, because I saw daily chart resistance, and I just tend to think of IBM as a sluggish stock. But, it would have worked. Credit to Prospectus for spotting it.

[Edit: Don't take what I said to mean that I'm hard-up for cash... I actually don't count up my p&l until the end of the month, when I request a check from my broker. I just know that I didn't trade a lot of days this month, so I would really like to get in at least one trade every day this week, if possible.]