Trader Mike

Michelle B submits:

Having read a few comments at trading blogs—OK, I have read zillions—I have encountered more often than not, a frenzied, harried, stressful approach to time when one is trading. Some feel the demonic pressure crushing them as soon as the market opens; others feel enervated by its demands needling and pinpricking them throughout the trading day. Regard time, instead, as a wonderful and gracious friend, accommodating your need to focus and execute successful trades.

Specifically, I rely upon my friend, time, in three concrete ways:

I. Using Time frames

All time frames are useful and valuable–monthly, weekly, daily, hourly, thirty minute, fifteen minute, five minute, and last, but not least, one minute. My motto is: …

I was all ready to write about all the shooting stars made today but Intel has launched the market (Nasdaq) into orbit and obliterated the shooting stars. This will finally get the SOX moving away from its 200-day moving average. It may be a wild one tomorrow if the jobs report is decent. (Duru nailed this in his INTC note last night)

NFLX has now essentially closed that gap from the earlier “good” earnings news. In honor of Mike, I thought I would drop a mandatory “NFLX presents yet another example of how dangerous it can be to chase stocks that gap up in the morning.” But I must also extend an olive branch to the NFLX bulls by saying that if this gap holds as support, the stock could start looking good for you bottom-fishers and aggressive flippers out there. Since the early September lows, NFLX seems to be putting in higher lows and higher highs… (again, this gap closure needs to hold).

As you know I was long ADTN for a few days recently but sold it because they were due to report earnings. The reason I get out ahead of earnings is that I have no clue what the company is going to say nor, more importantly, how the market will react to what they say. ADTN is a great example today. They reported real late last night (6:39 PM), although everything I saw said they were supposed to report this morning. This morning there were what seemed to be decent comments from a couple of analysts. The stock was trading down about a dollar to $28.50 in the pre-market. But all of this is …

I was just looking through some headlines when these popped out at me: Microsoft misses earnings expectation and Microsoft Posts Higher Profit but Falls Short of Expectations. I was surprised to see that because all I heard earlier in the day was how good Micrsoft’s numbers were. Even now the vast majority of the headlines say things like this:

Microsoft Reports Higher Quarterly Profit
Microsoft Posts Higher Profit and Revenue
Microsoft Upbeat on Prospects as Sales Rise a Strong 11%

Those headlines are true, but they also lead one to believe everything was great with Microsoft’s report. But most of those articles fail to mention this little fact:

Excluding $533 million in after-tax charges related …

Here’s an excellent example of the reckless buying I was talking about yesterday. Yahoo! was being bought like mad going into tonight’s earnings report. This stock has risen over 80% since its March bottom. Yet people felt the need to push it even higher just before the earnings report. Well, they met the estimates, and even raised their guidance for future quarters. The only problem is with a run like that great expectations were built in to the stock price. Here’s what happened after the news, on an hourly chart: