An NYSE Scalper's Tale - A Trader's Diary

Friday, February 09, 2007

Gettin' Greedy On ALU

Gross: +$1,481.00
Net: +$1,240.94
Loss From Top: 0
Trades: 72
Shares Traded: 247000

Stocks Traded Today (net profit/loss):
Alcatel-Lucent (ALU): +$916.89
QuikSilver Inc (ZQK): +$301.71
Laidlaw International Inc (LI): +$292.72
Time Warner Inc (TWX): +$122.36
EMC Corporation (EMC): -$0.31
General Motors Corporation (GM): -$22.84
Electronic Data Systems Corporation (EDS): -$26.42
BMC Software Inc (BMC): -$60.64
Corning Incorporated (GLW): -$79.69
MasterCard Incorporated (MA): -$202.81

I'm going to admit something to you folks out there.

I am absolutely terrified....

I am absolutely terrified of trading high priced stocks...the likes of Intercontinental Exchange (ICE), NYSE Group Inc (NYX), NYMEX Holdings Inc (NMX) and MasterCard Incorporated (MA).

I give kudows to those who can trade these stocks on a daily basis and be consistent at trading them. There are so many other bloggers out there who seem to have great success in capturing good moves on these high-flying stocks and they do it on a daily basis.

But for me...I'm terrified of trading them. They just seem to move a little too quickly for me, but I do know that if they move in your favor, the rewards can be huge.

Well, I knew that MasterCard (MA) reported this morning and I really worked up the courage to attempt to trade this stock. I kept saying to myself "NO FEAR, NO FEAR" and as I watched it open for trading for the day, I kept a close eye on opportunities that presented themselves.

But I think I over-hyped myself and got myself a little too overworked. I got into a MasterCard (MA) trade a little too early and I basically tried to trade it off the open (see bad trades below).

As MA opened, it moved upwards towards the $118.00 level and I kept saying to myself "Have no fear! Have no fear!" and I went ahead and went long 500 shares at the $118 level....but it was a mistake...I got in at 9:31AM and in all honesty, I really had no idea what MA would do next.

I mentally gave myself a 25-cent stop-loss, but almost as soon as I was in, it blew past it. I sort of sat there stunned...unsure of what to do next. Perhaps I needed to move my stop loss down further? Maybe this was the way these kinds of stocks moved?

I didn't know....but I did know that I wasn't liking it. Anytime I feel uncomfortable with any position I take, I just get out - no questions asked. I got my position out for a 40-cent loser...but as you can see, it was a good decision. I took a $200 loser right at the beginning of the day...but I felt that it was a good $200 loser (in that I didn't let it get any worse).

Anyways, for the remainder of the day, I really practiced patience with all my positions and it seemed to pay off.

Take a look at some of the good trades (see below)...you can see there was one for over 30 minutes, another one for about 20 minutes, and another for about 13 minutes. This may seem like a short time for some of you traders out there, but for me, those times are an ETERNITY!

The reason some of my hold times are so long is because what I did today was that I'd scale out a portion of my position whenever I felt like a move was stalling and when it came down to that last portion of my position, I would try to let the charts dictate when I should exit that last portion.

Of course, in an ideal world, I would have captured entire moves being made on stocks, but today I may have cut a few good trades a little short...mainly because I was feeling that there were other opportunities being presented elsewhere, or I got a little tired of the stock not going anywhere.

Today, the bulk of my profits came off of Alcatel-Lucent (ALU).

And this afternoon, ALU made me a bundle!

I got greedy on one of the ALU trades (see good trades at 2:22:03PM). I went long 20,000 shares of ALU and it slowly crept up and up. When it seemed like it was getting tired, I put out an order to exit so that I would have a $1000 winner on the trade. But ALU just sat there, and sat there, and sat there.

Then the Futures started tanking hard! I thought to myself that this was ALU and that if ALU wants to go somewhere, there's no stopping it! Even the Futures can't make this beast turn around.

But then I saw price level after price level melt away as the Futures continued to tank hard. ALU just started falling apart and it freaked me out so I would eventually get myself out with a $461 profit, but I could have easily had an $800 profit (if I wasn't soo insistent on getting that $1000 profit on the trade).

But it doesn't matter anyways...after that quick move to the downside, ALU would bounce right back up there and I would take another trade that would make up for that lost $1000 trade.

All in all, there were 4 good trades and one bad one.

Have a great weekend folks and be sure to come back for a visit sometime over the weekend for some more great articles from some great bloggers in my Weekend Reading!

Good Trades
9:38:18AM - Laidlaw International (LI) was moving up when it came up to some resistance at the $34.40 level. I managed to get long 600 shares @ $34.38 and long 1400 shares @ $34.40. I wasn't expecting LI to move as slowly as it did, but when it came up more resistance at $34.50, I added another 1000 shares long (so I was 3000 shares long in total). I would eventually get out as follows: 3-cent winner (1000 shares), 13-cent winner (600 shares), 14-cent winner (400 shares), 15-cent winner (1000 shares) ($314 profit before fees ; Long 600 shares @ $34.38, Long 1400 shares @ $34.40, Long 1000 shares @ $34.50; Out: 10:10:56AM)


1:19:08PM - QuikSilver (ZQK) was moving down and the Futures were just tanking. When size on the bid broke at $13.80, I went short 4000 shares. I got out as follows: 4-cent winner (1000 shares), 7-cent winner (700 shares), 8-cent winner (300 shares), 10-cent winner (2000 shares) ($313 profit before fees ; Short 4000 shares @ $13.80 ; Out: 1:34:58PM)


2:22:03PM - Alcatel-Lucent (ALU) started breaking out of it's trading range when some big size on the offer broke. I went long 20,000 shares @ $13.23. It slowly moved upwards and I had an order to get all 20,000 shares out at $13.28 (for a $1000 profit). It got up there and I was pretty sure I was probably next in the queue to get filled....but then the Futures started tanking hard. I thought that ALU would be strong enough to withstand the move in the Futures, but then I saw the bids at $13.27 slowly melt away....I could have easily gotten everything out, but I didn't. I ended up chasing prices back down as level after level just melted away. I got out as follows: 1-cent winner (11,300 shares), 4-cent winner (8700 shares) ($461 profit before fees ; Long 20,000 shares @ $13.23 ; Out: 2:35:46PM)


2:50:45PM - ALU had bounced back after the Futures tank and looked strong. It approached the $13.29 level where big size appeared to halt ALU's ascent. When it broke, I tried to go long 20,000 shares again, but got partially filled for 12,800 shares. ALU moved up fairly quickly, so I decided to book my profits. I got everything out for a 3-cent winner ($384 profit before fees ; Long 12,800 shares @ $13.29 ; Out: 2:53:28PM)



Bad Trades
9:31:44AM - MasterCard (MA) had barely opened for trading when it approached the $118.00 level. When I started seeing lots of prints at the $118 level, I went ahead and hit it for 500 shares. No sooner had I hit it, prices just tumbled back down very quickly and in about 20 seconds I had a big loser on my hands. I went ahead and got everything out for a 40-cent loser ($200 loser before fees; Long 500 shares @ $118.00 ; Out: 9:32:06AM) (sorry...the chart for the MA trade is rather hard to see...)

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7 Comments:

  • Great trades today! Your net is just a little shy from your best day back in June/06! But your ALU trade did beat your previous best trade (gross) on C. Keep up the good work :)

    By Anonymous Anonymous, at February 09, 2007 6:26 PM  

  • Congrats on your move on MA, JC.

    I believe most people trade them in the dummy way - on a break-out of a consolidation. I short them when they go insane.

    It's always risky to go in the direction of a gap open, especially after the stock already moved in the last couple of days, especially when the market also gapped, especially right after earnings.

    I'm sure you can make it and you will make it on these high fliers some day.

    By Blogger wincity, at February 10, 2007 7:55 AM  

  • Your desire to trade those highflyers is probably due to the need for action and excitement. I believe they are very difficult to CONSISTENTLY trade well as the large spread and quick moves often make us do the worst thing at the worst time, particularly for those of us that have a very low tolerance for risk/losses. Stick with your edge...do more of whats working. Keep it going...nice progress.

    M

    By Anonymous Anonymous, at February 10, 2007 8:46 AM  

  • Perhaps it will help to think in terms of percentages instead of points. A 25 cent stop on a 100 dollar stock is ridiculously tight. I operate on a bit of a longer time frame than you (30 minute bars) and I usually get nervous when my stops are tighter than 1% of the stock's price. It's so easy to get shaken with such tight stops, regardless of the stock's price. MA could do a 3-for-1 split and it would still be just as volatile.

    P.S. Good job on Friday!

    By Blogger Michael, at February 10, 2007 10:54 AM  

  • Anon@6:26PM,
    Thanks for your comments. If I had taken that $1000 winner, then I would have beaten that best trade on C. Keep in mind that that trade on C was made on a single trade...I'll update the sidebar to make it a little clearer..

    Wincity,
    Thanks for your comments. I think I just have to get used to seeing things move soo fast. I've been trading some of the thinner, faster moving stocks lately, but stocks like MA and ICE go really really fast. I guess I was also too excited to try to trade MA. I'm just glad I quickly took the loss instead of letting it go severely against me.

    Anon@8:46AM,
    Thanks for your comments. You may be right...I guess it might be because I've seen so many other bloggers out there capture a $2 or $3 move on those stocks fairly quickly and I felt as though I could do the same thing. And as you said, I have a low tolerance for losses, so thost highflyers might be something I should avoid.

    Michael,
    Thanks for your comments. That is a good point. I remember just before getting into the trade I was asking myself "where should I get out if this thing goes against me?" I guess a $1 or maybe even $2 stop would be a little better...perhaps if I hadn't traded so many shares, I might have considered it. Oh well...I gotta keep learning!

    Have a great weekend everyone!

    By Blogger J.C., at February 10, 2007 6:07 PM  

  • not a frequent reader of this blog or any other blog but what do you do w/ the tax consequences that you have to pay w/ all the short term capital gain?

    By Anonymous Anonymous, at February 13, 2007 2:00 AM  

  • Anon@2:00AM,
    Thanks for your comments. Since I work at a prop firm as a contractor, I believe that after the prop firm takes it's percentage, the remaining percentage I take home is considered regular income (I could be wrong on this...this is the first time I'm going to be doing taxes while at the prop firm). I'll have to ask around when tax time comes around.

    By Blogger J.C., at February 13, 2007 7:02 AM  

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