America-iNvest.com: What?s going on today?
Fredrickson: It?s a volatile market. That has been the story for what seems like eons now.
America-iNvest.com: Are there any sectors where the volatility can be taken advantage of?
Fredrickson: Biotechs have been great lately. Right after new year?s, they got hammered as a group and we began investing in Biotech Holders Trust (BBH). We bought some on Jan. 5 at 135 and sold it on Jan. 10 at 160. We bought it again on Jan. 13 at 150 and sold it the next day at 155. So it has been a pretty good thing. We?ve been in a lot of biotechs lately; they had some pretty nice setups.
America-iNvest.com: What defines a nice setup in your mind?
Fredrickson: Most of them were in a very nice uptrend, with a three- to five-day pullback before touching a trend line or moving average or price support.
America-iNvest.com: What?s a biotech name than has been good to you?
Fredrickson: Viropharma (VPHM) has been great. I invested in it when it was at 14, maybe six months ago. It gapped up to 90 this morning in pre-market trading. I became interested in it because the company was really close to some kind of flu drug. I looked into it, and they were further along than anybody else.
America-iNvest.com: What other sectors do you like?
Fredrickson: Cheap stocks. Anything under $10. Seriously, cheap stocks have kind of become their own sector for whatever reason. One that we played the other day is Information Architects Corp. (IARC). We got in at 10 7/8 and got out at the close at 15 1/8. If a stock has its biggest one-day upside move ever or even its biggest move in the last month, it will tend to attract some selling the next day. Sometimes it is some pretty strong selling, so we usually sell ourselves before the rest of it begins.
America-iNvest.com: Why do you think cheap stocks have become so popular, especially among day traders?
Fredrickson: Not everybody has a big account. There is a group of people who can?t afford anything over say 15, plus another group that is keyed into these stocks. That creates some rabid buyers. When you combine that with the market makers not making markets, it is ridiculous. It is insane that you can go in and buy 3,000 shares of a stock and move its price up $2.
America-iNvest.com: Do you have any specific strategies for earnings season?
Fredrickson: We made 20 points on Ariba (ARBA) and 15 or 20 on Yahoo.com (YHOO) after they reported. What we do is look for a stock that comes out and beats earnings after the close or before the open. The next morning, if it breaks its five-minute low, then we will short it. The premise is that it should be going up because it beat earnings, and a lot of people have bought it. But if it does go down, people start to panic. Usually we want to be out of it by 10:15 a.m. market time, because that?s when it usually starts to reverse. It is a quick trade, but you can make some bucks.
America-iNvest.com: Anything else you?d like to add?
Fredrickson: We?re hosting a free all-day online seminar at noon EST on Jan. 29 that will help teach traders improve their day trading. I will be one of the presenters. More information is available at swingtrader.net. |
