TODAY’S TRADING SUMMARY – Wednesday, March 30, 2001
Both the Dow and the Nasdaq were ugly today, following through on weakness from yesterday. The networkers closed down 7.3%, chips down 6.04%, and Internets down 5.83%. The $COMPX closed down 91 points (4%) and the Dow closed down 166 points. Only the Utility sector finished the day in the green, which is often the case on days of tech and broad-market weakness.
Starting out a bit choppy in the morning, we tried to buy the gap down (in anticipation of a rebound) in VRTS & some of the semis (RFMD, PMCS, NVLS) and were stopped out of a few, but the losses were fractional. We subsequently made over a point of profit in an IDPH short (Carol spotted that setup for us). We also are sitting on about a 3-point profit on our DONUT (KKD) short calls. It appears we nailed the top of the KKD run when we entered our calls yesterday.
The markets chopped around in the afternoon, which made it difficult to be aggressive on either side of the market. However, since many stocks began to give signs of being oversold (particularly semi’s and networkers), we began legging into long positions. In the afternoon, we traded AMCC and VTSS long, but ended up exiting both positions at break-even when the market rolled over. We went long ADI and AMD for a +3/4 profit each. Our first entry of AMD, RFMD and JNPR longs ended with small losses of -.45, -0.60, and -.30 respectively. Later in the session, we shorted NVDA for +3/4. Ultimately, the afternoon trading was uneventful.
Into the close we took several positions long when the futures held the prior session’s low and we observed divergences in market internals, including the Nasdaq advance/decline line on a 5-min. chart. As mentioned in prior post, we are also anticipating a recovery (at least a bounce) in the Nasdaq after a week of selling, including the two most recent consecutive climatic gap-down selloffs. We slipped into longs right off the lows in RFMD, VTSS, PMCS, AMD, JNPR and EXTR. If the markets gap up modestly Thursday as expected, we anticipate selling these positions into the open if the markets gap up.
By keeping our losses very tight today, we were able to quickly rebound from a string of losers with two successful trades. That's the nice thing about buying gap downs, and selling gap ups (when other conditions are right, and never against news)... the risk:reward is often quite attractive (see Deron's recent educational post on that topic). Losses of 0 - 1/2 point, vs gains of 1-5 points and more (in the Nasdaq high-flyers) are fairly common when this type of trade entry is well-executed & managed.
See you tomorrow for our next update.
Good Trading,
Deron, Steve, and Ed
General Partners
intradayinvestments.com |
