OCTOBER 29, 1999
Henel, a day trader from Buffalo, N.Y., thinks that his breed
gets a bad rap, so he agreed to share several weeks' worth of his
experiences with BW Online Columnist Robert Barker and his readers.
Here's the final installment of his six-part series. Next week, we'll
publish two mailbags of your letters to Barker about Henel's experiences.
of a Day Trader, Part 6
"How low would the stock go before it turned? I
wanted to be buying at the turn" |
Monday, Oct. 4
Today we had a 128-point rally as I predicted. The pressure might
come off the market tomorrow if the Fed stands pat on interest rates.
Tomorrow is the last day before J.C. Penney (JCP) goes ex-dividend.
It was up about 3/4 of a point early on, and then large selling came
in. A rally is often used by institutions to "sell into strength"
to unload a position. They also were using the dividend lift to unload
Anadarko (APC) was also down. Hard to understand since it actually
snowed in New York State near the Canadian border, not to mention
other places in the country. Our high temperatures through Wednesday
are in the low 50s. Lows at night in the upper 30s. Even with all
the early cool weather, oil dropped about 70 cents. The oil stock
index was down almost five points.
Gold is going through the roof. Tonight as of 8 p.m., we are up another
$8 to $326 an ounce after a big day today. I believe that a good number
of the people who were playing oil have sold that commodity and are
I regret selling my gold fund Friday, but feared that gold would drop
as we approached the Fed meeting tomorrow. Also, I smelled a rally
coming, and gold usually goes down when the market goes up. The fact
that gold has gone up today with this rally tells me that you have
to believe this is a gold rally. Either that, or half the world might
be short this commodity and trapped below.
I have often played the gold stocks for quick trades and watched for
many years as these stocks were destroyed -- $20 stocks that went
to 20 cents. There is still a lot of room to make money on this sector.
I think a number of people don't want to believe the rally. The same
thing that happened to oil at the $10-$13 dollar level. I believe
Merrill's man was calling for $7-$8 oil.
My current problem is that I am fully invested. Otherwise, I would
be aboard NEM. I have decided not to use the Gold Fund because you
have to wait for end-of-day prices. If this is just short-covering,
you might need a quick-exit option.
Tomorrow, the American Petroleum Institute statistics come out after
5 p.m. It is possible that it might help oil for Wednesday. One thing
to watch is the momentum in the gold rally. At some point this might
spook the stock market.
I still see heavy-duty tax selling everywhere. This worries me since
most "value" stocks are at the bottom of their price range and may
not rise until it stops. The market broke a key resistance level to
the upside at 10,400. If we can hold this, we may go higher. Today,
I sold half of my Coeur d'Alene Mines (CDE) for a small profit. The
liquidity in this stock is getting better, but I want to raise some
cash for better opportunities.
I still do not like the way this market acts. There are too many people
"standing by the door." My gut feeling: The decline is not over.
Wednesday, Oct. 6
Big rally today. However, it did not spread to my areas of investment.
Anadarko (APC) was up 5/8, and J.C. Penney (JCP) was up 5/16.
It is important to always be watching the size of the "bid" and "ask"
prices on the stocks that you are trading. An opportunity could pop
up at any time. Today, J.C. Penney (JCP) was trading in the 35 to
35 3/16 range for most of the day. The size of the bid and ask was
usually very small, no more than 10,000 shares on either size. The
stock however couldn't break 35 1/4. Someone kept throwing in stock
Late in the day, the true reason for the sluggish behavior became
apparent. Suddenly, a 50,000-share block appeared on the "ask" side.
From my experience, I realized that this stock was about to go lower
quickly. Most traders would have immediately sold out their positions
and taken their losses. I look at it differently, that being, an opportunity
to buy a cheap stock even cheaper.
It's kind of like being in Kmart (in the old days) when you were looking
at some merchandise (already on sale) when the manager wheels up the
"blue light cart" in front of the goods which you were about to buy.
You get a sudden rush of excitement.
First, I checked the news on JCP to make sure that something fundamental
to the company had not changed. Then, I quickly sold another stock
on which I was even in order to have money for the purchase. Big question,
however, was how low would the stock go before it turned? I wanted
to be buying at the turn.
It didn't take long before the action began. Whoever had this 50,000
block for sale either had more stock to sell than he was showing or
had other friends who also wanted to sell and RIGHT NOW. LOTS OF URGENCY!
In less than a minute, we went from 35 to 34. Sell orders everywhere!
This large 50,000-share block was now being offered at 34. I watched
for about three minutes as large buy orders started to hit (eat up)
the 50,000 share block offered. As the size offered dropped under
18,000, I entered buy order for 900 shares at 34 and was executed.
In less than two minutes JCP started to move up slowly. I entered
my order to sell at 34 15/16 (thinking to avoid a crowd at the whole
JCP moved up to my lone 900 shares being offered at 34 15/16, there
was just my 900 shares showing for sale. This lasted for about a minute
before someone placed a 10,000 share block for sale with me. I never
received an execution at 15/16 and the stock started to fall. I decided
to go out at 34 3/4, making a profit of $653. JCP closed at 34 15/16.
The entire event from start to finish took about five minutes. Also,
the low for the day was 33 15/16, 1/16 below my purchase. My methodology
differs in that most traders will not buy a weak stock in the first
place. However, since I already feel that the stock is on sale, I
can't resist a blue-light special.
I also sold my Rydex Energy Services fund purchased yesterday for
a gain of about $426. This made the total tally for the day of about
$1,075. I now have freed up some cash for day trading again, and my
positions in APC and JCP remain intact.
Tomorrow I'll be looking for a day trade. Possible areas include gold,
airlines if oil stays weak, energy service if oil is strong, or something
from my morning scans.
Thursday, Oct. 7
Had a busy day-trading session today. Trying to get some of the mud
off my face. It had gotten so bad that I could hardly see!
Oil was down again. It seems that OPEC is doing a little cheating
(seems like I am being the one cheated). It's down another 23 cents
tonight, to almost $22 a barrel. I think that we must be getting close
to the bottom of the pullback in oil. Anadarko (APC) was actually
up today. When trading commodity-related stocks, the security (stock)
tends to turn before the commodity. Anyway, there seemed to be a big
and persistent buyer in APC today.
JCP reported same-store sales down a fraction of 1%. Total sales were
up about 8%. Didn't matter: Tax-selling and stock down. Almost a repeat
This morning I decided to stick with what I had been trading most
recently, my badly beaten up friends, JCP, APC, and a new one, Halliburton
(HAL). I figured that I had to watch them all suffer anyhow, so why
put any new symbols (blood) on my screen. My strategy for the day
was to be very nimble and be out by closing. I had about $32,000 in
buying power. I ate my Wheaties and went to work.
Did a total of nine round-trip trades for the day. Five trades of
JCP, two of APC and two of HAL. All nine trades were profitable. Total
profit for the day was $1,221. Believe it or not, that is 3.8% on
the money in one day. I wonder if they would put my picture on the
(This is the final installment of Diary of a Day Trader. We'll be
publishing readers' letters about the diary next week.)
covers personal finance in his weekly column, The Barker Portfolio,
for Business Week from Melbourne Beach, Fla. And he appears every
Friday on Business Week Online
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BY DOUGLAS HARBRECHT