[9/7: stop moved to 260. We're already #FreeRiding on this one. So whatever we sell the remaining position for is pure profit!]
Today's trade leans against a significant support level that we believe will hold. But because the stock is at such a delicate level where it could quickly collapse on us if the level doesn't hold, we're going to keep the play simple and cleanly define our risks.
A picture is worth a thousand words, so here's the chart of Caterpillar $CAT that's got our attention:
I'm filing today's trade under the category of "Hard Trades." Not because it's particularly hard to execute or because it's a complicated multi-legged spread. It won't require an excessive amount of margin to get positioned nor is there any risk of unlimited losses.
It's hard because people might look at the trading action of the past few days and think that it's "gone too far" and "I should wait for a pullback."
And traders who think that way may be right.
But here's the thing: sometimes the best trades to get into are the best precisely because they are the "hardest" to pull the trigger on. And that's where our opportunity is. Those of us who fight through the conventional wisdom of average traders and get positioned ahead of the crowd will be lifted later on by those same traders who were "waiting for a pullback" and put an ever-rising bid underneath our stock that fuels our future gains.
We’re back to a key level of interest for Small-caps on an absolute basis. And we’re back down to historic levels relative to Large-caps. The chart tells a very powerful story.
I’m a buyer down here.
If the Russell2000 is above last Summer’s lows, I will be long the $IWM ETF. I also think there will be plenty of opportunities this summer in small-cap stocks.
We talked about $IWM internally this morning and I suggested a good, levered way to play this thesis while honoring a nearby risk management level that will get us out of the trade without much pain if we're wrong.
Is that because I’m a trader? Or am I a trader because I make quick decisions?
Over time, I think I’ve come to the conclusion that being a trader has instilled in me a knack and preference for quick decision-making. I wasn’t always like this. 25 years of trading has taught me to work with only 75% of the information I might want, and that is good enough to take action.
The phrase “invest, then investigate,” as Stanley Druckenmiller said, comes to mind.
Outside of trading, this can also affect my day-to-day decision-making. I think it frustrates my wife when I make decisions so quickly. In her mind, she probably thinks I’m being irrational, emotional, or acting on impulse. She, in contrast, is very deliberate. Cautious. Analyzes every detail…
Full Disclosure: I'm a Buffalo Bills fan. As such, I'm excited about this upcoming NFL season. This is the year! Does this fact color my interest in today's trade? Maybe.
I get all my speculative juice in the financial markets. But there is a growing number of Americans who are jumping into online sports betting. The increases in both participation and dollars wagered is skyrocketing.
Today's trade is a bet on a continuation of this trend that will likely be driven by the next NFL season.
Options premiums have risen a little bit in recent days due to the fed, earnings, government data, and trader indecision, and [insert your favorite scary story].
Whatever the reason, this feels like a good time and opportunity to add some delta-neutral positions to my portfolio.
You might have seen some of my tweets about an impressive trader I met earlier this week. I felt the encounter was too good to keep to myself – so here’s the full story…
I had a truly profound experience at the traders meetup I hosted in Denver on Tuesday night, where I met a new trader who completely blew me away.
Despite only having about a year of experience trading real money, this young man in his early 30s had a depth of knowledge and understanding that was truly remarkable. He carried with him a notebook filled with detailed market observations, trading strategies, post-mortems on trades, and more. No detail was left unnoticed, and his passion for trading was evident in everything he said.
What was even more impressive was his humility. He was incredibly smart, but he didn't flaunt his intelligence or try to impress anyone with his knowledge. Instead, he was genuinely curious about trading and had a thirst for knowledge that was inspiring to see.
If stock markets are about to recover and start another leg higher back towards all-time highs, I have a hard time imagining a scenario where Google (Alphabet) $GOOG doesn't at least retake last summer's highs north of $123 per share.
Call me crazy, but that's where my head's at.
Take a look at the coil that $GOOGL is working through right now:
The $GOOGL and $GOOG charts look the same. It's confusing and annoying that they have two shares classes (the "L" shares come with voting rights, the others do not).
The GOOG options have more open interest and volume, so that's where we will put on our trade.
I imagine it’s not uncommon for people to realize sooner or later that the person they thought they were is not at all who they really are. Perhaps not even close.
Are you being yourself?
Think hard about this. And be careful. Because your conclusion might have important ramifications beyond your day-to-day daydreaming through life. It will also likely have significant impacts on who you are as a trader and how you approach your relationship with risk – even your courtship of success (or lack thereof).
Everyone’s path to personal discovery will have its own speed limit, hills and valleys, and complements of sharp turns and extreme weather conditions.
The visibility isn’t always clear. For me, the wiper-fluid that cleaned my windows and sharpened my vision was my elimination of alcohol from my routine.
As we're starting to get the latest round of earnings reports into the rear-view mirror, we're getting some clarity on the next crop of leaders for a potential move higher in the stock market.
Today's trade is on an emerging leader in the Defense sector that positions us very offensively for the next move up.
