3 stocks for active daytraders
I had my eye on two stocks Monday
morning, Home Depot
(
HD |
Quote |
Chart |
News |
PowerRating) and Lowe’s Company
(
LOW |
Quote |
Chart |
News |
PowerRating). LOW is the
nation’s second-largest home improvement retailer. On Monday they announced that
third quarter earnings rose nearly 26 percent. The earnings were much better
than Wall Street was expecting. It is this type of earnings announcement that
usually creates volume and trading opportunities in an otherwise range-bound
market.
LOW opened over $3.00 higher than Friday’s close. My initial trade was a short,
as I expected LOW to sell off and fill in some of the gap. I immediately
realized I was wrong. I immediately covered my short position for a 20 cent loss
and “flipped†the trade. This means I switched directions and went long at
65.50.
This is not easy for many traders. Most traders will take it “personally†that
they were wrong on the initial trade and then do one of two things: either take
their loss and sit and watch as the move occurs, or double up on the short
position as a way of “getting even†with the market. They may come out okay on
the doubling up, but not without a lot of pain and anxiety. Most often, this
trader will end up covering the short position just as the stock is ready to
reverse back to the downside.
In my upcoming seminar, I will show you how to avoid this type of trading. (see
details below)
As I said earlier, I knew I was wrong and went long. I was able to ride this
long position up for a 35 cent winner to $65.85. At this point, LOW consolidated
for about ten minutes, pushing as high as $66.00. I realized that it was losing
momentum, volume was now to the downside and a number of sellers were showing
up. I had looked on a daily chart a LOW and had identified a large resistance
point at $66.29 from September 26. When LOW failed to clear $66.00 with any type
of conviction, I decided to go short. I covered this position for another small
profit. My best trade came in LOW when it traded below the open of 65.50 and
started to approach $65.20. Just like my initial trade in LOW, I established a
short position at $65.30 in anticipation of LOW selling off below today’s low
and filling in some of the gap from Fridays close. As it traded below $65.00, I
added to my short position at $64.94. I immediately placed a $65.10 stop on my
entire position. I began covering my short position at $64.70 all the way down
to $64.55.
If LOW tests this area again I will be looking to initiate a short if the
correct entry point presents itself. I will also be looking for LOW to go test
the resistance level at $66.29.
During the time I was trading LOW I also had a Level II open on HD. I simply
shadowed HD in my long and short positions at the same time I was establishing
positions in LOW. I will be looking to actively trade HD Tuesday as well.
Another stock I will be looking at Tuesday will be Agilent
(
A |
Quote |
Chart |
News |
PowerRating). Agilent
reports profits after the close Tuesday. It also has a live conference call
scheduled. If earnings are not in line with what is expected, I will be looking
for A to be very volatile tomorrow. I hope to actively trade all of the
opportunities that present themselves in Agilent.
Mike Kestler
P.S. In early December, I will
train 50 traders on how to daytrade and scalp the way I do. If you
are interested in attending, click here or
call 888 484-8220Â for more information.
Please e-mail with any questions
you might have at
mkestler@evotrading.com
Michael Kestler is a
full-time professional trader and managing partner for Evolution Capital LLC., a
proprietary trading firm. Mr. Kestler specializes in intraday trading of NYSE
listed stocks. Before founding Evolution Capital LLC., Michael began his career
on the floor of the CBOE. Mr. Kestler was previously a Mid-Cap and Nasdaq Market
Maker.
Â