How 2 stocks give multiple trading opportunities

When I came in on Monday morning,
I was torn on market direction. With oil prices spiking higher and
Tropical Storm Rita coming into Florida, I was leaning short. With the FOMC
meeting on Tuesday, I was leaning a little long.

Well leave it to the news to present me with some great
trading. Nike
(
NKE |
Quote |
Chart |
News |
PowerRating) reported better-than-expected earnings before the
NYSE opening and seemed to have caught everybody leaning the wrong way into the
report.

It was indicated to open with a large gap higher from
Friday’s close of  78.46. When it finally opened at 83.61, a gap of $5.15
cents (6.5%), I  felt that the best side of the trade was short. At this
point I was not getting any help from OpenBook as the bids and asks were all
large and deep. If you were watching NKE this morning, you know that I took a
loss as the price continued to move higher for the first 20 minutes with no real
pullback. I covered for a .40 loss and waited for the price to settle down.
Again, OpenBook was giving little guidance at this point with too many large
bids and offers to show real support and  resistance. Finally the price
stopped moving up and the volume began to decline as we moved through 85 to a
high of 85.25. The bids and offers started became smaller and more meaningful in
terms of support and resistance. I made some of my losses back when the price
traded below 85 and I went short. I covered at 84.60 and 84.25. I had my most
significant money winner when the stock broke a support level at 84. It had
traded down to 84 on 2 adjacent 15-minute bars and I had taken small 
losses because I had been short both times and NKE rallied both times. When it
came back to the 84 number the 3rd time, OpenBook proved its worth as large
offers came into the stock and price fell for the next hour and a half. I traded
back and forth with a core position short until 82.50. Sometimes it is the
second or third mouse that gets the cheese!

Around 11:40 this morning, Tyco
(
TYC |
Quote |
Chart |
News |
PowerRating) popped up on my scanner as a
Crossed down  Market. TYC was crossed down to $29.00 on ECN’S but I
realized through  the tape that there were a number of Buyers at 29.25. I
quickly bought  shares at 29.15 through the ECN’S and exited immediately
maket to the NYSE. I captured in a .10 profit on 5000 shares in a matter of
seconds.  Soon after this TYC was crossed down again so I felt that with
all of  this selling pressure TYC could not continue the support at 29.25
and I  was able to get short at 29.27. It was at this point that my news
reader  announced negative news pertaining to TYC. The negative news on TYC 
backed up what I was identifying in the tape and I was able to get short more
shares at 29.21. I started covering some of my position at 29.10 and was out of
the market when he started printing size at 29.00. When TYC  failed to
break $29.00 I went long for 1 trade and took a small  profit, exiting the
trade at 29.15. I was able to take advantage of TYC while it was moving
aggressively and quickly and establishing a position through ECNs.

The point of this is that you must continue to keep
trading even after a losing trade. With a fast-paced style of trading, I
recognize that I am going to have losses. Sometimes large losses! If I am
trading a volatile stock with plenty of range and liquidity, I will trade my way
back into profitability as the trend finally establishes itself. Please e-mail
me if you have any questions about this article or the tools that I use daily
for my trading ideas.

Mike Kestler

mike@evotrading.com