Stock Traders Blog

When I find comments on yahoo stock board compelling I tend to remember them and see if they can prove itself true down the road. Here is one I found

I think Financials just want to stay afloat until the second quarter so they can hide behind their inflated earnings. But they will have to show their hand within the next two to three weeks or so to offer investors some guidance. If that guidance is cloudy, I believe financials will sell off before the 2Q earnings come out in Mid-July onwards.

I expect the 2Q earning statements to be very confusing and investors might take some time to digest them as they try to determine what are true profits and what profits obtained from the mark to market accounting rules. If investors do quickly react to the ‘positive’ news and jump in , financials will go up until investors wake up and notice they have been duped or have misinterpreted the earnings and will sell off.

Point is financials are not going to be truly profitable for a long while. Call me a short if you want but these are facts. Credit defaults are on the rise, foreclosures are on the rise, job losses continues and now interest rates and gas prices are on the rise.

Original is from this thread:
http://messages.finance.yahoo.com/Stocks_%28A_to_Z%29/Stocks_B/threadview?m=tm&bn=1903&tid=1025357&mid=1025357&tof=-1&rt=2&frt=2&off=1

I tend to believe what it says here as the accounting rule changes really smog the finanical picture of the Banks. As I mentioned before the only indicator that the banks are back to normal is that they start increasing dividend payment. I guess that is still one or two quarters away for the banks that are able to repay TRAP.

I recall one of the small banks that I trade on OZRK. It seem to me a very well managed bank. It recently come down a lot because of a real estate loan went bad. But looks like its resistent is at $20 ~ $21. I want to remind myself that its current price may be a good entry point. But again the volumn on this stock is quite low.

It is the third day I hold the short position of Bank of America. I never hold a shorted position that long. The last record I held a short position was on Wells Fargo. I held it over the weekend for two trading days. I don’t feel comfortable holding short position for long as I know very well the potential lose being on the short side is unlimited.

I threw towel and took lose on Bank of America covering 2000 shares of short position at $13.30 and losing about $1600 on that trade. Frankly I was thinking about to go long on BAC today. Because I feel it still has momentum. Its price didn’t go down as much as many other finanical stocks today even after a big running up. Basically I dare not to be on the short side unless I find the price is extremely outrageous. It is the third big lose I got by being on the short side and I really don’t want that happen again. I was looking at a few stocks to long on. BAC, USB, WNR, and ATP. I am still holding a sold put position on USB and so I don’t want to long on it again. I want to see how the options work out on expiration day which is this weekend. If it works as expected then my account should go up $300.

WNR and ATP’s current price are all below their recent secondary offering prices and WNR even got an upgrade today. But WNR didn’t react positively so I decided to buy 1000 shares of WNR in hope that it will react to the upgrad tomorrow. If the market goes netural tomorrow I bet WNR will be back above $8.50. From the graph looks like the $8 is its support. Hopefully that will work out.

My account balance is currently below $30,000 which is my revised initial capital

Account Balance Change: +$700.12

According this article Bank of America Announces Exchange Offer For Certain Series of Preferred Stock, the owner of certain Bank of America prefer share will have the choice to convert their shares into common shares by June 24, 2009

The number of shares of common stock issuable for each exchanged depositary share will be equal to this consideration amount divided by the average of the daily per share volume-weighted average price of Bank of America common stock for each of the five consecutive trading days ending on and including June 22, 2009 (the second business day prior to the scheduled expiration date of the exchange offer). Bank of America will announce this common stock average price no later than 9 a.m., New York City time, on June 23, 2009.

One of the conditions of the exchange offer that must be satisfied or waived is that the common stock average price be $10 or greater.

I am thinking starting tomorrow the price of BAC will take into effect for the prefer-to-common share conversion. For Bank of America share the coming five days is probably going to be a battle between the prefer and common share holder? I think the prefer share holder certainly want to push BAC price down so that their prefer shares can worth more common shares. I am not sure if that make sense. The big prefer shares holders may be very motivated to short Bank of America and bring the price level down

I post my previous post on yahoo stock board and get a few comments.

http://messages.finance.yahoo.com/Stocks_(A_to_Z)/Stocks_B/threadview?m=tm&bn=1903&tid=1023908&mid=1023908&tof=8&rt=2&frt=2&off=1

I was called stupid and idiot. I don’t really mind that. What do you expect to see on yahoo stock board anyway? I do stupid things in my life from time to time. And one of the reason I set up this blog is to remind myself how stupid I was and how to avoid doing stupid things again. It will not only serve that purpose on my stock trading it will also serve that for my other aspect in life.

A decent investor may find that I am crazy trying to be a day trader. In fact day trader was a synonym of gambler or loser to me before. Because the majority of them losing money however everyone of them was trying to talk like a sure winner. Why I am still day trading because there are real winner out there and I want to learn to be one of them.

Probably you don’t want to read an idiot’s blog but I hope you can keep reading it and keep coming back. Because just like everyone’s life my blog is also a box of chocolate you never know what are you are going to get out of it.

I really start feeling panicking about my 2000 shares of short position on Bank of America. It is for sure a lost deal. When I took the short position I thought big bank’s movement should be somewhat in tandem. Some may behave wild but will not be too far out of line. I felt safe to short BAC when I looked at how USB behaved the day before. However Bank of America seem to negate what I believe. The major big banks stock price almost stayed at where they were a couple days ago but Bank of America shot up 10% yesterday and then 5% today.

Will it Move up another 5% next Monday? Probably if there is another upgrade on Monday which I think would not be impossible. Because major staking holder are seeming working with the investment bank and the media to pump BAC’s price up. If there are no upgrades and if the market is neutral then I believe it will full back 5% after investor have a weekend to think about BAC’s recent price movement. New investor may not be willing to get in at this level and some major holder may take this opportunity to take profit and buy others banks that has a clearer picture than BAC. If I am holding Bank of America I would’ve sold it and buy USB already. If the market tank for reasons like Bond jittering then BAC’s price can be down more. Of course there is possibility of the whole bank sector going up another step. That is something I really don’t want to see on Monday.

Monday will be my third day of holding this short position. I just hope I don’t have to lose that much on this deal.

Bank of America keep getting upgrades from analyst and its stock price keep going up. My lost keep increasing. I really don’t know what it is going to be like next Monday. Yesterday I regretted that didn’t short more at $13.20. Today I felt I was lucky that I didn’t do that. When Goldman Sachs and Morgan Stanley upgraded Bank of America their target price was too far out of line and nobody really believe into it. But it doesn’t matter what BOFA’s fair value is if the same view is repeated multiple times by different people then we find it is easy to believe into.

In other words this really tells us no body really understand how much Bank of America worth and no body really understand its book. We just know that the majority of the people looking at Bank of America and believe its price will go up and up. My lost increase about $1,300 more and my account balance is way below its initial value of $30,000. I believe a big pull back will happen sometime next week I just don’t know at at what price the pull back will happen. I feel the chance it going back to $12.50 is pretty small now.

Again it is the fault of taking short position in the first place.

Account Balance Change: -$1310.00

It was a wild ride today with Bank of America. This was the day I felt would definitely come and this was the day I was expecting for when I bought into Bank of America. Unfortunately I missed it and I missed it too hard. If you were following me you know that I brought 1000 shares of Bank of America yesterday at $12.06. I mentioned that I felt the upside momentum of this stock. But I sold it too early this morning at $12.23. After I sold it I quickly jumped into a short position at $12.43 and later increased my short position at $12.58. For the rest of the day I was carrying 2000 shares of shorted BAC and watching my account balance going down when BAC price was skyrocketing

Thoughts About Taking Suggestion:
All kind of wild thoughts came into my mind with the wild ride of Bank of America. I thought I shouldn’t have got up so early. If I gave myself more time to sleep I could end up making a profit and at the same time I could have a better sleep. Too bad I followed Rpena’s suggestion. =) However when I sold my shares too early I thought it was too bad that I didn’t follow Rpena’s suggestion. If I took the suggestion I wouldn’t take the short side today and ended up with a lost.

There were three reasons that I chose to sell for a small profit. First, BAC didn’t react well to the upgrade in pre-market. Its price just went up a little in pre-market and I thought that was it. Second Repena reminded me there was a 30 year Treasury bill auction today and I thought it was not going to be good. Again it was Rpena’s fault. =) Thirdly I felt I should follow my guidelines. Of course I know I shouldn’t blame anyone for the action I decided to take. I felt I wasn’t a mature trader and Rpena is far more experience than me.

Thoughts About Recouping Lost:
My wild thought went on and I found today’s Bank of America was very much like Wells Fargo on the day when I lost $10,000 trading it. That was the day after the government announced the stress test results and Well Fargo announced its secondary offering to raise capital at $22 a share. I increased my short position two times on Wells Fargo on that day causing me a big lost. Today I dare not to increase my short position on BAC for the third time. In fact when Bank of America’s price jump to $13.19 I was about to click the button to insert an order to short 2000 more shares but I didn’t when I thought about the Wells Fargo trade. Later on I regretted I didn’t do it when I saw BAC closed under $13.

My thoughts went on about selling 100 contracts of BAC June 12 Put at 0.22 to recoup my lost today. That was only 100*100*0.22=$2,200 involved. But what if BAC price drop under $12 next week say to $11.50? I could lose more than $5,000. So I sold 20 contracts instead. That helped a little bit.

Thoughts About Lesson Learned:
Now I am pondering whether there are some lessons I learn today? I really don’t know. Because I found the lessons I learned are seemingly more and more contradicted with each other. I thought one lesson I learned out of today could be that I acted too early in the trading session. I should’ve waited to act till the latest market hour. But this was not always valid though. I was thinking about this post, “I Have Got to Treasure Selling Opportunity”, in which I could make money if I acted early.

Another lesson learned could be I got up too early and I should just take it easy and have a good sleep. I am not sure if that was a good lesson. The third lesson I thought about is not to panic and close a lost postion in a hurry and wait at least three trading days before you throw towel. I actually wanted to write about this for a while but not sure if that was a good one. From my past lost experience if I were able to hold the losing position long enough say three days I could at least see an opportunity to close it without lost. I found that was right for my previous two big losts.

1. Trading Out of Discipline and not Knowing How to Stop Caused Big Lost and
2. Wells Fargo Is Over Valued at $25.70

I am not sure if this is going to be right this time. Anyway we will see if BAC can get down to $12.50 in a couple days which was my average.

Another lesson which should be positively right. Life is much better on the long side. This is the third time I lost big on taking a short position and I want o highlight this. I should be very very careful about the entry point when taking a short position

I lost about $400 for the day and am holding USB and BAC puts and 2000 share of shorted BAC at the moment. The lost on shorting BAC is more than $10,00 but off set by the gain on the USB and BAC puts and gain on previous long position on BAC

Account Balance Change: -$405.85

My Account was up about three hundred dollars. I sold VRSN at $19.37 at market open. I sold it too early. It ever went up to above $19.80. But as I mentioned in my previous post Verisign was down because of a pricing fixing law suite and I believe the law suite has a lot of merits. If it went down more I wouldn’t feel surprise. I am glad I make money on that deal.

I made some profit on trading Bank of America mostly by shorting it above $12.30 and covering it in $12.20 level. I feel Bank of America wanted to go up for another step however its peers (USB, WFC, JPM) didn’t want to. And that eventually drag Bank of America down. In fact Bank of America was ahead of its peers most of the day. At the end I was holding 1000 shares of Bank of America at $12.06. Bank of America was down really fast in the late session. When I set up the order to buy BAC at $12.06 I was thinking BAC was very strong during the day and if it went down to 12.06 it could quickly went back up. But it didn’t went backup and stayed closer to its peers.

I feel the upward expectation on Bank of America is still high and mostly it will open higher to $12.10 or above in pre-market tomorrow. If economic data released tomorrow is not too far out of line I think the bank sector should rebound a little. If all data beat expectation I feel Bank of America can jump ahead of other banks again. The gain shown on my account today included gains on the USB puts I did not close yet. I mean to hold it pass the expiration date which is next weekend and pocket the total proceed of $450. Excluding the gain on puts my profit was about $240.

Account Balance Change: +$343.09

Today the government announced some of the big banks that were allowed to repay Trap. I thought the banks would take that as an event to push their price up another step. But it turned out nothing happen. On the day when the government released the stress test results the market was like a wild horse. Today I feel it was like a turtle. Sometimes the market just behaves very calm and logical. It didn’t make sense the way that the market reacted to stress test results then but it made sense to me the way the market reacted to the government’s announcement today. After all we pretty much know which banks are able to repay TRAP.

I wanted to short Bank of America this morning but I wasn’t sure if today was going to be another wild day. I did not dare to do that. Thinking back I should have looked at the volume. If the volume is light then it is not going to be a big day. I wanted to take a long position but I didn’t feel BAC worth that much. After all it was not one of the banks that were able to repay TRAP. It should be categorized as a weaker bank.

In searching or a tradable stock I found Verisign. It was involved in a price fixing law suite and its stock price dropped 20% in a couple days. It seems to me that $19 per share is its support line so I got in at $19.07. I am losing money right now.

Frankly I think the law suite has a lot of merits. Verisign owns network solution Inc which monopoly the domain name registration business. I didn’t understand why the market which was installed with anti-monopoly laws could allow a company like network solution Inc operated as monopoly in the first place. If you have an explanation of any kind I would love to hear it. I had the thought back in the DOT COM era that network solution Inc was a monopoly and would be suited. Basically everyone has to purchase domain name from them. I didn’t expect to wait till that long to see a law suite. That is one of the reasons I want to take a shot a VRSN. After all it down 20% and loss $1 Billion market capitalization already

Account Balance Change: -$79.49

I could not access my yahoo account. I reply some spam email and yahoo has decided to disable my account. It doesn’t work to talk to them so I changed my contact email to stocktradersblog@gmail.com. feel free to contact me.