Stock Traders Blog

I thought about a few trades yesterday and today but as I said in my previous post I lost confidence about my judgment lately so I didn’t make the moves. It turned out that if I made the move I would make good profit. I thought about shorting 2000 shares of Bank of America yesterday after market close at $13.40 but I didn’t do it. I thought about buying 2000 shares of BAC this morning when it dropped to 13.04 a couple times but I didn’t do it.

Now I am thinking about shorting 100 shares of Baidu at $318. As you see Google dropped $14 dollars after market close. It is like selling on the earning report. Baidu usually follow Google or the Chinese market. So I kind of think Baidu will drop and will drop $10 at some point tomorrow. I am still thinking about the move. I will have the chance to short it till 5:00PM

I post the same question on Baidu board. http://messages.finance.yahoo.com/Stocks_(A_to_Z)/Stocks_B/threadview?m=tm&bn=22855&tid=273994&mid=273994&tof=6&frt=2. Seems like no one really have the same feel. I let go that thought again.,

Like I felt yesterday Intel’s result dragged up the market. I lost on the Baidu put and I sold them. I traded on GCI (GANNETT CO INC) today. I noticed this stock in my trading tool’s news window. I felt this company was kind of under valued even at today’s closing price but I didn’t follow this company for long. It reported 2nd quarter profit of $0.46 a share and its stock price was at $4.50 at close. Its forward P/E is quite low. I have no confidence on my own judgment any more so I am not going to keep it. I feel I just need a break. After more than a month of hard work I am still at loss. So I may not be trading for the rest of the week.

Transaction 2009/07/15

Account Balance 2009/07/15

Account Balance Changes: -$260.59

I covered my short position on Bank of America and brought some Baidu Jul 290 puts. I felt I took the wrong side. I felt the market turn bullish after Intel report better than expected earning. Technology stocks may go up tomorrow and so will Baidu. Baidu likes to follow Google or the Chinese stock market as far as my observation goes. Looks like it is not going to go down either way. Google will report earning on 16th. My put option will expire on 17th. Looks like the chance I make profit on this put is low.

Tansaction 2009/07/14

Account Balance 2009/07/14

Account Balance Changes: +$18.72

Bank of the Ozarks is one of the banks I followed. It is a very small region bank comparing to Bank of America. You may read Bank of Ozarks business profile here if interested. I have long believe that Bank of Ozarks is one of the well managed banks that is financial is much healthier than its bigger peers. Bank of the Ozarks reported earning today. So lets see if that believe still holds and see if we can get some hint about the earning of Bank of America from Bank of the Ozarks.

It reported record earning $9,501,000 and $0.56 per share. 10.4% higher than the same period last year. Q1 2009 had profit of $9,286,000 so Q2 was a bit higher. I summarized what was the change compared to Q2 2008 or Q1 2009.

• Loans and leases were 0.7% declined from last year
  
• Deposits 7.6% declined from last year
  
• Total assets 3.6% declined from last year
  
• Common stockholders’ equity and Book value per common share increased about 23% from last year but slightly decline from Q1 because of an unfavorable change during the quarter in the Company’s mark-to-market adjustment for unrealized gains and losses on AFS investment securities.
  
• Net interest income for the second quarter of 2009 increased 28.2% but slightly declined from Q1 2009
  
• Non-interest income for the second quarter of 2009 increased 306.9% to $22,610,000 compared to $5,557,000 for the comparable quarter of 2008. Q1 Non-interest income was about $9,000,000. his large increase in non-interest income was primarily attributable to significant gains on sales of investment securities during the most recent quarter.
  
• Service charges on deposit accounts were $3,047,000. Q1 was about $2,800,000. 2.7% increase from last year
  
• Mortgage lending income was $1,096,000 in the second quarter of 2009. Q1 was about $900,000. 72.3% increase from last year
  
• Trust income was a record $751,000. Q1 was about $650,000. 19.4% increase from last year
  
• Net gains on investment securities and from sales of other assets were $16,487,000. It was $206,000 last year and about $4,000,000 in Q1 2009
• Non-interest expense for the second quarter of 2009 was $17,945,000. 33% increase from last years. It includes $1.3 million for the special assessment levied by the FDIC on all insured institutions. It was about $16,000,000 in Q1 2009
  
• Nonperforming assets as a percent of total assets increased to 1.37%. It was 0.59% as of June 30, 2008 and 1.17% as of March 31, 2009
  
• the Company’s provisions to the allowance for loan and lease losses totaled $21.1 million. It was $4.0 million last year and $10.6 million the first quarter of 2009.
  

The source of this data is from
businesswire Bank of the Ozarks, Inc. Announces Record Second Quarter 2009 Earnings

What I saw from this summary is that business was about the same from Q1 to Q2. Provisions to the allowance for loan and lease losses almost doubled form Q1 to Q2. However Non-interest income, mainly the gain on sale of investment securities and other assets was able to more than offset the provisions for loans loss.

I don’t see this earning report a good news because the record income was not generated from its day to day business. Loan loss provision has huge increase and it doesn’t look good for the next quarter with employment rising. However stock price of OZRK went up 2.4% after report come out.

I kind of think we will see the same on Bank of America. Like the analysis I did on this post, “Bank of America Earning Forecast and Financial Statement Analysis”. Business may not have significant improvement compare to Q1. Loan loss provision will be huge. Mark to Market change is not favorable. And Bank of America has to rely on gain on asset sale to show a profit and most likely this gain is not able to offset loan loss provision and MTM changes. So it will likely to show loss. Book value may slightly decrease from last quarter.

Before I used RSI - Relative Strength Index as a buy and sell indicator I didn’t really understand what it means. Now I lost money on using it and I started to dig into its meaning. Relative Strength Index is a technical momentum indicator that compares the magnitude of recent gains to recent losses in an attempt to determine overbought and oversold conditions of an asset. RSI is calculated using this formula, RSI = 100-(100/(1+RS)). The RS in formula is the ratio of the average ups in the past time interval divided by the average downs in the past time interval. The time interval can be a number of days or a number of hours.

Now I understand that and I don’t think it will be very effective. It could be more effective considering the recent news on the stock abd the over all sentiment of a sector. Well I guess it is easy to say and the hardest part is to turn it into gains.

Today is a big up day especially for the financial sector. Meredith Whitney upgraded Goldman Sachs dragging up the whole financial sector. All the big banks were up 6% to 9%. That was a lot in a single day for one analyst call. Of course it was not all attributed to Meredith Whitney. But she did choose the right time to show off her power. I on the other hand traded in and out of Bank of America and lost almost $250. At the end of the day I hold 2000 shares of short position on Bank of America. I feel uneasy at the moment because that is a lot of shares and I will lose $200 dollars for every 10 cents if BAC is going up. I take the short side most of the time today because I bet the big bank’s earning is not going to be as good as the market expected especially for Bank of America. Meredith Whitney didn’t upgrade any other big banks except for Goldman Sachs. She said big banks in general were in better shape. That is something we have already known however.

I made a lot of trades on Bank of America. I don’t usually make so many trades in large amount in a single day. I did that today because I found a technical indicator in my trading tool seemed to be pretty effective for the past couple of days and I wanted to see if it really worked again. The technical indicator I was talking about is RSI (Relative Strength Index). See the bottom part of the following graph. If it is over 70 then it means the stock is over bought and if it is under 30 the stock is over sold. I short sold 2000 shares at $12.80 when RSI was above 70 but it kept going up and it was above 75 at the end. Today’s trading pattern looks familiar to me. Short covering pushed up stock price at the end of an up day. I lost on the same pattern more than a couple of times by taking the short side too early. Looks like I am going to make the same mistake again.

The following are the transactions I made today.

Tansaction 2009/07/13

At closing price I lost $242.29. BAC actually went up to $13.07 in after hour so I lost $160 more already.

Account Balance 2009/07/13

Account Balance Changes: -$242.79

Yesterday I thought the University of Michigan Consumer Sentiment Index wouldn’t have a good reading today. It turned out to be true but the market didn’t drop as much as I expected. I was thinking the DOW would drop over 150 points at some time today and BAC would test the lows of yesterday’s $11.30 when I saw future dropped more then 70 points before market open. I was busy during the day and I set an order to buy BAC but never get executed. Close to the end of the day I took a short position on BAC in hope that a selling attack would happen but it never happened. I noticed that JP Morgan dropped a lot. It is going to release earning next Thursday. I originally though BAC is going to be the first big Bank to release earning on next Friday but JPM is one day ahead of it. And the first big Bink to release earning is actually Goldman Sachs which is on next Tuesday. So there will be a lot of earning to watch next week.

At the end of today I pull in about $30 gains on the BAC trade. No gain is too small to have.

Stock Transactions 2009/07/10

Account Balance 2009/07/10

Account Balance Changes: +$29.71

There were a lot of companies that have issued common stocks to raise capital lately. Many of them are trading below their offering price right now. I want to list them out here. I just think that in case the market rebounds these issues may be among the ones that will rebound the most.

They are either energy or financial stocks. Let me know if I missed any one that you think is worth to look at.

Yesterday I kept my 800 shares of PCX (patriot coal) in hope that it would rebound when oil price rebound. In early today there was report that oil price was held stead above $60 a barrel and PCX was up at around $5.45 not long after market open. The DOW was up 40 some points at the time. I thought that was it and the rebound of PCX was disappointed to me. I was eager to find a chance to sell PCX. I sold it at $5.47 early in the morning. Looked at how it closes. PCX was at $5.63 and the Dow was only up 5 points. So once again don’t under estimate the tie between oil price and energy stocks. Energy stock can be affected by oil price more then by the general market. So this is a bad move I made today. I brought these 800 shares at $5.76 a couple days ago.

I did make a good move. I bought some Bidu (Baidu) puts and sold them later net about $120. So my total gain today is about $250. Not a lot but my account is back above my initial capital of $30,000. I have learned to be happy with small gains and I love this thinking “Go slow. Preserve capital. Learn the fundamentals. Achieve consistency”

Account Balance 2009/07/09

Stock Trades 2009/07/09

I feel the overall sentiment of the market is still bearish. The market is waiting to see how the financial sector was doing in second quarter and is very cautionary. I bet the University of Michigan Consumer Sentiment Index tomorrow will not have a good reading since unemployment rate is still going high. And I feel good holding only cash.

Account Balance Changes: +$259.67

Today is a perfect trading day for day traders. It is perfect because it has multiple ups and downs and that is what a trader is looking for. If a trader can master all this ups and downs then great profit can be made. But I didn’t make much profit. The market was very nervous about Alcoa’s earning and I was very nervous about it too. My nervousness made me avoid two short attacks on BAC. I bought 1000 shares of BAC at $11.95 and sold them at $11.98. I later bought 1000 shares of BAC again at $11.78 and sold them at $11.84. This two trades only net me $30 in total. I sensed the nervousness when I sold them but I dare not to take the short side. My nervousness also make me miss the big run up close to the end of the trading day. I didn’t regret for not taking the short side but I regret for not buying into BAC again when it drop below $11.50. I sold DRYS (Dry Ship) for a profit and I trade on PCX(Patriot Coal) to make some profit too. At the end of the day I still hold 800 shares of PCX and my account is up $134.61. Not a lot but I feel good that I was able to avoid a loss on trading BAC

Stock Transaction 2009/07/08

Account Balance 20090708

BAC Graph - Shows where the two BAC trades were taken

Account Balance Changes: +$134.61