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
Yesterday I was planning to sell PCX and DRYS today so that my account could be up above my initial capital. I saw this opportunity in early morning but I didn’t act on it. I was expecting more. Actually news already pointed out early morning that oil was continue dropping., It made sense that it would put pressure on energy stocks however I didn’t pay attention to it. I kept expecting a 4% bounce backup on PCX after yesterday’s almost 10% drop. It certainly wouldn’t happen when oil was continue dropping. I just didn’t sense the connection between oil price and energy issues. That’s definitely another lesson learned.
There is always ups and downs in a trading day and there is always opportunity to make profit. To train myself to make more right decisions than wrong is the purpose of the “Stock Trading Lesson Learned” category. I also watched Baidu today I wanted to trade on its call options and I set an order to buy its Jul 280 Call at $6. The price was set too low however. My account was down almost $300 at today’s closing price
 Account Balance 20090707 |
Account Balance Changes: -$272.80
In a previous post that I discussed whether technical analysis worked in stock trading I mentioned that Baidu’s price was going up simply because its price target was raised by Goldman Sachs. Looking at Baidu’s price now it stands at $304. If I brought its shares at that time I should have made good profit buy now. I didn’t buy it because Baidu share was too expensive and I can not follow my guidelines if I trade Baidu’s share and it happened that I was considering whether I was wrong not following guidelines. Because of the hesitation I missed an obvious earning opportunity.
Goldman Sachs was the major underwriter helping Baidu go public five years ago. Its opinion has been a major driving force behind the ups and downs of this stock. Next earning will be big because it is a good chance for the analyst to play a big game. Baidu’s valuation at this level is supper high compare to many other stocks. If Baidu miss analyst expectation it can trigger a streak of downgrades and Baidu’s price could be pushed back to $220 level. If they beat expectation the stock may go up a bit say 10% to around $330 and still analyst other than Goldman Sachs will downgrade it using the excuse of high evaluation. I am thinking may be I should watch out for any shorting opportunity after the next earning report.
There is still a long way to go though.
I have know for long that the world financial markets tend to echoing each other and ADR issues have the tendency following its home market performance but I hardly pay attention how much the world market went up yesterday.
I just found out that China and Hong Kong index went up almost 4% yesterday. Japan went up 1.63%. Most Europe market went up 3% yesterday. For Baidu which is a high beta stock usually the percentage it went up or down will be bigger then the index. In fact its change is usually two times of the Nasdaq or its home market.
So I don’t understand why I took a short position this morning when the market was up only 100 point (DIJ). That was 1.3% only. And I don’t understand why I took the short position on Bidu when it was up only $9 which is 3.5%.
First I was wrong on taking short position. Second I was wrong on taking the short position before the market running out of its potential today. Third I was wrong on taking the short position on Bidu and fourth I was wrong on breaking two of my guidelines. I didn’t think twice the probability of a better entry point. I have doubled my initial bet of on a trading day.
What a messy day. Should I take lost right now?
I tend to win small but lost big. Is that a typical day trader’s fate or just me? I can not defy the temptation of the surprise gain. And of course I miss judged the market. The US market opened higher following the world. I thought the market should be trending down during the day because of the GM bankruptcy news. So when BIDU jump $9 at opening I thought it was a good opportunity to short. I took a short position at $272. I was so wrong and when it went up to $279 I increased my short position again but it went up over $287. I lost $2500 currently.
The market hardly pay attention to the GM news. In fact it seems to be celebrating it. It almost wipes out my entire gain for the past month. Just as my trade on Wells Fargo wiped out my two months of gain for about $10,000 before I started this blog I feel history is repeating itself again. I am being punished for not being discipline.
I was not convinced that this would be a bull market so I frequently took the short side. Now I am convinced that life on the long side would be a lot better. Another lesson I learn is that I don’t know how to stop. I should’ve cut my lost when BIDU went above $275 but I didn’t. I really don’t know what to do now. Let me know if you have suggestions and I would love to hear from you.
I am still holding the short position at the end. At market close my account lost $2,119.40
Account Balance Change: -$2,119.40
