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
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.
