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Tuesday, November 13, 2007

E*Trade

I had an awesome afternoon rally with ETFC having rode the express train from $4.05 to $4.64 before closing my intraday trading position. The day's high was $5.50 and it closed at $5.00. I took the profits and felt the rally had topped at $4.75 and would backtest $4.50, but I was wrong so I missed on another 80 cents. The "bankrupt" scare initiated by Citi Analyst Prashant Bhatia caused a 60% drop on 11/12/2007. Apparently the cash/share value is about $4.50 and the CEO was confident that they had enough money to cover a write down up to $1 billion. Also, takeover rumors swirling and strong premarket were strong. In sum, I expected a short covering bounce as the stock was oversold and the premarket gap-up signalled to me that the stock could have a very nice move in the day. I waited about 15 minutes after the open and got in at $4.05 with a stop at $3.95 which was perfect with support at $4.00. The bid sizes were incredibly huge in comparison to the ask sizes which was another indicator of a big move up. After the retracement from the day's highs, I decided to repurchase a position, albeit smaller, to hold overnight as a swing trade. I'm expecting a move to at least $5.50 and hopefully a breakout to most of the gap up to $8 which was left on Monday. Of course, another belly up comment from the financials overnight could hurt me and that's why the game is to limit risk. I'm setting my stop at $4.85 and will move it up accordingly. After hours has E*Trade at $5.24.

A lot of traders had predicted this short covering rally after 4 straight days of hard selloffs. I got caught yesterday trying to catch falling knives in JASO and TSL as both support levels at $50 were smashed without much of a battle. I also tried a bounce play at their moving averages, but their were no bulls in sight. Typically the 200 dma is strong support/resistance. Too bad it didn't hold true in these stocks. I got frustrated and was trading a bit emotionally at the close expecting a rally into the close, but the opposite happened and I lost even more.
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