Archive for November, 2006

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Takin’ It All to Vegas

I’ve been a Mayall fan for years, mostly the old 60s stuff and Spinning Coin from the early 90s, but a fan nonetheless.

Yesterday (ironically, during the meltdown), I heard this song from Debbie Davies’ album Key to Love: A Celebration of the Music of John Mayall on the digital blues channel. Debbie wrote this particular song, and I’ve never had something strike me as so funny and eerily appropriate. Tell me you haven’t felt like this sometimes:

I went down to see my stock broker
I said, “Cash me out and gimme the rest”
I took a taxi to the airport
I bought a one-way ticket headed west

Takin’ it all to Vegas
Takin’ it all to Vegas
You know I’m takin’ it all to Vegas
Can’t take Wall Street no more

You know, losin’ so much money made my spirit sink
If I lose in Vegas, ‘least I get a free drink
I’m goin’ to Vegas
Yeah takin’ it all to Vegas
You know I’m takin’ it all to Vegas
Can’t take Wall Street no more

Now the crooked execs got their hand in the till
They say they gonna quit it, but I know they never will
Now a blackjack dealer will never cheat or lie
‘Cause he’s being watched by the eye in the sky

Whoa, Vegas baby
Woo-hoo, I’m goin’ to Vegas
Well I’m takin’ it all to Vegas
I can’t take Wall Street no more

You want to get rich quick, and now I know
Down on Wall Street you can’t even get rich slow!
Goin’ to Vegas
Yeah, yeah, yeah I’m goin’ to Vegas
Well I’m takin’ it all to Vegas
I can’t take Wall Street no more

Debbie Davies, “Takin It All to Vegas”

 

On Tilt

As per the previous post, set up my great 3rd monitor. Got the best night’s sleep in weeks, maybe months. Got up this morning (my day this week off from the ICK! regular job), made coffee, fired up the Command Center, watched the pre-market action.

Then, insidiously and without warning, it happened. Made a trade. Small loss. Routine.

Market reversed… caught it, ha! Made another trade, took extra-large position because I was feeling smug. Market went up, but the stock went tick, tick, tick, down, down, down. Sold half the position at a loss. Back up a little, then down, down, down. Sold the other half.

Went On Tilt for the rest of the day. Click that link and read it. I’ve said professional trading is like professional poker. That link was me today. Fully On Tilt.

Now this evening as I’m mopping the blood up off the floor, I’m humbly going back to What I Know. Run an Advanced Analyzer scan on every stock that finished significantly up or down. Study daily, 30min, 15min, 10min, 5min, 3min, and 1min charts of each of those stocks. Take notes with a pen and paper. See if there’s anything new happening, or if I just wasn’t paying attention to my old notes. Where are they, anyway? Under a pile of bills and other papers on the desk or the bookshelf, somewhere. How long since I’ve actually looked at them? Yeah, I can recite them all, but how long since I actually read them?

I read Trader-X’s post this weekend, and thought, yeah, he’s so right. Well, hell.

Been trading a long time. Been here before. Let’s take a breath and collect our thoughts. Thanksgiving week’s a good time.

I’ve been neglecting the personal site since June. Think I’ll work on it a bit. Owe that to Da Girlz. Hits here will decline. Ad revenue’s bound to fall. ;-)

 

A Pioneer Passes

Milton Friedman, my Favorite Economist of All Time, died today at 94. A close friend gave to me as a gift just a couple of months ago a copy of Freedom to Choose signed inside the cover by Friedman in 1982 with a cute little note ending in “Your good friend who you like to eat with, Milton Friedman.”

The following lines are from an excellent synopsis of the man and his work published in the Financial Times today. I’d highly recommend the entire article:

Both his admirers and his detractors have pointed out that his world view was essentially simple: a passionate belief in personal freedom combined with a conviction that free markets were the best way of co-ordinating the activities of dispersed individuals to their mutual enrichment.

It was in the late 1950s and 1960s that Friedman developed the monetarist doctrines by which he became best known. He treated money as an asset. The public desire to hold this asset depended on incomes, the rate of interest and expected inflation. If more money became available the effect would be initially to raise real output and incomes, but eventually just to raise prices more or less in proportion.

Reading Freedom to Choose today is astounding because Friedman’s observations, especially regarding Social Security and other entitlement programs, are even more relevant than they were then, and often you forget the work is 25 years old until you run across a reference to President Carter or Nixon or the then-recent 1973 oil crisis.

I rant (at every opportunity) about the Fed’s unprecedented flooding of the economy with new money, and how anyone celebrating the string of “Tame PPI” reports is severely misled, and will be caught off guard by the coming economic troubles. We should be fighting runaway inflation, and the fact that we’re not is very troubling. I believe that because of Milton Friedman, and I think in the future much of his work will be looked back upon as prophetic.

 

Trading Tools I Use

Lloyd (Mr. Flatwallet), in a comment to a previous post, asked what tools I use for scanning/trading. I started replying, and the comment got so long (what, me, full of hot air?), I decided to put it up as a separate post. Here ’tis.

…as for tools, they fall under my personal rule that I won’t pay $10 for anything stock-related unless I’m nearly certain that it will be responsible for making me at least $11. This especially applies to newsletters- a friend wanted me to subscribe to one that was $1200/year.. I asked, “And you’re sure it’ll make me at least $1201/year? And if he’s that good, why’s he selling overpriced newsletters with hocus-pocus mystery inside secrets?” (I’m not talking about a legit case like Fallond, who’s completely open about how he bases his recommendations, as well as disclosing their performance; I’m talking about “Subscribe Now! And we’ll tell you about the stock of a company which participates globally in the commodity technology financial business, and is ready for a Big Move! So Subscribe Now!)

Ergo (I’m gettin’ tired of starting paragraphs with “So”), I use various tools which all have one thing in common- they’re FREE. Most are premium subscription services that are free because I use Ameritrade, so if you don’t use AMTD, I’d say explore any “perks” that your broker offers in addition to the freely-available stuff on the internet. Here goes my list:

  • MedVed Quotetracker integrated with Ameritrade streaming data feed. I’ve never in my life touched a more customizable interface. How many million times have I thought, “If only I could do this with this chart…” Infinitely-variable bar frequency and chart periods (how about 13min bars on a 3hr 45min chart?), or setting the bar width in pixels so they’re not too skinny or fat for your visual preference, setting custom AUDIO alerts based on your hand-drawn trendlines, custom colors for every bar, line, trend, etc… Well, Quotetracker can pretty much do it all, it’s just a matter of knowing where to click. And even better, you can save the settings to use them later across a range of stocks. And unlimited real-time charts, just depends on how much monitor real-estate you have (I’m thinking of going from two 19-inchers to four).

  • Ameritrade Streamer Suite — the charts I used before quotetracker. Not as customizable, but useful enough for daytrading (although limited to 5 open charts at at time). Also free Level II (useless for me), free time and sales (very useful at times), real-time actives lists by volume or trades for last 1,5,30min, etc (set to “volume” and “1min” catches some nice block trades), streaming quote portfolios with custom alerts (kinda clunky to set and change on-the-fly, though)

  • Advanced Analyzer — this software used to be a premium piece called BigEasy Investor before AMTD bought them. It still very much has a 1998 feel to the interface, but it works great for end-of-day scanning on daily bars for potential swing-trade entries. After the data is updated (~1 hr after the close), you can scan the entire market for stocks that meet your criteria (RSI over 60, greater than but within 1.5% of 10ma which is less than 4% below 20ma, volume less than 70% of 30-day average, etc, etc, etc)[this is not an actual scan, just “for instances”]… you can start the next day with a very short list of stocks that you’re confident are good potential trades.

  • ProphetScan from Prophet.net. This free scanner gives me exactly what I need for my crop of daytrade candidates, both long and short- Lucky for me, as the free version only allows two saved scans. My “Long Daytrade” scan goes as follows:

    • Last Price between 15 and 100
    • Average Volume at least 300,000 shares
    • Virtual Volume at least 20% greater than average (see their site for an explanation of this one, very very handy)
    • Today’s Open at least 1% higher than previous close (i.e. a gap); also note that this is NOT a gap above the previous high, but the previous close.

    This scan usually gives me a list of 20-40 stocks, which I then pare down manually. Note that you typically must wait 10-15 minutes after the open for the results to reflect today’s list, so this is not of use if you trade in the first few minutes after the open. If things go well, by 1015-1025 EST I’ll have a list of 8-15 stocks that I end up watching for actual trade entries.

I’m seriously considering subscribing to Prophet.net, since I’m all John Galt-ish with my money and I think they provide services that are well worth the subscription price. I’ve only hesitated because the scanner is the only tool of theirs I use.

Otherwise, I pay a grand total of Zilch for the trading tools I use, so every penny they make me is an undefined return on my investment (little division-by-zero joke for the 7th graders).

Cheers.

 

Genentech (DNA) Example: Longer-Term Trading

In a comment to my last post, John W points out that DNA may not be a great buy-and-hold candidate:

Let’s say you get about 19 points in the next 5 years that takes it from today at 81 to 100. Thats about 20% which parses out to about 4% a year rough averaging - currently you can get 5.25% out of 6 month CDs

I’m not exactly sure where the 19 points in 5 years comes from (Genentech’s up about 300% in the last 5 years), but I agree with John’s conclusion. I think “buy-and-hope” is mostly a successful marketing phrase repeated at every opportunity by people who want you to give them your money.

I thought I was relatively clear that I was not recommending for anyone to run out and buy Genentech at the current level of 81, or any other stock at any level, based on anticipated increases in revenue or another fundamental measure. But I’m very grateful for observations such as John’s, because it helps to remind me of something I’ve said in past posts, which is that the market is an elephant and we are blind men, in that we can all look at the same picture and see it in completely different ways. I see a potential swing trade setup on a breakout, others see what they judge to be a low-reward candidate for a long-term position. That’s wonderful, because it’s what “makes a market,” and explains why some people are buying while others are selling.

I can honestly say that the concept of “5 years” when it comes to the stock market never crosses my mind. I can only think of two instances where I’d be in a stock for five years:

  • I get into a swing trade which proceeds to go in the direction of my entry for five years straight without ever hitting my trailing stop, for a multi-thousand percent gain. I don’t think that’s possible, but here’s to hoping!
  • I die with an open position, and my daughters don’t realize it for 5 years.

This really got me to thinking- if I had the patience to watch a stock over the years and stay in a position for months (I don’t), what would someone like me see in a stock like DNA? Of course I went directly to The Charts, and what I discovered was surprising.

Caution: This is total hindsight, and everything’s always easier and clearer in hindsight. But it was very educational for me, and hopefully some other folks will find it of use. I’ve tried to annotate each chart and describe what I see [tips hat to Michelle B.].

Let’s start back in 2003. Continue reading this post »

Avastin (Genentech: DNA) Sales - News From the Front

I’d like to share a tidbit with ya’ll about Genentech, and specifically, about Avastin sales.

I talk very little on the blog about my “regular job,” mostly because it’s not relevant to trading, but also because it’s in healthcare, and I try as hard as I can to avoid pulling out my healthcare soapbox. I tend to go off on tangents, but if I get started on that one I could write hundreds of pages and bore everyone to tears.

I’m a hospital pharmacist. I work for a “major medical center” with 4 hospitals locally. My hats include things like working in our surgery satellite pharmacy, our IV admixture and parenteral nutrition areas, drug research (our research dept has dwindled due to some internal politics), and usually 1-2 days a week, I’m the primary coverage in our Cancer Center when one of our “regular” chemo pharmacists is off. ISO 6 cleanrooms, gloves/ gown/ mask/ booties, and some of the most expensive drugs you can lay your hands on. With some of them, you can easily hold $100,000 worth in one hand. That’s mostly revenue being channeled to drug companies from the taxpayers via Medicare, with each stop along the way taking their cut. And that’s where my soapbox starts, so I’ll stop, and get back to the post.

Monoclonal Antibodies are all the rage in drug research right now. You can usually spot them by the “mab” in the actual (generic) name of the drug (infliximab, basiliximab, abciximab, e-i-e-i-o). Many of them act as immunomodulators, and along with the theory that many of our current chronic diseases actually have an autoimmune basis, have caused a paradigm shift in the treatment of things like asthma, Crohn’s Disease, and rheumatoid arthritis. (P.S. Stay on the lookout, much of cardiovascular disease has an autoimmune component as well, and cardiology is where the drug companies see BIG $$$.)

Genentech is a leader in developing MABs, and their cancer pipeline is very strong. Their drugs include well-known names like trastuzumab (Herceptin®) and rituximab (Rituxan®).

Bevacizumab (Avastin®) is the new kid on the block- it’s only been around a couple of years and has been mostly used for colorectal cancer. But anyone who deals with chemo (Avastin’s not chemo as in “cytotoxic antineoplastic” like cisplatin or fluorouracil, but chemo as in “used to treat cancer”- it’s actually an anti-angiogenesis drug) recognizes it immediately- it’s the one that routinely busts the purchasing budget. This drug is expensive with a capital EX.

Until very recently (i.e. the last couple of weeks), the vast majority of Avastin you’d see would be dosed at 5 mg/kg, or 375mg in a 75kg patient. Every once in a while there’ll be a 10 mg/kg dose, but they’re rare. Those doses have been the only approved doses for its only indication so far- metastatic colorectal cancer. Avastin comes in 400mg and 100mg vials, but we usually just buy the 400’s because we use so much of it already.

Now the news: You may have read that Avastin’s been approved for NSCLC. What you may not have read is that NSCLC is the most common form of lung cancer, the second most common cancer overall, and the most common cause of cancer deaths in the U.S.

So, we’re gonna use it on a very common cancer. That’ll increase sales. Yeah, but then there’s the fine print. The dose of Avastin for NSCLC is 15 mg/kg! The first few times I was in the “cage” (one of our cleanrooms) making chemo and ran into one of these new massive doses, my reaction would be WTF?, but on our usual double-check of our double-check, I’d see that the oncologist was using it for the new indication, so the dose was kosher. We’ll now be routinely seeing doses of Avastin well over 1000mg per patient.

The upshot - the use of Avastin will go up dramatically, because we’ve added an indication, and the dose for that indication is three times what it would have been for the previous one.

According to Genentech’s press release of 10 Oct 2006, sales of Avastin were $435 million out of total product sales of $1,941 million, in other words, a very significant amount, which means the increasing or decreasing sales of this drug can have a major impact on this big compay’s bottom line. I’m here to tell ya, they’ll be increasing.

What does this mean for our trading? Should I run out and buy DNA (Genentech)? Hell no! What are you, a fundamentalist? Leave the fundamentalism to Jerry Falwell and Robert Tilton (that video’s given him new life, no?).

Let’s Look At The Chart:

DNA

Where’s DNA gone in the last 9 months? Nowhere. What’s its 52-week range? 75-100, or so. Could we wake up soon with anti- drug- company “reforms” from the new congress? Absolutely. What if some new horrible side effect emerges with large-scale post-approval use of Avastin? Its revenue goes to zero and Genentech is defending lawsuits.

So why am I writing this? So that, in the more likely scenario that none of the above gloomy events occurs, Genentech’s revenue from Avastin will be accelerating very rapidly as its use for NSCLC expands. Avastin already has to be drop-shipped (i.e. directly from the manufacturer) in most areas because it’s so expensive, and we’re all having to vastly increase our already jaw-dropping inventory levels.

If the increasing Avastin sales begin to affect the chart, a break above 85-86 could provide a very nice trade entry. A nice, longer-term trade entry, not a few-day swing. This thing moves too slowly. Dust off your longer moving averages and weekly candles, and check up on this one from time to time.

 

Dollar At Inflection Point

Just a quick heads-up before I crash tonight. Long day at work, then 3-hr hockey game with the 4 daughters (well, the friend was hangin’ with us tonight, so we adopted her for the evening).

The dollar is at a critical level around 1.28-1.30 per Euro:

USD

If the big head-and-shoulders holds, we would break down (stronger dollar) decisively from here. Although the H&S is a major pattern, I just can’t see that happening. Leading Dems have been pushing to speed up the rate at which China revalues the yuan, so I can’t imagine the election results having a strengthening effect on the dollar, UNLESS there is some great fiscal restraint showing up really soon. Heh, not with our politicians, of either ilk.

If the H&S gets broken, and the dollar heads up thru 1.30 and 1.35 per Euro (i.e. weakens, which seems more likely from a fundamental perspective [did I just use the “f” word?]), it would actually make sense with our deficit, anemic growth, nothing but increased spending in the future, more pressure on China, etc, etc.

The rapidly-weakening dollar would show up, of course, in higher gold and oil prices and more expensive imports. Caveats to the stock market.

We’ll see the result of this multi-year setup within the next few days to weeks. Let’s not forget its profound effect on every facet of our lives, not the least of which is our trading.

 

URBN Block Trade Triggers Profitable Flip-Flop

A neat trade today that I’d like to post because it exemplifies something I mention quite often: the importance of considering volume.

Now after the post last night that I stayed up too late and drank too many beers working on (didn’t get it published till today- beer messes up my beautiful Southern grammar even more), you might assume this is one of the few good trades among the many so-so and couple of stinkers I took today. And you’d be right.

In fact, today was my “tradin’ day for the week,” off from the ICK! other job. I did some adding after it was all over, and arrived at this statistic: I traded more dollar volume today than I did my entire first five years of trading combined! Of course, my first years were the “trade options with a $2500 account” days, so it won’t surprise you that there were some… sabbaticals… as I regrouped, and re-funded.

Back to business:

I took a long trade on URBN today off a classic setup. 30-minute bars, market strong, gap opening, decreasing volume, lower high after lower high. I even threw the patented Trader-X 5-period MA on there for some perspective (BTW, I like the EMA on 30’s, vs. the SMA).

URBN

The trade went off without a hitch. Once the 1230 bar broke the 1200 bar’s high at 18.47, it didn’t look back. Easy on the nerves. The opening range high was 18.90, and when you have such a long trip back to it, you’d better believe you’re gonna run into resistance. Therefore I put in a limit order to sell half at 18.85, which worked out nicely at 1310 EST.

Then we went sideways, 18.75 to 18.85, back and forth. I was impatiently waiting for a break, down or up, so I could make my next move. I had an audio alert set to ding if the price wandered down below 18.75 when I wasn’t looking.

At precisely 1332 EST my computer went “DING!!” — now at that point we had been 5-7 cents above my watch level, so this really hit me like a bolt of electricity. In one tick, the price dropped 12 cents. I went, “Oh, SH*T!”, but before I could even reach for my mouse, the price popped right back to 18.80 as if nothing had happened. Then I saw it- a massive volume bar down at the bottom. On a stock that was trading 200k-400k shares every 30 minutes, a single trade of 1,600,000+ shares had crossed.

URBN

If you’re a glutton for punishment and have read back through some of my ramblings, you’ll know I place great importance on extraordinary volume spikes. On swing trades (daily bars), a single bar can act as support or resistance all by itself.

Here’s my gold (well, maybe silver) nugget on daytrades: check 5-minute bars on your trades every now and then. The intraday volume spikes get obscured on the longer bars we use to enter and follow trades. Many, many times if you see a huge volume spike on a 5-minute bar, you’ve got a near-term top or bottom to trade off of, or take profits, or whatever. Why is it gold? Because it gives you a heads up before the technical indicators.

So, the big block trade told me “You’re looking at the top and you have a few seconds to a couple of minutes to do something.”

So first, I sold out my remaining long position. Then I looked for a spot to get short. As the little sideways range had a bottom at about 18.75, I put in a stop limit order to go short at 18.74 with a limit of 18.72.

NOTE! Stop LIMIT, not Stop MARKET! You don’t want a trade to get triggered as the stock falls off a cliff only to be filled at the bottom!

What happened next, well to quote Ronnie Milsap, it was almost like a song:

URBN

Now I certainly don’t smoke, but I’ve just relived this trade in my head as I’ve written about it, and… anyone got a cigarette?

 
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