Am I Stock Trader or Stock Holder?

I found I held positions over night frequently in the past couple of weeks. For a period of time I just hate to hold position over night especially for short positions and I usually took profit or loss at the end of a trading day. Usually when I took loss it was not considered big. I did extremely well for that period of time though. I guess holding position over night means something to me. It probably means I didn’t get a sense of the market. I have no confidence about closing a losing position and recovering the loss subsequently. So I am asking myself the question “am I a stock trader or stock holder”.

I am still holding Bank of America. The longer I hold a position the more I doubt about it. It is the third day I am holding my 2000 shares of Bank of America at average $12.50. I saw the chance of closing out the position with a profit this morning but I didn’t do it because I was hopping for more. However I couldn’t resist my doubt on holding 2000 shares of Patriot Coal. I sold it early in the morning at $6.25 only to see it raised above $6.45. At the time I sold it I was hopping to get it back at a lower price. Like I said I didn’t get a feel of the market and again probably I act too early in a trading day.

Anyhow I decreased my long position buy selling PCX and I am not using any margin now. My account was up about one thousand at today’s close but it is still down more than one thousand dollars from my initial capital.

Account Balance Changes: +$1069.63

Trader’s Mind is Full of Dilemma – My Thought Gone Wild With Bank of America

It was a wild ride today with Bank of America. This was the day I felt would definitely come and this was the day I was expecting for when I bought into Bank of America. Unfortunately I missed it and I missed it too hard. If you were following me you know that I brought 1000 shares of Bank of America yesterday at $12.06. I mentioned that I felt the upside momentum of this stock. But I sold it too early this morning at $12.23. After I sold it I quickly jumped into a short position at $12.43 and later increased my short position at $12.58. For the rest of the day I was carrying 2000 shares of shorted BAC and watching my account balance going down when BAC price was skyrocketing

Thoughts About Taking Suggestion:
All kind of wild thoughts came into my mind with the wild ride of Bank of America. I thought I shouldn’t have got up so early. If I gave myself more time to sleep I could end up making a profit and at the same time I could have a better sleep. Too bad I followed Rpena’s suggestion. =) However when I sold my shares too early I thought it was too bad that I didn’t follow Rpena’s suggestion. If I took the suggestion I wouldn’t take the short side today and ended up with a lost.

There were three reasons that I chose to sell for a small profit. First, BAC didn’t react well to the upgrade in pre-market. Its price just went up a little in pre-market and I thought that was it. Second Repena reminded me there was a 30 year Treasury bill auction today and I thought it was not going to be good. Again it was Rpena’s fault. =) Thirdly I felt I should follow my guidelines. Of course I know I shouldn’t blame anyone for the action I decided to take. I felt I wasn’t a mature trader and Rpena is far more experience than me.

Thoughts About Recouping Lost:
My wild thought went on and I found today’s Bank of America was very much like Wells Fargo on the day when I lost $10,000 trading it. That was the day after the government announced the stress test results and Well Fargo announced its secondary offering to raise capital at $22 a share. I increased my short position two times on Wells Fargo on that day causing me a big lost. Today I dare not to increase my short position on BAC for the third time. In fact when Bank of America’s price jump to $13.19 I was about to click the button to insert an order to short 2000 more shares but I didn’t when I thought about the Wells Fargo trade. Later on I regretted I didn’t do it when I saw BAC closed under $13.

My thoughts went on about selling 100 contracts of BAC June 12 Put at 0.22 to recoup my lost today. That was only 100*100*0.22=$2,200 involved. But what if BAC price drop under $12 next week say to $11.50? I could lose more than $5,000. So I sold 20 contracts instead. That helped a little bit.

Thoughts About Lesson Learned:
Now I am pondering whether there are some lessons I learn today? I really don’t know. Because I found the lessons I learned are seemingly more and more contradicted with each other. I thought one lesson I learned out of today could be that I acted too early in the trading session. I should’ve waited to act till the latest market hour. But this was not always valid though. I was thinking about this post, “I Have Got to Treasure Selling Opportunity”, in which I could make money if I acted early.

Another lesson learned could be I got up too early and I should just take it easy and have a good sleep. I am not sure if that was a good lesson. The third lesson I thought about is not to panic and close a lost postion in a hurry and wait at least three trading days before you throw towel. I actually wanted to write about this for a while but not sure if that was a good one. From my past lost experience if I were able to hold the losing position long enough say three days I could at least see an opportunity to close it without lost. I found that was right for my previous two big losts.

1. Trading Out of Discipline and not Knowing How to Stop Caused Big Lost and
2. Wells Fargo Is Over Valued at $25.70

I am not sure if this is going to be right this time. Anyway we will see if BAC can get down to $12.50 in a couple days which was my average.

Another lesson which should be positively right. Life is much better on the long side. This is the third time I lost big on taking a short position and I want o highlight this. I should be very very careful about the entry point when taking a short position

I lost about $400 for the day and am holding USB and BAC puts and 2000 share of shorted BAC at the moment. The lost on shorting BAC is more than $10,00 but off set by the gain on the USB and BAC puts and gain on previous long position on BAC

Account Balance Change: -$405.85

My Mind Switched Side But so Did the Market

From the past few weeks of trading I had concluded in a previous post that live was much better on the long side. So I reminded myself from time to time to avoid taking the short side. I thought about taking the short side in pre-market this morning when I noticed future was down so much but I was hold back because of past experience. In retrospect if I went short at pre-market and went long in after-market then what a great day it was going to be.

Anyway I bought Bank of America and I bought 2,000 shares at average $12.50. I not only bought Bank of America but also added more Patriot Coal (PCX) also at $6.12. My average on PCX is now $6.90. I am buying the dip. In fact I am all in already and on a small margin. I changed from the short mind to a long mind and the market changed from bullish to bearish. The result was of course I lose big. At today’s close I lost almost $2,500 today. My account balance stood at $27,107.79 which was 10% down from my initial capital.

I bought Bank of America because I was betting there would be a run up after the prefer to common share conversion. I am surprised to see someone post my link about the conversion on yahoo message board

http://messages.finance.yahoo.com/Stocks_(A_to_Z)/Stocks_B/threadview?m=tm&bn=1903&tid=1042741&mid=1042741&tof=11&frt=2.

I still think my entry point at $12.50 can make me some money in a couple of days because I believe the conversion price will be above $12.50. But I feel a bit shaky after seeing the market tanked like this today.

I am not sure if I should put today’s trading in the lesson learned category but I put it there any way. I don’t know what kind of lesson I have learned today. Probably I act too early again in the trading day. At least I put it there so that it would remind me what I was thinking when I losing big on my trades

Is Financial Stocks Over Bought in General?

When I find comments on yahoo stock board compelling I tend to remember them and see if they can prove itself true down the road. Here is one I found

I think Financials just want to stay afloat until the second quarter so they can hide behind their inflated earnings. But they will have to show their hand within the next two to three weeks or so to offer investors some guidance. If that guidance is cloudy, I believe financials will sell off before the 2Q earnings come out in Mid-July onwards.

I expect the 2Q earning statements to be very confusing and investors might take some time to digest them as they try to determine what are true profits and what profits obtained from the mark to market accounting rules. If investors do quickly react to the ‘positive’ news and jump in , financials will go up until investors wake up and notice they have been duped or have misinterpreted the earnings and will sell off.

Point is financials are not going to be truly profitable for a long while. Call me a short if you want but these are facts. Credit defaults are on the rise, foreclosures are on the rise, job losses continues and now interest rates and gas prices are on the rise.

Original is from this thread:
http://messages.finance.yahoo.com/Stocks_%28A_to_Z%29/Stocks_B/threadview?m=tm&bn=1903&tid=1025357&mid=1025357&tof=-1&rt=2&frt=2&off=1

I tend to believe what it says here as the accounting rule changes really smog the finanical picture of the Banks. As I mentioned before the only indicator that the banks are back to normal is that they start increasing dividend payment. I guess that is still one or two quarters away for the banks that are able to repay TRAP.

I recall one of the small banks that I trade on OZRK. It seem to me a very well managed bank. It recently come down a lot because of a real estate loan went bad. But looks like its resistent is at $20 ~ $21. I want to remind myself that its current price may be a good entry point. But again the volumn on this stock is quite low.

Bank of America Prefer to Common Share Conversion

According this article Bank of America Announces Exchange Offer For Certain Series of Preferred Stock, the owner of certain Bank of America prefer share will have the choice to convert their shares into common shares by June 24, 2009

The number of shares of common stock issuable for each exchanged depositary share will be equal to this consideration amount divided by the average of the daily per share volume-weighted average price of Bank of America common stock for each of the five consecutive trading days ending on and including June 22, 2009 (the second business day prior to the scheduled expiration date of the exchange offer). Bank of America will announce this common stock average price no later than 9 a.m., New York City time, on June 23, 2009.

One of the conditions of the exchange offer that must be satisfied or waived is that the common stock average price be $10 or greater.

I am thinking starting tomorrow the price of BAC will take into effect for the prefer-to-common share conversion. For Bank of America share the coming five days is probably going to be a battle between the prefer and common share holder? I think the prefer share holder certainly want to push BAC price down so that their prefer shares can worth more common shares. I am not sure if that make sense. The big prefer shares holders may be very motivated to short Bank of America and bring the price level down

Roubini VS Buffett

Dr Doom Roubini speaks out today. The following are some of the minutes of his speech.

1. Those aren’t “green shoots”–they’re yellow weeds
2. The crisis isn’t over, and everyone has become way too complacent
3. We’ll be in recession for another 6-9 months
4. The recovery after that will be weak
5. Big risk of a double-dip
6. Households aren’t deleveraging
7. Oil could go to $200 just as economy starts to recover
8. Real interest rates could spike, killing housing, etc.
9. Concern about hyper-inflation
10. All this could lead to “perfect storm” that will clip wings of economic and financial recovery
11. So we need to stay focused on averting disaster before we redesign regulatory architecture.

See original here

So Roubini or Buffet who is going to be right? Buffet was very optimistic. He called for the stock market bottom last quarter when the Dow was at around 8000 and it later dropped to 6500. Roubini called for the financial melt down more than a year ealier and he was right. Buffet was onto banks and he was right too. For most part their views may not be contradicted with each other. For example their views on the risk of inflation. But their views on housing seem to be different. Buffet was optimistic on housing market going forward. Roubini’s view was kind of depressed. Who do you believe.

I am more on Roubini’s side on housing because I just don’t think housing price will go back to 2006 without a major raise in wage. Banks will not provide those exotic mortgages again. Housing price went crazy during 2005 and 2006 majorly because of those exotic mortgages. No money down, stated income, 110% finance and reverse mortgage. Those things are not easily coming back.

As for inflation some economist think it won’t come until consumer borrowing increase. But consumer borrowing is still decreasing so inflation will probably come eventually but not that early. However inflation expectation will built into commodity price before the economy recover. Roubini predict “Oil could go to $200 just as economy starts to recover” that is about 6 to 9 months later. So it is probably a good move to load up the oil share like CEO or PTR now.

Banks in a short time will run up because some of them will repay TRAP and no matter what it will be seen a positive sign for the sector. Anyway I just want to jog down some of the ideas I want to keep in mind going forward.

I make some profit today and I feel comfortable with it. I said I didn’t want to trade option but I trade again. I sold USB put again. Next weekend will be the expiration day let’s see if I can pocket the $450 bucks. I said I want to be on the long side of banks but I took the short side when BAC was above $12. I trade a couple times and make profit. Another thinking I change is that I don’t want trading cost get into my mind and affect my decision whether to close a position or not. As long as I can make money net of commission I don’t want to care about how much it is.

Account Balance Change: +$196.98

Does Stock Trading’s Technical Analysis Really Work?

Looks like Epena is on technical analysis. See her comment on Baidu. No offensive but I don’t completely believe in technical analysis and I don’t rely on technical analysis to do any of my trades. My take on technical analysis is that it will just work 50-50. Because I think any well known stock trading theory is self-destructive. It only works when I am the only one understand it and use it. When many people understand it and use it it will become ineffective. Since technical analysis is well known strategy I don’t think it will work. But if anyone use technical analysis find it works let us know here. Let’s see what the odd is.

I have a silly theory. That is the stock price movement is the weighted average result of tarders’ sentiment on a stock. The weighted factor is the money held in traders’ hand. Let’s say Baidu if the number of bearish and bullish traders on Baidu are equal and they are holding the same amount of trading power then stock price should not move. However if the bearish side of the traders hold a larger position than the bullish side then price will be pushed downward. On the opposite when bullish traders hold a bigger trading position then price will be pushed upward. Simply put price movement is to achieve new balance of the bulls and bears. What we do is to find the imbalance between the bulls and bears and take advantage of it. It would be like guessing the mood of a group of people. I usually make a trade based on the price level, its previous movement and what is happening on the company, the industry and the economy. I don’t usually look at graph.

Take Baidu again. I think it will get close to 300 in a couple weeks and then it will come back and stay around 290 till next earning release. It went up today simply because Goldman Sachs upgraded it otherwise it should back down to $270 level. Goldman Sachs has a lot of power on Baidu and it can easily turn bears into bulls.

I guess I babble too much on my theory. But let’s put it on if you have another one