My Trading > My Trading Journal > February 1, 2012

My Trading Journal

February 1, 2012

9:41 pm (PST)

EA was up 1 point after-hours after their earnings release. BMC looks unoved after its release. XHB was up .57 to 19.24 so my spread is in-the-money again - not a huge deal.

TLT, after going up for a few days and getting a little too close to my strike price, had a nice decline of 1.38, and was down even more intra-day. Although I am feeling better about it, the high - and somewhat inexplicable - volatility is still a considerable risk factor. A daily range of 30-40 cents would make me feel better than daily 2 point moves.

This high volatility is due to bullish and bearish forces facing off against each other. Although this duality of simultaneous bullish and bearish forces is not uncommon, these occurances are usually driven by technical factors. More specifically, one of the most common times these situations occur is when a growth stock has been going up for quite some time (perhaps a year or more) and is reaching a point where it is clearly overbough and possibly overvalued. Many contrarian traders come in and short the stock (expecting a pullback to occur), while opposing momentum traders buy the stock (expecting the new highs to lead to more new highs). One specific example - and perhaps the most well-known example - of this duality would be Netflix's (NFLX) extended and volatile consolidation last within the 200-250 range last year (2010).

TLT is a little unique because it is one of those relatively rare times in markets where there are polar forces facing against each other that are based predominantly on fundamentals. Bond bulls are going long based on the assumption that a Greece default will cause an unprecendented global meltdown; while bond bears are pointing to the fact that interest rates are at record-low levels while the economy will be rebounding in the future.

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