Buy The Rumor Sell The News

Trade
*****
Sell 100 GS @ 116 vs. cost @ 74.79 (55.1% return)
Buy 1000 FAS @ 8.50
Sell 1000 FAS @ 8.9914 (5.81% return)

Positions
*********
+100 FAZ @ 9.34 vs. cost @ 17.02
+2000 UYG @ 3.75 vs. cost @ 2.00


Markets
*******
My stop was filled on GS on April 15th because I wanted to snag a sizeable profit and stick to my guns. Yes, GS is trading @ 122+ but discipline cannot be compromised. Besides, the trade was done on margin and that required me to ensure I managed my stops. I bought at 74.79 with an initial stop @ 70. Once I was comfortably in the green, I loosened the grip on my stops and let the winner fly.

There has been a theme of pre-announcing earnings results by financial firms this quarter. Thus far, the firms have all beaten consensus. With Citi scheduled to release tomorrow morning (-$0.33), one could hypothesize that a timely release signifies disappointing results. I will not be the one to make that hypothesis, but it is intriguing. JP Morgan's results topped estimates and I believe JP has the highest quality and most sustainable potential. They actually increased their loss provisions across the board.


I mentioned to a colleague today that the S&P500 was being supported by technology and that the Dow could catch up in a late day rally. I've seen a trend on the eve of a major financial firms' earnings release: Market rallies strongly in anticipation and sells off post release. I thus bought 1000 FAS @ 8.50 and placed a buy stop order @ 8.99. The move netted 5.81% returns, but I saw an opportunity and took it. Alas! The move was much stronger than I anticipated and FAS is trading @ 9.40.

Afraid to lose or afraid to lose out? I'd take the latter.

Live from Queens - Does Citi follow its predecessors?
TM