Monday Review with Trading Errors and Thoughts for Tuesday
Mar 9, 2020 Trading Blog
I always like to review each trading day and Monday was one for the history books. I made a few errors today and wanted to share, maybe it helps someone else out there.
The worst error I made turned out to be MTDR. It got crushed today by about 60%. In Saturday’s writeup, I posted to stay away from the lesser quality, smaller cap stocks, but I picked up a 1/4 position in MTDR anyway. I was greedy for a big return on it and gambled. I lost that one. Lesson: when the market is this weak, stick with quality. I also picked up 1/4 position in PE, which is a little larger and better quality, however it go hit too, just not as bad. If you take a look at the XOP components, the smaller cap names got hit the hardest. Stick with size and quality. Also, always follow the written plan, which I didn’t follow my own writing on that one.
The second error (which I didn’t make, but really thought about) is to add to MTDR at $2.00. I admit, I was tempted. It would have pulled my average price down to under $5. The problem with a stock that has fallen from 17 to 2 is that it’s probably toast. Sometimes you just have to let it go, so I did. That one’s probably not coming back and will be a total loss, at least it was only 1/4 position. Lesson: no matter how attractive it may look or how far down you can get your average price, just don’t do it. The only time you should do it is if you pre-planned it (I did on several others including SLB, XLE and XOP).
Also, on days like today, turn off Twitter. I have no idea how guys were trading and Tweeting today. Remove every distraction on busy days. It’s fine for boring days, but a day like today requires 100% focus. Lesson: remove all distractions on busy trading days.
Another error I made today was that I wasn’t as familiar as I should have been with trading halts. Go to the NYSE website and study the halt procedures. I missed a trade because of it and it cost me money. Be sure you know exactly what kinds of halts there are and how long each one lasts. I was playing an overall market halt, when in reality my stock (HAL) was on an individual halt. Lesson: know the rules of the game.
Next error was dealing with 3x ETF’s. I never play them, in fact I absolutely despise them, but I had a few guys DM me about the rules for when a 3x ETF literally blows up. I really don’t know the rules on that, but I should, and so should you if you are trading them. Lesson: know the 3x ETF rules so you don’t get trapped in a Volmageddon.
Anyway, those were just a few things off the top of my head that I dealt with today that might help someone else. As for my trading, I had some nice hits. The best hit of the day was CVX at 80.25 in and 86.50 out, +$6.25 on that one. I mostly traded XOM today since it was lower volatility than every other name. It was also showing the most relative strength and finished better than most of the crowd.
SPY is almost at my 271 target that I posted Saturday, but I get the feeling that it isn’t going to stop there. We could be looking to retest the 235 lows from December 2018. I’ve got 401k cash to put to work and I plan on starting with 1/4 of it on any break below 250. I’ll probably go a quarter every 25 points down after that. IWM totally collapsed today. The 144 level was a big one and will probably cap the upside if it does bounce. 126 is the next road sign on the way down.
On oil, I missed that one badly. I was thinking 35-37. I definitely wasn’t thinking 30-32. We are pretty much sitting right near the 2016 lows and will likely take a look at those points soon. Just don’t get complacent if you are short, this thing can bounce quickly and really bite you. All it’s going to take is one positive headline or government action and XOP could bounce 25%.
I’m really not sure where XOP goes from here. That collapse at the end of the day was horrible. I’m not sure if everyone was just trying to dump today or if that was a clue that the selling might continue tomorrow. My gut says we see at least a few hours of selling on Tuesday, possibly all day. Watch the 9.05 area early for clues. If it can get back above 9.05, it could make a run back up above 9.50. If it rejects at 9.05, then it’s probably looking at new lows Tuesday.
For me, I’m pretty much done with XOP. I was having a difficult time trading it at 20, which was almost impossible at 15 and is absolutely a no go at 9. There’s just no intraday movement on a $9 stock. In addition, most of the sector is now untradable for me. There are only about 5 stocks that offer any intraday range at all: XLE, XOM, CVX, COP and EOG. Pretty tough to make a living trading those five only. I’ll be moving most of my daytrading to IWM. I’ll still try to post my thoughts on XOP and energy stocks each morning, but my involvement in energy is going to decline, unfortunately. I’ve traded this sector for years and these stocks are like my children, but the place is wrecked right now and there’s just no short term opportunity.
I do like my deals on XOM at 40.01 and XLE at 35 this morning and I think those will do well in the long term fund. Those are the largest positions in the long term account. The addition of XOP at 9.87 should work out in the long run and really helped the average price. I doubt I’ll add anything else to XOP. The two service names are troublesome. I really like those companies, but they got hit a lot harder than I thought they would. They are both 3/4 positions, not the largest, but not small either. I don’t mind holding the top two service names, when things turn they are top stocks. The last three EOG, MTDR and PE are all small 1/4 positions. My thinking on those was the top shale company (EOG) and I also wanted some Permian exposure with big return potential (PE and MTDR). I thought about adding to all three, but it just wasn’t worth it today. I would imagine that the last bit of my cash will go in to XLE on Tuesday around 31-32. Here’s the whole list from my Twitter this morning:
$XLE 6/4 37.65
$XOP 3/4 12.45
$XOM 4/4 40.50
$SLB 3/4 25.06
$HAL 3/4 13.57
$EOG 1/4 55.64
$MTDR 1/4 7.58
$PE 1/4 11.75
Also, sorry if I missed anyone’s messages today, it was a crazy day. I’m always around if you have any questions. Good luck out there tomorrow.