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Dan,
Sure it really quite simple a simple trade to understand and not my own (a
fellow trader shared it with me). Basically it is the acknowledgement that
the "news or trading event" is already discounted in the price of the
commodity. A reaction to the news occurs, but then the reaction quickly
fails. Grain traders use it frequently on a grain report day but the bonds
and SP's with the current volatility are other good places to watch for "a
news reversal trade".
It is also discussed in the Raschke/Conners book "Street Smarts" I think,
which may have been the trades origin, or at least documented.
Basically when a market moving event is about to happen you note the price
of the underlying commodity, then after the commodity reacts to the event ,
lets say up for example, you place a sell stop at the price the commodity
was at "before the event". If the commodity trades back down to that price
you go short. They actually happen quite frequently.
Here is an example, it is widely expected (or maybe not) that the crop
report might show less yield, smaller acreage, larger exports whatever for
soybeans. The price prior to the report (the previous day because crop
reports are at 7:30 am as I recall) had a range of $5.05 to $5.10 closing at
$5.08. The report comes out and beans when they open at 9:30 am gap or trade
up to $5.21. At that point you would place a sell order at $5.10 and if
beans trade back into the previous days range you go short with a stop at
the gap high or a money stop whichever works with the risk you wish to take.
Exit the trade (hopefully profitably) using any number of profit taking
techniques. The reversal in the commodity occurred because a majority of
the news was already in the price prior to the news. When the news came out
a few people/traders react to it only to find out that most people are ready
to take their profits after the initial reaction. This profit taking is the
reason the price declines and if it trades back into the prior range
increased selling occurs from those who were recently long hoping for a
positive reaction.
Several other examples happened this past Friday. Some people were long the
SP in the afternoon prior to the two court rulings around 1395 feeling it
may go Bush's way. The ruling came out and the spoos rallied to 1404, if a
sell stop was placed at 1395 you would have gone short and they traded back
down to 1388 area. The bonds were another example opening at 7:20 at 103-21
and prior to the employment report they were around 103-25ish (a bullish
report was expected), the report came out the bonds traded to 103-31, at
that point place a sell order at 103-25 or slightly below since the range
was tight. The report was not as bullish as expected, there was a slight
reaction up, then profit taking set in.
The news reversal is simply buy the rumor sell the fact or sell the rumor
buy the fact which may explain Intel's short term reaction to bad news.
"That warn" was already in the price of the stock, it was not a surprise to
most. Hope this all helps. Like I said they happen all the time. Said simply
"it is not the news but the reaction to it that is important".
don ewers
----- Original Message -----
From: "Dan Cash" <dcash@xxxxxxxxxxxx>
To: <realtraders@xxxxxxxxxxx>
Sent: Saturday, December 09, 2000 9:17 PM
Subject: Re: [RT] Re: Trading Events
> Don,
>
> Do you mind expanding on your trading news reversal technique in any
detail you
> care to, I would appreciate the insight?
>
> Dan
>
> Don Ewers wrote:
>
> > Ira,
> > Can you enlighten us with an example, since I only trade, "what are
billed
> > as major event s" from the "news reversal trading technique". Obviously
your
> > expertise utilizing options would be a welcome trading technique that we
may
> > be able to learn from. I normally go flat ahead of these events feeling
it
> > is gambling in lieu of trading, so I am anxious to hear your reply.
> > don ewers
> > ----- Original Message -----
> > From: "Ira Tunik" <ist@xxxxxx>
> > To: <realtraders@xxxxxxxxxxx>
> > Sent: Thursday, December 07, 2000 1:22 AM
> > Subject: Re: [RT] Dow
> >
> > > If one is just trading the underlying, then a cardinal rule should be
to
> > be out
> > > of the markets when major announcements are to be made. If you know
how to
> > > utilize options in volatility positions that are non directional, then
you
> > put
> > > on these positions just before announcements are made and trade the
> > volatile
> > > swings with glee. The bonds are a classic example of where this works
> > > wonderfully. There is sufficient liquidity in both the options and
> > underlying
> > > bonds to allow one to trade some of the huge swings the bonds are know
to
> > make.
> > > Ira.
> > >
> > > Don Ewers wrote:
> > >
> > > > Dom, all-,
> > > > True, but one should not neglect events that "make the charts",
meaning
> > > > sometimes charts say one thing and an event and the price reaction
to
> > it,
> > > > makes the chart say quite another and therefore a different story
> > unfolds.
> > > > We need to be flexible enough in our trading to accommodate this.
Charts
> > > > rule until they fail, one good reason depending on your trading
> > timeframe to
> > > > avoid major events that have been built up to be market movers. It
is OK
> > to
> > > > stand aside at times and let the story be told?
> > > > don ewers
> > > >
> > > > ----- Original Message -----
> > > > From: "Dom Perrino" <domenick@xxxxxxxxxxxx>
> > > > To: <realtraders@xxxxxxxxxxx>
> > > > Sent: Wednesday, December 06, 2000 9:46 PM
> > > > Subject: Re: [RT] Dow
> > > >
> > > > > My belief is that technical analysis already reflects ALL,that is
> > known
> > > > > about a stock including all fundamental factors. I believe that is
the
> > > > > standard belief of technicians. It seems that is what you are also
> > saying.
> > > > > My original email to Bob may have been ambiguous.
> > > > > Dom ----- Original
Message -----
> > > > > From: "Ira Tunik" <ist@xxxxxx>
> > > > > To: <realtraders@xxxxxxxxxxx>
> > > > > Sent: Wednesday, December 06, 2000 10:03 PM
> > > > > Subject: Re: [RT] Dow
> > > > >
> > > > >
> > > > > > Those factors would all have been factored in before you
selected
> > the
> > > > > stock to
> > > > > > trade. They would be terrible if you were looking for a short
in a
> > down
> > > > > market
> > > > > > and they would be wonderful if you were looking for a stock to
trade
> > in
> > > > an
> > > > > up
> > > > > > market. After the selection, you would trade it technically.
Ira
> > > > > >
> > > > > > Dom Perrino wrote:
> > > > > >
> > > > > > > Bob,
> > > > > > > In your opinion,what would you consider key differences
between a
> > > > > technician
> > > > > > > and a fundamentalist ( like yourself ) if both let the market
tape
> > > > call
> > > > > the
> > > > > > > shots on a day to day basis, and, as you well put it, keeping
the
> > > > > account
> > > > > > > healthy.
> > > > > > > It would seem to me that the technician would have an easier
job
> > since
> > > > > on a
> > > > > > > short term basis p/e, book value,sales, balance sheet, current
> > ratio
> > > > > > > etc.would not need to be factored into the trade .
> > > > > > > Dom
> > > > > > >
> > > > > > > ----- Original Message -----
> > > > > > > From: "Bob" <bobskc@xxxxxxxxxxxx>
> > > > > > > To: <realtraders@xxxxxxxxxxx>
> > > > > > > Sent: Wednesday, December 06, 2000 1:21 PM
> > > > > > > Subject: Re: [RT] Dow
> > > > > > >
> > > > > > > > An elitist? I hope not and I certainly hope that you detect
a
> > man
> > > > who
> > > > > > > > doesn't send insulting comments about someone he knows
nothing
> > > > about.
> > > > > > > >
> > > > > > > > As to the content of my mail, I was trying to state that as
long
> > as
> > > > > > > > liquidity and beta are the principal drivers of the nas
while
> > value
> > > > > and
> > > > > > > > common sense take a back seat, all gains should be viewed as
> > > > temporary
> > > > > and
> > > > > > > > unsustainable. As to "burning flesh", I don't care which
way
> > this
> > > > > market
> > > > > > > > goes as long as it goes .. I let the market tell me what to
do
> > on a
> > > > > day to
> > > > > > > > day basis and I don't fight the tape. My account is healthy
..
> > I
> > > > hope
> > > > > > > > yours is as well.
> > > > > > > >
> > > > > > > > Bob
> > > > > > > >
> > > > > > > > At 03:35 AM 12/6/2000 -0500, you wrote:
> > > > > > > > >Bob,
> > > > > > > > > I've been a student/investor for many years. Sounds
to
> > me
> > > > like
> > > > > > > you've
> > > > > > > > >become "insulted" that the mob out there doesn't have your
> > > > > intelligence
> > > > > > > and
> > > > > > > > >prescience.
> > > > > > > > >
> > > > > > > > > Do I detect the burning flesh of an elitist?
> > > > > > > > >
> > > > > > > > >
> > > > > > > > >To unsubscribe from this group, send an email to:
> > > > > > > > >realtraders-unsubscribe@xxxxxxxxxxx
> > > > > > > >
> > > > > > > >
> > > > > > > >
> > > > > > > > To unsubscribe from this group, send an email to:
> > > > > > > > realtraders-unsubscribe@xxxxxxxxxxx
> > > > > > > >
> > > > > > > >
> > > > > > > >
> > > > > > > >
> > > > > > >
> > > > > > >
> > > > > > > To unsubscribe from this group, send an email to:
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> > > > > >
> > > > > >
> > > > > >
> > > > > > To unsubscribe from this group, send an email to:
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> > > > > >
> > > > > >
> > > > > >
> > > > > >
> > > > >
> > > > >
> > > > >
> > > > > To unsubscribe from this group, send an email to:
> > > > > realtraders-unsubscribe@xxxxxxxxxxx
> > > > >
> > > > >
> > > > >
> > > > >
> > > >
> > > >
> > > > To unsubscribe from this group, send an email to:
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> > >
> > >
> > >
> > > To unsubscribe from this group, send an email to:
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> > >
> > >
> > >
> > >
> >
> >
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>
>
>
> To unsubscribe from this group, send an email to:
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