October 28, 2014

Facebook, Gilead, Electronic Arts and InvenSense Disappoint!

facebook in black Did you see Facebook after the earnings announcement?  Looks like the news scraping algo’s took a solid hit to the face. In a grand effort to be first they got it wrong – again. Initially the stock ran up to $82 just before the manure hit the fan dropping prices to $72 in a matter of minutes as the volume stampede for the exits was over 20 million shares.

What caused the massive run on FB? I suppose some of it has to be the disappointment from the street where an expectation of 40 cents a share on revenue of $3.12 billion was actually 43 cents a share on $3.2 billion. More likely though, it was the concern from Facebook execs that operating costs are going up in 2015. Wow, talk about a reversal of fortune the darling of social media companies may have just fallen from grace right in line with Twitter and Yelp. With LinkedIn up next on Thursday the market was not prepared to gamble on a more a positive result and began taking the stock down during after hours trading.

gileadGilead Sciences, (GILD) also shed 2.8% as a mass exodus on heavy volume dropped the stock over $5 after reporting adjusted 3rd quarter earnings on $1.84 on revenue of $6.04 billion when the street was looking for $1.92 on revenue of $5.99 billion. It’s not nice to disappoint even when you have some of the most promising and expensive drugs that can control two of the world’s worst viruses.electronicarts

Next on the chopping block was Electronic Arts (EA), which actually topped the street’s estimates for its 2nd quarter and raised its outlook. Nonetheless, the stock fell 4% to $36 on heavy volume.

Perhaps the most severe disappointment came from InvenSense (INVN) which dropped a whopping 26% to $15.20 also on heavy volume after the company reported fiscal adjusted second quarter earnings of just 5 cents on $90.2 million when the street was expecting 16 cents on revenue of $90.4 million.

There were some bright spots amongst earnings announcements on Tuesday – AMGN posted strong results and raised guidance. TSLA announced a new leasing deal, which brought the buyers flocking back in ahead of reporting earnings next week. WHR and X both shot higher after posting strong results.


All in all when coupled with the hope whim and prayer for Wednesday’s FOMC announcement to produce another upside rampage, the broader indexes wasted no time in jumping the gun and pushing prices sharply higher on Tuesday. The massive stampede to get back in towards the close was amazing to watch. Whether it was capitulation on the part of the bears or position squaring ahead of the FOMC announcement the last half hour of trading saw some huge buyers moving into to take the index futures higher.


The rallies off of the October 15th lows have been intense and nonstop thus far. The markets have pushed into overbought readings and many have been starting to look for a break to the downside to begin. From current levels, though I’m not that convinced that the expected downside would push the markets back to the lows seen two weeks ago or lower as some expect. But, hey stranger things have happened recently so while the probabilities may not be as high neither were the chances of FB slicing $10 off in a heartbeat.

gdpdropsSo, what if a second leg down did occur. The most common relationship between waves A and C of a corrective pattern is that they are equal in length. If Tuesday’s highs mark the completion of the countertrend rallies the ensuing declines would be expected to drop the ES to 1779.25, the NQ to 3665 and the YM to 15,430. Those are the levels where wave A would be equal to wave C, assuming Tuesday’s highs are not exceeded. Needless to say, volatility would ramp back up in the VIX, UVXY, and VXX. Treasuries would likely rise again as yields sink, the dollar might see some downside again and the rally in precious metals would likely catch fire.

Expectations for tomorrow may include some initial reaction to Tuesday’s sell off in the broader indexes, but I suspect things will slow down and possibly get range bound until the FOMC announcement at 2PM EST. After Tuesday’s massive buying spree there may be an equal amount of anticipatory trading energy waiting to react, so treat it as a ‘binary event’. As a day trader I am always flat ahead of the announcement and allow the initial frenzy to wane before jumping back in. It is too easy to get caught in huge swings that are common after FOMC announcements lately. Expect a sizeable reaction in either or both directions within the broader indexes, treasuries, and precious metals.

keyinsandRemember the key is being able to reduce and separate the “noise” from opportunity. This takes knowing and executing a well-defined strategy and allows you to see opportunities amongst the “chaos” and by trusting the mechanics of your strategy, be able to take advantage of them. 

Opportunity continues to knock on our doors.  While it doesn’t come without risk, risk can be defined and more manageable. Volatility and broad moves are exactly what a day trader desires and being able to respond without questioning is a luxury many are unaware of. 

tradersThe Logical Signals Trade Room is up and running. We have an outstanding group of members that have already begun contributing across the board from trading indicators, patterns and products, to computer software and hardware.

Thus we are ready to move on to phase two of membership/subscriptions. Now that a core group has been established we have a few additional spots for other traders that may have an interest. Phase two, though will be somewhat more involved in that prospective members will get a chance to talk in more detail on their trading goals, experiences and expectations with me and possibly other members before deciding to join.  At this early stage it is important to continue to steer the room in a direction that favors all of the members. Should you have an interest please contact me at Michael@logicalsignals.com I should have the updated “Invitation to My Trade Room” under the Trade Room tab back in place soon. Presently we have 10 additional spots open before closing this room until next year.

Steer the course and don’t compare yourself to everyone else. You are not they and they are not you. Remember to trust and believe what makes you unique at this moment in time and in this situation and allow others to choose for themselves. Don’t be swallowed up by the chaos and false emotions swirling around. Remember it’s just a number.