Sears (SHLD) is in ‘free-fall’ and its rate of decline is ‘very concerning’
(Sears’ operational decline is accelerating, according to one analyst.EDC) Sears’ shares enjoyed a strong surge this week, soaring as much as 20% on Thursday after the company reported its first net profit in two years.
But traders’ cheer quickly wore off and shares dipped again, as the grim reality behind the initially rosy headlines set in: Sears’ operational decline is in fact accelerating, and its odds of survival beyond 2017 remain uncertain, according to Evercore ISI analyst Greg Melich.
A closer look at Sears’ earnings show that the company’s sale of its Craftsman brand in March is responsible for its net income of $244 million in the first quarter. Excluding the sale, Sears’ losses deepened to $230 million from $199 million the prior year.
Dying Sears Could Be Quickly Running Out of Cash
Wall Street may want to temper their exuberance over the quarter struggling Sears Holdings Corp. (SHLD) just announced. “Sears’ declining cash balance heightens its need to continue to source $2 billion of liquidity annually,” David Silverman, Senior Director, U.S. Corporates at Fitch Ratings told TheStreet via email.
“The company’s ability to continue to operate is dependent on their ability to continue finding these sources — it currently has a number of unencumbered store locations which could be monetized.” And Sears may want to get moving on finding buyers for those properties, and brands such as Kenmore and DieHard.
Today’s Trading Lesson…
Trading Plan Outline
A trading plan is an outline successful traders use to keep focused on decisions with a high probability for profit. The trading plan also eliminates trading scenarios that do not meet your edge.
The outline consists of two core components:
- The trading system, method or process that defines your trading edge, which includes buy or sell signals.
- Money management and risk management parameters that match your skills and resources.
Finally your trading plan includes which markets (or securities) to trade, your goals, your emotional characteristics and then chooses a trading style.
Although not part of the trading plan itself, professional traders include a process for writing a trading journal [watch video].
Reviewing your performance represents a critical element of trading success ignored by most traders. Which is also why most traders never reach their full potential.
You can’t improve, or eliminate mistakes, if you don’t review your actions. Traders will always feel close to success, but never actually achieve financial independence without a structured process. The trading plan and the trading journal increase your odds of success.
Each of us brings unique goals, resources skills and education to the trading. We bring different capital, risk tolerance, personalities and emotions to trading. A well-thought trading plan gives you a document personally designed for success.
On the Tape Today | 5-30-17
AMZN Amazon.com inside day and sniffing distance to the $1,000 mark. We should see a spike through the level with a ton of buy-stops triggers. Expect volatility, but don't leave your seat, you could see an extreme reversal once the event occurs. AMZN could offer us some great day trading volatility around this level, be disciplined if the stock price trades below the open.
Hard to find short sale today that isn't near support of oversold. TWLO-Twilio offers opportunity today with a target @ $20 to cover. Looking for an inside day breakdown to trigger a sell-stop @ $24.75. Expecting minor support at $23 before a decline to $20. Stop loss on a close above $26.
Tape Reading the SPY ETF
$SPY price action traded according to plan on Friday, a light volume inside day.
I would be patient this morning and let the stock market get some price history before jumping in. A long weekend and lack of significant news leaves stock prices looking for a catalyst. Last Friday’s blog post called for the SPY ETF to see profit-taking and that analysis remains in play.
An inside day after a Saturation Point typically counts as a “neutral” day. Since Friday was practically the start of a 3.5 day weekend, we are not giving it significance which means I expect lower prices today. The common question I get about profit-taking centers around “fading the move.”
“If we believe prices are heading lower, should we look for short sales?” The correct answer is yes and no. Smart traders look to secure profits on longs, and sell short those stocks showing relative weakness (such as many oil and gas stocks). The GIANT MISTAKE too many traders make is short selling strong stocks.
Yes they may trade lower, but in the long-run it is a horrible probability for a consistent winner. I just had this conversation with an experienced trader named Mitch last night. The topic gravitated to “what’s the difference between those traders who succeed and those who don’t?” It always comes back to the same problem.
You finally turn the corner to a steady income when you eliminate the low probability trades. Every bad trade you make, pushes out your probabilities. Instead of needing “10 trades to be profitable, you need 20, because you messed up your edge with those bad trades.
This concept is also why winning traders don’t care about losing trades. The losers are simply part of the process (assuming losses are held in check). If you make “10 perfect trades,” which means 10 trades that perfectly match your strategy, you should get paid, over-and-over again. It’s when you make 6 perfect trades, and 4 bad trades, that now you need a minimum of 14 trades to get profitable.
Every bad trade you make literally pushes out how long it will take you to get profitable. If you’re struggling, now you know why. Stay away from bad trades and you have a chance. Learn to push your winners, and you live the life of your dreams.
Stock Market Performance:
Stocks to Trade 5-30-17 | Tuesday Edition
Bullish Momentum: AAOI, GRUB, TSLA, NVDA, FNSR
Bearish Momentum: sm, srpt, prgo, spg, stld
Long-Term Order Flow
Bullish Order Flow: AAOI, NVDA, COST, CAT, CC, MAR, DE, PM, BABA, AMZN, AET, AVGO, FB, AMT, AAPLK, UAL, BA, UNH, HON, NFLX, ADBE, ADSK, EA, INCY
Bearish Order Flow: prgo, spg, trip car, akam, clr, vlo, lulu, alxn, agn, apc, lly, amgn, dks, dvn, fl, cop, tsco, slb, bhi, dfs
2X Normal Volume: NTNX, BBY, ALXN
Inside Days: aapl, fb, bby, snap, intc, hal, slb, yhoo, mo, mat, crm, nflx, mdt, low, cog, low, ntap, cvs, met, cat, mos, twlo, ma, kss, dks, dg, coh, kmx, amtd, dd, cc, pcln, amzn
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