Wednesday, July 26, 2006

Trade of the Day - Akamai Technologies Inc. NASDAQ (AKAM)

AKAM reported strong earnings AH beating the estimate by 2 cents. As soon I read "We had an exceptionally strong quarter, exceeding our growth expectations", I knew I wanted to get in on the AH trade. I waited until the price stabilized after the initial wild price swings and took position at $32.55. I was trading from the office so I didn't have the benefit of an AH chart. All I could tell from my was that resistance was at $36.00. Price consolidated for quite some time after taking out $33.00, but patience paid off as it soon took out $34.00 and shortly thereafter made a quick dash towards $35.00. I took my exit at $35.00. I didn't want to risk having trouble getting out if price decided to pull back as I was trading from a Web Trader. Trading from a Web Trader is like trading the old fashion way - refresh, refresh, refresh....

My trading rules with respect to trading earnings is only to attempt this with highly liquid, well known names. Min. avg. daily volume of 5 million. I always wait 5 minutes (or more) for the wild price swings to shake out. After the shake out, if the stock is trading above the 10 period EMA on the 5 minute view, I try to go long as close the MA as possible. Vice versa on a short. Trading earnings is very risky because a stock could be trading up on earnings but as the conference call progresses, the dynamics could change. If you are going to trade earnings successfully, you have to have a good system. I learned this the hard way. Hope you can benefit from my experience.

My only other trade today was GILD on a buy stop order above yesterday's high which triggered around 9:45. I took my full profit at 10:00 because I didn't like the way the Qs were acting.

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