Wachovia(WB) and the Financials

In the book Street Smarts, Linda Raschke and Larry Connors talk about trading the news from page 131 to 147. They spend more time on the news than on any other situational type and for good reason.For my money news trades provide some of the easiest and most consistent profits of any setup out there. Most people will not agree with this, but that's because they do not trade the news correctly. Most of the time a person's logic works this way "Wow, XYZ has some great numbers, I'm buying". When XYZ starts to trade lower they dig in saying something like "Look at those idiots selling XYZ, don't they realize that the numbers were FREAKING GREAT!" and they buy some more. Trading in this manner is a way to almost gaurantee you won't be around long.

Today there was a great news trade opportunity in Wachovia, which I traded entered for my own and client accounts, as well as gave in Toni Hansen's free Othernet chatroom. Wachovia Reported horrible numbers last night, a loss of around $8.9 billion, and the stock gapped lower on the open with most traders probably thinking it was the start of yet another leg down in the financials. This would be the most logical guess, especially with the significant gap lower, however thats not what ultimatly happened. Wachovia did at first continue lower, but it quickly found its legs and then moved higher. Once it managed to trade over $13.00 per share WB was yelling pretty loudly that it wanted to move higher, the news be damned. I got greedy with my limit order and missed the first entry there, but as the day progressed Wachovia provided another opportunity for entry (stocks almost always offer another chance if your patient, this is another lesson that many traders do not ever learn and as a result go broke)when it based for a good part of the afternoon and then broke higher. I managed to get long shares of WB from 14.21 as it started to move higher. One of the great things about using this intraday entry to get into the swingtrade is that I'm able to use the lower daytrading stop to have the potential of a swingtrade. Wachovia went up much more than I had thought it would today, so I did something I do not often do, take partial profits on a position and daytrade. I got out of 1/3 of my position though at 16.77 and am fairly happy with the trade so far. I hope that the people in Toni's chatroom are also. If you have any questions about this trade or setup please feel free to ask.