Best and worst trades from Tuesday, July 26th, 2011

Market continues to chop around. Been trading 'bread and butter' earnings gap plays as they mostly trade on their own mojo unless the market is really in a lather, and I don't have to hold overnight (though I do have some swings, but less and less over the last week). They are trading a bit less explosively than I have experienced (but its early in the season yet), so I am taking smaller positions and letting them work, rather that taking larger positions and scaling out. My trading has been very protective. Good trades in ACIW, SANM, and WAB, not so good in SVU and PLXT.

The bad:

So the rest of the day I went smaller and let things work. Though ACIW was my best trade (took it from the 1st minute bar, was in my top watch list even before earnings), WAB is good because I don't trade the downtrend break on earnings gap pullbacks as much as I should. I was just going through all the earnings plays and I took the simple WAB trade off a slightly bent downtrend break, but it offered such a nice flag and so much upside potential (it could have retraced the whole days pattern and broken out) that it was an easy take, and it made a dollar move in 15 minutes. No home run, but I'll take a point any time.

Where to be...

Will the market consolidate, find its footing, and move up to news highs? I have no idea, but if it starts to move I will be focusing on industries that have shown strength in the last run, some of which I have already established positions.

The ITA has been strong, and has now pulled back from bouncing off the top of its channel. This moves in legs, so look for the turn and then focus on good setups in the space.

IYR. Real estate confounding macro traders, similar to the retail space.

IBB. The dreaded biotechs, sure to eat a hole in your gut on overnight holds. Risk/reward higher here, and it may be valid to feel that the risk outweighs the reward. Some component stocks have really been moving (IMGN, RIGL, ADLR sold off today, keep em tight, GERN for example) , so lets see if the IBB can break and hold.

EWM and IDX. This region is hot, but there is some unrest right now in Malaysia... but if there is not unrest, it is just around the corner, so really, you just have to trade it how you see it. I like the IDX, has more pop than EWM, and is holding well here.