"Hurricane Monday" gave traders their most volatile session since the London bombing in early July. Going into the morning, I started a diary to illustrate how I measured the risks and opportunities triggered by the event. This exercise will show you my thought processes when a quiet Monday gets turned upside down by bad news.
7:14 a.m. EDT: I'm at my trading screen. Katrina is down in size overnight. My weather graphics show the eye headed straight toward New Orleans. Crude oil opened Sunday near $71 and dropped off to $70 immediately, It's now hovering about 50 cents below this "round number" as traders gauge the storm's impact to the supply chain.
The reversal at $70 says this is still major resistance and energy traders need real news to push it over the big number. The big problem is that no one can assess rig, pipeline or refinery damage until at least Tuesday, and it will take days for real damage numbers to be tallied. That means movement in the energy pits this Monday will be traders jockeying for position based on pure speculation.
I'm surprised the Oil Service HOLDRs Trust (OIH - commentary - Cramer's Take) is trading up in the premarket. Some rig companies will see enough damage to undermine earnings for the rest of this year.
The Swing Shift Storms Loom in Energy Charts 8/29/2005 11:59 AM EDT A look at crude oil, natural gas and more indicates that Katrina is not the only storm that could move the commodities.
The Swing Shift Switch Gears to Long-Term Trades 8/25/2005 11:31 AM EDT Adjust to the long view in this thin environment with five S&P 500 stocks that have promising long-term patterns.
The Swing Shift Five Strong Tech Stocks 8/23/2005 12:00 PM EDT After wondering why he had no good tech trades, Farley did research that yielded five stocks that could garner interest.
At the time of publication, Farley was long Sigma Designs, Apple Computer, L3
Communications, NRG Energy, Geron, Enersis and Global Industries, and short Per Se Technologies, although holdings can change at any time.Alan Farley is a professional trader and author of The Master Swing Trader. Farley also runs a Web site called HardRightEdge.com, an online resource for trading education, technical analysis and short-term investment strategies. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Farley appreciates your feedback; click here to send him an email. Also, click here to sign up for Farley's premium subscription product The Daily Swing Trade brought to you exclusively by TheStreet.com.
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