Trading: Story of My Life -- AMD

Well...I hope someone took my advice because I sure didn't. Was I scared to pull the trigger? Nope. I was too busy between work and moving to a new house that I didn't have money in the right place at the right time.

Anyway, if you haven't noticed, AMD ran from around $22 when I first posted about it to $26 and some change today. That would be a handy little 20% gain in a little over a month, but you do have to take into account what you would have done had you owned a sizeable percentage of the stock.

Looking at the chart, it's likely that I would have pulled out during the pullback on October 27th. However, I do love to play October weakness so I might have stuck with it. Outside of the 27th, I would have been set as long as I had a provider with a trailing stop loss. In the past, I haven't, but I definitely think it's worth it to save time and potentially increase gains by relieving the pressure of watching a stock.

Anyway, I hope someone dropped a huge chunk of change on it. If you're still in it, make sure you have a good exit strategy.

Stock Thoughts: AMD

Advanced Micro Devices has come a long way from playing alongside Cyrix in the Intel clone market. As a chipmaker for PCs, they've gone from making cheap, discardable processors to exceeding Intel at its own game. The latest 64-bit chips for the desktop and the Opteron chips for the server have contributed to AMD outpacing Intel in the market. Additionally, Sun Microsystems jumped on the AMD bandwagon in a big way and has vaulted from nowhere to number 6 in the Intel-based server market.

So the big question is, why is the stock going down? Simple answer, it ran up too far and Intel warned recently. I'll be looking for a bounce off of obvious support levels before the end of the year.

Equity Trading -- Mylan (MYL)

Talk about being really, really, really wrong about a company. Mylan announced today that it will be buying King Pharmaceuticals, and the stock dropped like a rock. I haven't fully researched the deal, but it appears that it will be diluting earnings substantially.

This just goes to show that you should always set your entry and exit points prior to a stock purchase and not deviate from those rules. If I had held on expecting the turn that should have come, I'd be something like 20% down right now. As it is, I only lost 5% trading Mylan.

Equity Trading -- Updated Stop Loss Strategy

After this Mylan (MYL) trade debacle (ended at $20+ after triggering my $19.95 stop earlier in the day), I will be changing my stop loss order approach and will use 2-3% behind the support point when trading stocks listed on the NYSE. Trading the Nasdaq, I've rarely had this happen, but it has happened all too often at the NYSE. In 2003, I was trading E*Trade (ET) taking runs from $4 to $4.30 as often as I could get them, and a few times, my $3.90 stops were taken out followed shortly by a 10-15 cent positive run.

Given that I can't watch prices throughout the day consistently like I did a year ago, the stop loss orders are extremely important to my trading. A year ago, I would have checked the technicals on MYL before executing a sell order at $19.95 and likely would have stayed in the stock. I still like this stock's chances to reach mid-20's by next January, but I need to get my money to another broker with lower fees before considering another purchase.

Equity Trading: Mylan Laboratories, Inc. (MYL)

After my little rant about the FDA and patent extensions, I looked a little more closely at Mylan Laboratories, Inc. as an investment opportunity. In my small short-term trading experiment ($2000, one stock at a time, one trade a day), I accumulated 10% over 3 months of trading in a choppy / down market (December 2002 - April 2003). During that experiment, I often found myself trading support / resistance points and/or trading counter to the trend. Mylan's chart brought back some memories so I couldn't help but play.

Looking at the chart, you can see resistance in April 2003 of $20 and a break through that resistance shortly thereafter. The recent news brought the stock back to that $20 range. I ended up buying early at $21.02, but I'm hopeful that won't matter on a slightly longer-term hold than what I did in my short-term experiments.

News today, though, could kill this investment. I have approximately a 5% stop loss order in place, and it might be triggered Tuesday with negative news of the FDA rejecting Mylan and Teva's request to prevent authorized generics. I usually put stop losses a few cents behind the support point as I've frequently been stopped out by a penny on the NYSE so mine is at $19.95 right now.

E*Trade Flat Fee Trading...Not So Fast

In just 3 years, I've gone from not even knowing how to get started investing to a good understanding of technical analysis. My trades all executed with either E*Trade Securities, LLC or Scottrade. I maintained my mutual funds and, early on, played with trading some lower priced stocks in an E*Trade account. Spending $19.99 for limit orders, trading frequently at E*Trade was difficult given the amount of money I had available (for active trading, a rountrip over 2% is too much) causing me to move active trading to Scottrade.

Somewhere along the way, E*Trade introduced an order processing fee. This meant that instead of paying $19.99 for a limit order, I was now paying $22.99 for that order. If E*Trade needs more money per trade to be profitable, I can understand that, but my issue with their move is that they continue to advertise trades at the lower dollar amount when clearly you will never pay that amount. Scottrade has a similar practice where they pass through some exchange fees on sales orders, but in their case, it is typically only $0.07.

After achieving a 10% profit in the 5 months leading up to the Iraq War, I took my small amount of money out of Scottrade to use to buy my wife a 10th anniversary present. Since then, my only equity trading account has been an E*Trade account. Today, I reviewed E*Trade's higher volume trading accounts to see if I could stick with one broker instead of maintaining multiple brokerage accounts. Unfortunately, I found out by reading the SMALL PRINT that I cannot.

E*Trade's Priority Account page tells all about $12.99 flat fee limit orders. It's still higher than $7 at Scottrade, but it might be worth it to deal only with one brokerage. Knowing after my order processing fee experience that there might be a catch, I scrolled down and found a link for additional information about the offer. Clicking the link revealed the real flat fee amongst other things.

E*Trade in fact intends for everyone to pay the $3 order processing fee. Even the Priority and Power E*Trade accounts carry the order processing fee as an extra. Additionally, they are not actually flat fees. E*Trade charges the normal rate of $19.99 until the customer reaches whatever trading quota has been met on the account. Once met, the fees switch to the lower rate and excessive charges are refunded at the end of the quarter. Additionally, there's a $0.01/share fee for orders over 5,000 shares.

So much for $12.99 flat fees.

Experts tell you early and often to read the fine print and see if a broker plans to nickel and dime you to death, but they often recommend E*Trade in the same breath. Let's call a spade a spade...E*Trade IS a "nickel and dime you to death" broker. It's unfortunate, too, as they have a lot of nice products and services and provide a nice place to centralize bank accounts, mortgages, loans, brokerage accounts, retirement, etc. Because of their good points, I will continue to use them, but I intend to keep all of my equity and options trading elsewhere.