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BP= Bankrupt Petroleum?

  
Analysis, Education, US Market
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Above is the Monthly chart of

It was a bad day for most stocks , but it was a bloodbath for embattled oil giant BP.

Shares of BP dived 16 percent , driving the stock price to below $30 per share, the worst drop on record for the company. The British energy giant closed at $29.20 per share. More ominously, investors and traders rushed to dump their BP: Trading of the stock occurred at four times normal volume today.

As a result, the asset-rich company is now trading for less than its book value, which is essentially all the assets it has — oil fields, oil rigs and so forth — minus intangible assets and liabilities.

In English, this means that investors and traders think that the company is now actually worth less than all the hard assets it owns. That’s a confidence trade.

Today, BP is worth $91.4 billion. In mid-April, the company was worth $180 billion.

BP will be forced into a pre-packaged bankruptcy hit the markets like a torpedo into a well head.

What is interesting is that companies are usually very quick to respond to market rumors. So far BP has been silent and has yet to issue any statements regarding the speculation of a bankruptcy filing.

I have no other information than what is being reported on the wire services. If BP is to make a statement dispelling the speculation they had better do it soon.

 

EGO

  
  Education
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There is no place for arrogance on the trading floor. The stock market has the uncanny ability to identify and humble arrogant traders. The best traders respect the market at all times. Traders are most susceptible to arrogance after an extended winning streak. It’s amazing how weeks of disciplined trading can be wiped out by one bad day. Arrogance is a virus in your trading, as it eats away at the edges of your discipline. Without proper discipline, the market will eat you for lunch.

Why does it happen?

  
  Education
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There seems to be a consistent pattern when it comes to these trading teachers turned rogue traders. The story usually is that a trader struggled for years, then “made it”, and decided to teach others. Students etc began offering them money so they set themselves up as a money manager and then *bling* collapse in flames and do a runner.

One obvious theory is that their trading psychology had adapted to trading their own money at a certain equity level, and they might even have been very successful at that, thus making them confident and bold. But then all of a sudden they are thrust into new territory in terms of both a massive influx in equity and thus volume to have to trade, and the burden of being the crux for investors hope and fear all day.

Imagine it – you are happy trading 1 or 2 standard lots and you have a good rate of return on your own account, but now all of a sudden you are trading 100 lots per trade, and the phone is going every half an hour with someone yapping “So?! How’s it going? What level is my investment at now?! Has their been any losses??!!”

*Brring Brrring!!* – “Someone grab that god damn phone, I’m trying to focus here!”

You could almost feel how this would cause your heart to start pumping and you would break out into a sweat; your mind would go foggy – yet you are supposed to stay cool and trade. I personally sense that many of these guys just didn’t consider this at all. They thought they were ready; they weren’t.

Add to this possible new market issues that throw a spanner in the works, such as trying to get filled with bigger volume, slippage – your positions maybe starting to show up on the radar of other market players and drawing interest to yourself.

The trusty old scalping system seems to not work like it used to work. One bad day and you’ve drawn down 20% of the account and you can’t sleep at night. You can’t bring yourself to tell the investors right now until you try to reduce that loss, so you tell a bit of a white lie.

Down the rabbit hole you go. Soon everyone is calling you scum and saying the honourable thing to do is commit suicide and you are facing six years jail. The moral of the story – think twice before becoming a home-brew money manager.

Wisdom from Market Wizards

  
  Education
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Tony Saliba

“How do you lose money? It is either bad day trading or a losing position. If it’s a bad position that is the problem, then you should just get out of it.”

“Clear thinking, ability to stay focused, and extreme discipline. Discipline is number one: Take a theory and stick with it. But you also have to be open-minded enough to switch tracks if you feel that your theory has been proven wrong. You have to be able to say, “My method worked for this type of market, but we are not in that type of market anymore.”

“Until recently, I set goals on a monetary level. First, I wanted to become a millionaire before I was thirty. I did it before I was twenty-five. Then I decided I wanted to make so much a year, and I did that. Originally, the goals were all numbers, but the numbers are’t so important anymore. Now, I want to do some things that are not only profitable, but will also be fun.”

Dr Van K. Tharp

“The composite profile of a losing trader would be someone who is highly stressed and has little protection from stress, has a negative outlook on life and expects the worst, has a lot of conflict in his/her personality, and blames others when things go wrong. Such a person would not have a set of rules to guide their behaviour and would be more likely to be a crowd follower. In addition, losing traders tend to be disorganized and impatient. Thet want action now. Most losing traders are not as bad as the composite profile suggest. They just have part of the losing profile.” (more…)

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