From a subscriber in the chat room, here’s a despairing note to those who would attempt to trade the night session:  “Good luck in the after-hours market,” he wrote. “Those mother******s run stops like nobody’s business.”  True enough, DaBoyz who work the night shift are a sleazy, talented bunch – the kind of predators who frequent poker lounges in pairs, who fix horse races, and who can arrange “dates” for men who get lonely at 2 a.m. in Albuquerque, Kansas City or Philadelphia. We wouldn’t trust one of these guys alone in the house with our pet lizard, let alone have one over for dinner.  

But that doesn’t mean they can’t be beaten at their game. One Rick’s Picks subscriber actually appears to have accomplished this feat Wednesday night while he slept.  We’d put out a bulletin for E-Mini traders, as follows:  “Night owls please note:  A Hidden Pivot at 841.50 looks very enticing as a place to try bottom-fishing. The futures have just bounced precisely from its sibling midpoint at 846.00, so any breach of that support might be expected to bring ES down to  the target.”

As it happened, the E-Mini S&P was about to make an overnight low at 840.25, a scant point-and-a-tick beneath the target. The subsequent bounce went 14 points, yielding what in retrospect was a highly favorable bet. Several chat room regulars who live outside the U.S. and who are in the room at odd hours evidently took the trade and were cashing out just before stocks greeted the dawn on the NYSE Thursday morning. But our sleepy subscriber managed to bypass the stresses of overnight gyrations, awakening to good news, good fortune, and a good mood that would have done Willard Scott proud:  “Put a buy-stop in just above Rick’s 841.50 ES [target] just before going to sleep last night with a stop-loss slightly under,” he announced in the chat room. “Woke up to a fill, no stop-out and a nice profit. GOOD MORNING!” 

 A Scare in Google

Now, we don’t want to suggest that everything is quite this honky-dory all the time. Far from it, actually. While we were able to ease out of some calendar spreads in Goldman Sachs that had worked out nicely, we were also fighting the tape in Google, about the worst stock you could have picked to short yesterday. For the last couple of weeks, we’d been waiting patiently for GOOG to run up nearly $40 before attempting to short it.  We thought our rally target at $387.70 looked like a good place to try it, perhaps easing out of long positions as well, and for a few lovely moments it looked like we were going to be precisely right. The stock pushed up to 388.10 in the first hour, then sold off $5 during the next hour.

But GOOG got second wind on earnings news that quite obviously had been leaked to the world earlier in the week, and a short-squeeze drove the stock as high as $412 after the bell. The buying frenzy detumesced almost as quickly, but not before doing the kind of damage that could have ended the careers of at least a few traders who were on the wrong side of the move. We stuck with our modest position nonetheless – a single September 270 put purchased for around $8 – with expectations that reality will put a lid on Google. If so, we plan to short some put premium against what we own.  All in a day’s work.

***

We posted the following update later Thursday night:

It became clearer Thursday evening why the short-squeeze in Google reversed so precipitously.   Just after the closing bell, the stock shot up to $412 on headline news that the company’s earnings had beaten estimates. However, more thoughtful ruminations followed just minutes later, focusing on a more sobering story. It was of a sort that we might have expected to cause Google to plummet.  Here’s the substance of it, from The Wall Street Journal:  

“A Google Inc. (GOOG) executive said Thursday that seasonal patterns could become “more visible” in the current downturn, increasing concerns that Google could see slowing growth in the next two quarters.”

On balance, we probably needn’t worry about the September 270 put that we bought yesterday for around $8.

(If you’d like to have Rick’s Picks commentary delivered free each day to your e-mail box, click here.)