For the day: up $75, and down $1491 overall.

First, I’m likely not going to post daily on this subject anymore because, since I don’t trade daily, I’m mostly recapping the same stuff (up/down status) you can find if you follow the links in my “watchlist”. That and my little ‘vacation’ is over and I have to get back to ‘real work’ tomorrow. So I’m going to have to go back to more of a ’swing trade’ strategy that served me better than the recent pseudo-’day trading’ I’ve been trying out.

I’m also contemplating starting a new blog specifically about being a new trader, documenting lessons learned, etc. I’ll keep you updated if I go that route. I have a feeling most of my regular visitors aren’t interested in that sort of thing anyway.

With that said, today’s market activity was unpredictable, at least according to my methods, yet a good day in the end.

I mean, sure crude prices were up (which is a good indicator that solar stocks will be up to), but the Dow was down 200+ points most of the day and the entire market was a bear. The solar energy stocks I watch were mostly up at least slightly. I interpreted that to be the result of supporting news in the face of a down market. Had the market been up and investors in the risk-taking mood, the solars would have been much higher.

But in the last five minutes… holy cow! It blew up! My current ‘long holding’ China Sunergy (CSUN) went from $17.30 to $17.71/share. I’m watching the after-hours trading real-time now, and it’s in the $17.80’s.

That leads me to ponder the psychology of the masses. I mean, on such a down day, with no other news to prompt it, why would there be such a spike in buying activity?

I have two guesses:

1. Perhaps someone knows something the rest of us do not. Perhaps a new contract was signed or new energy legislation will be proposed… or some other news is due to hit the wires. Speculators bought it up at the last minute at what they perceive to be “cheap” prices based on something they expect the market to find out and react to positively in the next day or two.

2. Perhaps someone is simply playing on the ’stampede’ mentality of momentum traders. In other words, if they can buy up a bunch of shares at the end of the day so the chart shows a massive up-trend just before close, after-hours and pre-market activity tomorrow will probably reflect small buyers acting under guess #1 above. Given that today was such a down day for the market as a whole, everyone assumes tomorrow will likely be better. So by buying in and creating some hype, small-time traders and weak-hearted shorts covering are going to drive the price even higher such that it will gap up significantly tomorrow morning. At that point, today’s big last-minute buyers sell off at a profit, letting the rest of the ‘players’ sort things out on their own.

Look at this 5-day chart: CSUN 5-day. (I apologize for not posting the chart itself, but my Windows Live Writer is having issues.)

You can see the last-minute buying on 12/26 resulting in the gap-up on early on 12/27. Momentum buyers drove the price up, at which point came the sell-off and profit-taking. Since then, the price has struggled to stay above the low of that day. I attribute the relatively tight trading range to stubborn longs (like me) who bought in over $18 and to stubborn shorts who sold borrowed shares at less than $16. No one likes to lose money.

(Side note: I attribute the late-day sell-off on 12/31 as those looking to take the loss on their taxes.)

So, my prediction for tomorrow morning is that, assuming no negative news for the solar industry, oil prices nor CSUN, the price will gap up, followed by an early sell-off, followed by a slow move upward the rest of the day, but not quite reaching the morning high (basically a replay of 12/27).

Of course, I could be wrong.

But if I’m right, I need to figure out how to spot this kind of activity as it’s happening and ‘tag along for the ride’ with the big boys.