Daily Stock Picks Report Archive

December 3, 2008, Wednesday Evening                                  
www.TradeStocksAmerica.com

It was push and pull all day today with two big buy programs as well as one big sell-off.  If your viewpoint wasn’t biased on only one direction, you should have done very well with both long and short intraday trades.  Many stocks had 4-5% up, 3-4% down, then another 5-6% up, then a 7% move up toward the close, especially in the financials– all in the same day!  This is why I am encouraging you to master the intraday trading technique or what is called scalping in the Wizard Training Course.  When you have this much volatility, keep your intraday charts on the 3 minute setting with 1 or 2 days of data on them and it smoothens out the moving average lines, and is a lot easier to interpret and stay calm.  The 1 minute setting on the intraday charts tend to cause too early of buys and sells.

The stock market has some powerful buying that can be turned on like a light switch so be mindful that the overall sentiment could be changing (without a whole lot of logic needed).  The breadth, which is the ratio of advancing stocks vs. the declining ones was stronger than the market indicates on the point gain.  The expectation was the market would resume its downtrend pattern which is still likely but some stocks that look more bullish are from the Nasdaq.  AAPL, FSLR, and AMZN are showing rising technical indicators as shown on the daily charts for the MACD, OBV, and stochastics.

We are starting to get the early signs that we may be bottoming on an intermediate term basis (months).  It may not make sense that a stock market goes up facing a deep prolonged recession but the stock market is 6-9 months ahead of the economy in its timing.  This isn’t a recommendation to start buying for longer term hold periods yet because no doubt we are going to have some volatility in this bottoming process that will likely give us better prices.  It is worth noting though early signals are starting to show up we could have months of upward movement as a general direction.

The coal stocks (FCL, ACI, CNX) were weak, as they have been for many months now and they hardly responded during the days the stock market moved up.   Many of the swing trade short ideas clearly did not work today.  The financials continued to rise but I’m expecting a pullback with this group at some point (WFC, BAC, JPM, STT looks weakest).  Fairly soon there will be some good money to make on these financials and monitor closely for potential shorts.  The steel stocks are still falling with MT and RS still having profit potential being short for a few days.

Housing stocks were very strong today with KBH, DHI, CTX, PHM, LEN, moving up 11.5% to 21.7% today alone and most of the technical indicators are pointing up for this sector.  TOL was the laggard of the group moving only 5.1% today.  It isn’t making sense these are moving up but the odds favor waiting for a top for potential profits on the short swing trades.  These housing stocks are on my go-to list to short when the market starts correcting again.

Solar stocks FSLR, LDK, STP and SOLF had a big day up TODAY.  Watching and waiting.

Intermediate Trade Positions:  none unless you want to commit hari-kari.

Swing Trades:  The swing short ideas with the coal stocks [FCL, CNX, ACI] are still working; financial stocks such as JPM, WFC, BAC, STT should  be watched for a potentially excellent short swing trade.   Housing stocks such as DHI, TOL, PHM, LEN, are eventually going to be good short candidates as they move up.  If the stock market in general moves up, that would be an opportunity to look for higher prices to sell short.  Keep position sizes small, especially if you are new to selling short.

Day Traders/Intraday stock ideas:   Drop and pop should be profitable tomorrow with the long side being good with perky stocks like FSLR and AMZN.  If the market opens down tomorrow morning, let the stocks drop longer and deeper before looking for a intraday position long.  Again, switch to different chart settings from 3, 15 and then 1 minute charts after you open your position.  Set a 3 minute chart to look at consistently throughout the day as your "base" chart and then rotate through other charts on the same stock to get a different view on it. 

Concluding thoughts:    The market looks like the bias might toward being long after an initial drop.  We are sort of on the sidelines as far as not being fully committed to any larger positions overnight.  Intraday trades are outstanding and should continue to be on the long and short side tomorrow, especially the long.   If there isn’t selling tomorrow at the open and the market goes up use those better prices to open short positions based on the 3, 5, and 15 minute chart settings.   Don’t be buying long overnight yet–the market is rewarding the intraday traders, you can make a lot of money with this volatility on intraday trades.   We are going to look back in history and say that these were the heydays for intraday trading just like bullshorts were in early 2000 for the dot.com stocks and long swings in late 1999.

Thoughts:  Best odds only, be decisive, aggressive, mentally flexible, stay in position size, don’t overtrade and wait a little longer to buy and wait a little longer to sell.  You will find that will make you more money on your trades.  Trade what you see, not what you hope for.

Don’t trade unless the setup is there for you, then use the charts to tell you when the odds are heavily in your favor.  I recommend wide stop losses when using this technique otherwise you get stopped out frequently which is expensive, frustrating and distracts you from the bigger picture of making a successful trade.  Don’t force anything to work for you tomorrow, let the setups develop and then take advantage of that.  Be patient the next couple of days.  Stay in position sizes without letting any intraday trade represent more than 10-15% of your total account value.  As you build your account, your position size percentage should get smaller and smaller to lower your risk.

Have a great day and I’ll talk to you tomorrow. 

Mitch King

www.TradeStocksAmerica.com

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