Daily Stock Picks Report Archive

December 7, 2008, Sunday Evening                              
www.TradeStocksAmerica.com

I recorded another tutorial on some real-time scalping (intraday) trades from Friday’s stocks.  Again, this has been the primary trading technique that has been working but some swing and intermediate trades are starting to show up again.

The stock market is showing signs of building a mildly bullish pattern that could last for weeks with occasional selling caused by various news events.  A vote on the US automaker’s bailout this week should cause the market to open tomorrow on the bullish side.  The volatility is likely to decrease as the stock market stabilizes and has a cautiously bullish trend.  At some point, the market is going to become a little more immune to more bad news and start moving up.

The housing stocks are exceptionally strong with no apparent reason as KBH, TOL, PHM, DHI, LEN, HOV, CTX and even BZH (the dog of the housing stocks) continued to move up.  The charts are developing a trend that is not likely to be sustainable and could present a short selling opportunity.  This group would not be a high odds buying opportunity on the long side after most of these stocks have doubled in the past 2 weeks.

The coal stocks FCL, ACI, CNX have completed the swing short on Friday and have nothing else to offer us.

Oil prices reached a low of $40.81 on Friday and should have a technical bounce of some sort the next few days.   

Note that the unbelievable rise in bond prices have driven down interest rates and mortgage applications for home purchases have quadrupled in the last 2 weeks.  This could be the reason why the housing stocks are moving up so much yet TOL, Toll Brother’s CEO was commenting how awful the outlook is for the coming 2 quarters. 

When we see small pockets of speculation starting to show up plus a few days of strong buy programs are indications that the buyers are coming out and showing strength.  The sentiment might be starting to shift here overall but no doubt there will be events to scare people.  Just maybe the "buy on dips" strategy that works in a bull market (which we are not in at the moment) could start working again for a couple of months.  Plus we should start hearing about some of the positive results from all of the different countries’ governments pumping in money into their system, lowering interest rates and bailing out industries that have had problems.  This happens often to see a gradual change in psychology of investors and frequently this builds into a momentum of buying that can react irrationally on the upside.  This is when swing trades long and intermediate positions start to outperform the intraday trading technique. 

Intermediate Trade Positions:   FXI, Xinhua 25 ETF is getting a nice gradual move upward that is worth a small long position for an intermediate trade.  The FXI etf has 40% financials, 20% telecomm, 25% energy stocks and this should be watched as a potential long purchase on an intermediate term (weeks to months).  The technical indicators are becoming favorable and pointing upward but will also get pullbacks from time to time.  Conservative investors may wait for a pullback while aggressive traders could take a small long position immediately.

Study the daily chart on this. COG, Cabot Oil & Gas, EOG, EOG Resources and PTR, Petro China oil and gas are looking interesting on the long side for an intermediate.  Buy on pullback from here. Set a 5-6% trailing stop but wait for lower prices first.

Swing Trades:     XTO, COG, EOG, NBL, are independent oil and gas companies that are worth having small long positions for several days.  Don’t put too much money in any one sector.  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 was excellent today again-look at the tutorial attached to this email.  This technique should be profitable again tomorrow both long and short side.  I’d favor FSLR on the long side and AMZN on the short side and AAPL both ways.  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 is gradually showing more and more bullish signs and coming out of "no man’s land" right now.  Swing and intermediate trade ideas are starting to appear and intraday trades will continue to be good on most days.

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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