Daily Stock Picks Report Archive

December 11, 2008, Thursday Evening                                                                                                                          www.TradeStocksAmerica.com

Well surprise, surprise, surprise!

What now Gomer?

Just look at these business headlines Sarge….. Auto bailout stalled, GOP seeks UAW concessions…..Bank of America to Cut Up to 35,000 Jobs……JPMorgan CEO warns of "terrible" fourth quarter……….Dow falls almost 200 points amid auto bailout worries………..New unemployment claims surge to 26-year high………. Golly Sargeant, I knew this last night, and the night before and 3 days ago from The Daily Stock Report on TradeStocksAmerica.com!  Good thing I listened to that King guy who said to sell short financials, housing stocks, ag-chemicals…… oh gosh, just a whole bunch of stocks!

Private Gomer Pile….. I was shorting these a couple days ago, now get out of here!

The media (of which I am not part of) never ceases to amaze me that they print headlines as if this news is supposed to be shocking.  What is more amazing is the public, as a group, is actually shocked and amazed.  Or is it shock and awe?  Do I need to bring up the photo of sheep following each other off a cliff just to show group behavior is the same with humans?  No complaints here because understanding group behavior can really create a lot of wealth for you-it has for me.   It couldn’t have been more obvious that the auto bailout was going to either be delayed by some politicians or have less benefit in it than originally discussed.  And since the media plays up such high expectations in the news that it almost is a slam dunk to assume that the stock market will be disappointed when any of these expectations are not met.  Then they write headlines like these above-these are actual headlines from this afternoon.  Learn to recognize when the market’s expectations are out of whack with your common sense.  Then look for an opportunity to make money.

The Dow 30 opened down 140 points, climbed up 185 points then sold off 300 to close down 196 for the day.  The headlines say the auto bailout delay is the cause for the stock market dropping today but we have had a really nice run up.  Look at the financial sector, stocks like JPM went from $19.60 to $37.64, almost a 100% move so it is no surprise we having relatively mild selling, so far.  But we could see some fear come back into the stock market.

The financials are turning over more aggressively today.  Look at the daily charts of WFC, JPM, and GS. 

The ag-chemical stocks turned over with MON and MOS correcting harder at 9-10% declines.

For the most part, I think we are past the stage where we saw forced selling caused by margin calls, redemptions and outright panic but it is still possible we get another dose of that.  At the moment, the viewpoint is "buy on dips" will start working again for this countertrend rally that appears to have started.  The odds are increasing that a mild rally could last for a couple of months into next year with interspersed periods of selling for shorter and shallower pullbacks (also known as selling).

Oil prices had a huge move up today, 10.2% today, with a high of $50.30/barrel from the $40 level from last Friday.  Today was one of the few days that stocks dropped while oil went up.

Intermediate Trade Positions:   So far so good with these three intermediate trade positions, FXI, Xinhua 25 etf, PTR and SNP.  Oil moved up sharply today and should help support these two oil stocks.

Swing Trades:    Last night I didn’t see the daily charts of DRYS, Dryships, EGLE-Eagle Bulk Shippers, and DSX, Diana Shipping.  These are miniature bullshort charts and I went after them this morning gaining 21-25% profits on these today alone.  I covered them near the bottom, the shorted them again on a small bounce near the close.  See the video attached to this email to learn how I handle this type of technique.  There is still profit in them tomorrow but if they open down substantially, don’t short them unless they bounce well above the opening price.  After the market today, these three sold off after the regular close, especially DRYS.

The housing stocks such as DHI, CTX, TOL, PHM, LEN, are still in a corrective phase.  Hopefully you have established a short position or perhaps some of the more experienced investors or traders may have purchased put options.  If there are no shares available to short, consider buying put options that expire well into 2009, February or March with close strike prices.  Look for another 10% in this group on the short side.

The life insurance sector (HIG, PRU, MET, LNC, PFG) sold down from 5-8% today.  If this sector sells down gradually with small percentages the next week or so, watch for a turnaround for higher highs.  Technical analysis calls it a bull flag.  What you want to see developing is the faster acceleration of declines, like the WFC daily chart shows through today.  This whole group of life insurance companies should be selling off for several more days but watch for any bullishness that may tell you this group may want to stay up and move to higher highs.  This is likely to sell down for a couple more days though.

The coal sector stocks (FCL, ACI, MEE, CNX) peaked in the first hour today and sold down the rest of the day.  This group just started to correct.

FCX, Freeport McMoran peaked at $25.20 today and corrected to $22.893 at the close.  The odds are good that FCX continues to sell off.  Today was likely the peak price in FCX for the next couple of weeks.

AMZN, Amazon.com is still correcting and it is slower to move down than other stocks on the short list.  The $46 target to cover this short looks possible tomorrow but I’d cover it tomorrow even if it doesn’t hit $46.

If you have JPM, JP Morgan Chase or WFC, Wells Fargo short, it is possible that tomorrow could be the right day to cover your swing short.  It would be a smart thing to cover them tomorrow, probably in the first couple of hours on the first drop, even if they open down, which is likely they gap down.  If we have a market meltdown in the next few days, these could really break down but the risk is higher than the reward.  The idea of these swing shorts were to get 2-3 down days and try for 15-20% profits and that’s what we are getting.

SKF, Ultrashort Financials ETF closed at $128.88 but moved up to $135.14 during aftermarket hours as financial stocks sold off after the regular market close.   So we hit the $130 price target that I was looking for but this could go substantially higher next week.  If you are still long SKF, hold it over the weekend because it is looking like we could have more selling Monday and Tuesday in the financials.

The steel sector started to sell off today so day ONE of selling usually is less than subsequent days.  (Look at WFC for example, today is day three and the largest percentage drop than the previous two).  This is the next group to open a small swing short position on  SCHN, X, AKS, RS, MT, NUE, STLD, and IIIN.  We are not looking for a big kill on this group.

Day Traders/Intraday stock ideas:   Continue the drop and pop stocks like AMZN, FSLR and AAPL.  Note that AAPL had a $2 drop followed by a $9 bounce up(no typo, NINE DOLLAR).  Keep track of stocks that are "perky or bouncy" on the long side and note when stocks are more negative than others to short earlier than others.

Concluding thoughts:    It is Friday tomorrow and if the bailout still looks delayed, consider holding over swing short positions over the weekend unless there is substantial selling that occurs tomorrow, in which case, taking your short profits is prudent. 

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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