Daily Stock Picks Report Archive

December 15, 2008, Monday Evening                                                                                                                            www.TradeStocksAmerica.com

We have had several months to make us accustomed to volatile markets and when we have a day like the last couple of days where it meanders with little fanfare, we think it is boring and that is what happened today.  The stock market volatility is decreasing and somewhat immune to bad news, like the $50 billion Madoff fraud, which would have brought the market down for days in hundreds of points for days in November.  So the pattern continues to show signs that although we have pulled back some today, the stock market is more likely to be moving upward these coming weeks in a gradual way without any great sense of urgency.

No, it would not be surprising to see some bad days or consecutively some down days but more and more symptoms are that buying is there to catch what would have been big drops in October and November.  The bids just aren’t disappearing now on some selling.

The financials continue to move down with WFC, BAC, GS and JPM continuing to move down.  At this point, it is too late to short these but this group should be watched for an opportunity to buy again.  Continue to set alarms to wake you up as these move downward.

We are at a critical point to the ag-chemical stock MON to see if it breaks below the $70 level.  If it does continue to trickle down, keep watching for another high odds long position as a swing trade (up to 7 days long).  This may take a weeks to develop.

As you can see, I am constantly monitoring stocks and sectors to see when a high probability entry point to go long  (in this case) appears.

REPEAT and STILL RELEVANT:  We are at a point in the market where the odds no longer favor short positions and that we are entering "no man’s land" lasting at this week but at some point, the market is going to try to come to grips with further negative economic news.   

People may be watching and waiting for some Fed action as well as government action on the auto bailout.  It is obvious to point out that we may have a substantial spike upward when something is approved or enacted.

Intermediate Trade Positions:   These three intermediate long positions are within the parameters of an uptrend , FXI, Xinhua 25 etf, PTR and SNP but are at a support level where if these stocks break down further, it could spell trouble.  If you draw a trend line at the higher lows and the higher highs, you will see a "channel" in which these stocks are moving up within that channel.  Our job as traders or investors (really more traders because investors can hold stocks for years)is to monitor how our stocks are acting.  When they act differently than they should, it is time to make an adjustment.  Right now we want the stocks to continue to follow the same pattern and we would be happy.   Oil has dropped the last couple of days which accounts for two of these stocks moving down. 

WATCH WFC, BAC, and JPM for entry point to buy long.  This will probably take some days.

REPEAT:  The steel sector has been very strong lately and should be noted that there may be a possible opportunity to go long this sector after a substantial pullback in the coming week or two.  Start setting alarms for prices to alert you after a 15% pull back from here on X, SCHN, and AKS.

Swing Trades:    WATCH RMBS, Rambus, a memory chip developer.  It has been moving up from $5 and now approaches $15.  I mentioned it a couple of weeks ago but failed to set alarms and continue monitoring it.  It is too late to go long at this point but is worth watching for a potential short some time in the next few weeks.  You must realize that because we watch many stocks, most of them never turn into a good idea.

REPEAT:  he housing stocks such as DHI, CTX, TOL, PHM, LEN, are still in a corrective phase.  Look for 8- 10% in this group on the short side.

The life insurance sector (HIG, PRU, MET, LNC, PFG) should continue the selling for several days or more but watch for any bullishness that may tell you this group may want to stay up and move to higher highs. 

The coal sector stocks (FCL, ACI, JRCC, MEE, CNX) really acted strong Friday and could be another commodity sector starting to show signs of at least a countertrend rally within a bear market.  Normally we would look for the oil to lead us out of the historic commodity sell-off since mid July 2008 but that seems to be on its own track.

FCX, Freeport McMoran is still a swing short that may last for most of this week. 

HIGHLY SPECULATIVE:  CPE, Callon Petroleum looks like a very good swing short idea on a very low priced stock.  This has a two edged sword, and could be very profitable as it goes down as well as hurt you bad if it moves up sharply.  A 1 dollar move at this point is a 33% loss if it goes up or about a 50% profit if it goes down and your short profits.   It looks interesting though.

Day Traders/Intraday stock ideas:   The drop and pop stocks like AMZN, FSLR, RIMM and AAPL were disappointing because there was a long extended drop and little pop that was tradable. 

Concluding thoughts:    REPEAT:  The stock market is looking like it is responding to more good news than it is reacting to bad news making the bias with our trades toward the long side.   We could be starting a longer trend up with sectors related to commodities that were badly hurt.  The next couple of days may be a good time to take a rest from the market as we are entering a point where the odds do not heavily favor either way.  Try to be observant and patient with little temptation to trade just because you are looking at something.  The market appears to be waiting for government action to bailout the automakers and/or reduce the interest rates to 0.5%.

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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