Daily Stock Picks Report Archive

One of the things that I look at when I am trying to get an overall picture of the financial markets are technical indicators that give the sentiment of investors.  What kind of thoughts, as a group, do people have?  And it is very negative at this moment.

  To try to get a feel of the mood of stock market investors, mutual fund managers, or even day traders, you can look at University of Michigan Sentiment Survey that comes out each month (I have no idea why they ask college students but this indicator has been used since the late 1940’s), the volatility index (VIX), which can be used as a contrarian indicator (1) of a pending turn in the market direction, and a variety of other technical indicators that tell us what stock market investors have been doing with their stock positions.

One area that I am watching for stock trading ideas or stock picks resides within the financial stocks.  You might be asking, why would anyone be interesting in buying stocks in a sector that has been kicked, beat up, and one company was executed in March (BSC, Bear Stearns).  Shouldn’t we be selling short you might ask?

I make the most money in the stock market when I identify individual stocks or sectors that stock market investors or stock traders are selling out of at an increasing rate until ideally, they panic.  (Panic doesn’t occur too often). I’ve said for years to people that you want to try to gauge the maximum point of enthusiasm in investors to sell your current stocks (or sell short) and the maximum point of despair in order to buy.

It takes a lot of discipline and courage to do this because it feels like you are going against the grain where nobody else agrees with you.  But to quote myself from a book I wrote in 1997, "You don’t make a lot of money doing the same thing everyone else is doing at the same time." 

Here is a quote I just ran across last week that is supposedly from Warren Buffet ….. "Most people get interested in stocks when everyone else is. The time to get interested is when no one else is. You can’t buy what is popular and do well."
        Warren Buffett

Just remember I said it first! (lol).

Getting back to recognizing when a stock or sector is ready to buy ….  I think we are approaching that point with some of the financial stocks as a sector and a few of them individually are getting close to a technical bounce.

        What you should be interested in are points in the stock price where the probability is very high that you will make money no matter what kind of stock trading strategies you are using from short term investing, to swing trading to intraday trading or buying and selling stock options. 

The financial sector as a group still looks like it has more to drop but my guess is that BAC, Bank of America is most likely to be one of the first to turn up based on the technical indicators (more on that in another lesson).  The current price is $21.17, target price next 2-4 weeks would be somewhere $26-27 but it still isn’t ready to buy yet although I am watching it this week for a possible long entry for a short holding period of anywhere from 2 weeks to 2 months.       

Earnings is scheduled for BAC in two weeks from today on Monday, July 21st, but not sure if it is before or after the market hours.  Fund managers, hedgies (hedge funds) and traders are afraid their numbers are going to be worse than expected so that is the likely reason why it has been dropping so quickly this past week.  I will be looking for a bottom in BAC in the next week or so, I am guessing that $20 will hold unless they announce some extremely bad news on July 21st but my hunch is the news is already reflected in the stock price now.

The ideal situation is that you find the strongest stock (in every measure you use to evaluate) in a sector that corrects this hard, look for that stock to bounce upward first and the strongest.  Eventually, we are going to see that people will "get used to" the bad news in banking and housing and start speculating on buying. 

The following stocks were ones that I had sold short these past weeks in anticipation of its fall, which we saw very nice profits.  PDO, FPP, ROYL, MXC.  This set of ideas is over so don’t buy or sell short any of them, just learn the pattern of the bullshort, which I teach very extensively in The Wizard Training Course.  This was the second wave of short selling in this set of stocks that I did.  This is a very advanced trading technique that I started developing in 1993 and have made very substantial money from.  But don’t load up the boat on these stocks, start with very small positions relative to your total portfolio or account balance in that one account.

GMXR, GMX Resources, hit a high of $78 today and dropped to $71.13, so this has started its correction similar to HK.  I am looking for mid to low 60s so this doesnt have quite the potential profit as HK but 20% is possible on the short side.

I see MON as a probable stock to rebound once this ag-chemcial group rebounds.  I am looking for this signal to turn upward the next few days with only a small 2-4 day trade of possibly 15% max.  I would consider this a swing trade.

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Mitch King is the founder of TradeStocksAmerica.com.  All material presented herein is believed to be reliable but we cannot attest to its accuracy. All material represents the opinions of Mitch King. Investment recommendations may change without notice and readers are urged to check with their investment counselors before making any investment decisions. Opinions expressed in these reports may change without prior notice. Mitch King and/or the staff at TradeStocksAmerica.com may or may not have investments in any stocks cited above before or after this newsletter is prepared. Mitch can be reached by leaving a message at 503-343-3490.