Daily Stock Picks Report Archive

945am, Pacific time:   Interesting developments in the financial sector this morning.  Last night Jim Cramer on CNBC was doing his normal Mad Money show and said……. the Federal Reserve is no longer in control of the banking situation and will be powerless to stop at least one of these institutions from failing….., referring to Freddie Mac (FRE) and Fannie Mae (FNM) and brokers Lehman Brothers (LEH) and Merrill Lynch (MER).  Cramer is also worried about the fundamentals of C, BAC, WM and WB.

Then early this morning William Poole says in an interview with Bloomberg News….

Former St. Louis Federal Reserve President William Poole said Congress should recognize that government-sponsored mortgage Freddie Mac (FRE) and Fannie Mae (FNM) are insolvent after losses and that the odds are rising that the US Government may need to bail the two firms.

While this was going on, Federal Reserve Chairman Ben Bernanke and Secretary Treasury Henry Paulson were testifying to Congress Thursday that …… new regulatory powers are needed to insulate the national economy from damage if a big Wall Street firm collapses.

So FRE opens this morning at $10.55 which is about where it closed yesterday, and drops 37% to $6.75. in the first couple of hours, then rebounds 28% in the next hour.

FNM had similar behavior….opened at $15.11, drops 22% to $11.70, then rebounds 28% to $15.05.

Regarding these two stocks, FRE and FNM, this gave excellent opportunities to make some of that 28% and 22% profit potential BUT it is absolutely necessary for you to set up real time charts that are provided by your brokerage firm for FREE!   See NOTE #1 below.  These kind of special situations I will be posting in another service that I will introduce September 1st, called The Trading Room.  Stock ideas will be posted in real-time as they occur with occasional discussions as they relate to different trading or investing techniques.

Back to the financials…..how this flurry of news affects the Bank of America (BAC) stock picks is that it muted the climb that I had expected.  BAC dropped hard by the open of regular market hours, 630am Pacific time, and went down to $21.27, then rebounded upward over $23.  BAC has held up fair well considering this kind of news and the fear that is permeating in the air around the financials.

Normally what happens in this situation is that there is a lot of volatility followed by a general uptrend in stock price but you have to set your stop losses so if really bad news hits (Israel attacks Iran or vice versa), your losses will be limited.  Make sure you discipline to do this.

After Market Close:  I purchased BAC again this morning at about $22.05, with a stop loss of $21.45.  My target price is still somewhere around $28-30 and I constantly re-evaluate the target price each day to see if the stock is on track.

As you remember yesterday, I traded out of this at $23.80 (from a buy at $21.17) and planned to repurchase this morning.  I don’t normally like to trade in and out of an idea like this but I couldn’t help see the 12% profit in 24 hours plus I know there is going to be big swings in price with this kind of trading strategies in this sector.

The stock acted fairly well today throughout the day, stronger than most other financials so it looks like it is in a bottoming process now.  I will watch and wait from here.

You might remember my comment on HK, Petrohawk Energy, a couple of days ago.  I was setting an alarm on it to wake me up for a possible short sale, which would be my 2nd helping on the short side. 

HK is moving up nicely and I will evaluate whether this is ready to sell short tomorrow but $50 is looking good.  I’ll look for how high it moves up, how the stock market is acting and what the price of oil is doing.  Stay tuned for more on HK this next week.

This is not normally a good time to be doing much short selling when the general market is deeply oversold but this is an oil and gas stock, which has been on a big run the last 6-7 months especially. (You are probably saying "duh" by now but I have to state the obvious to get everyone on the same track).

All the signals that I look at are starting to tell me we should turn up in the market the next 6-8 weeks.  You may ask why 6-8 weeks?  Because that is about as far as I feel comfortable forecasting right now in this environment.  I am using this forecast as an underlying theme when I evaluate new stock picks..

The ag-chemical stocks (MON, MOS, AGU, and POT) are starting to gradually move upward, as expected BUT it is a little spotty in this sector so far compared to the previous pattern.  Yes, patterns are really important because if when they change after repeating so often, the sentiment of the investor-trader has changed.  It is just another indicator for me but not weighed heavily.

MOS and POT look the strongest; normally MON is the leader.  I am only looking for 12-15% off the bottom from a couple days ago.  But just watch the charts to get your signals.  I’ll post an occasional tutorial but if you wanted really in-depth teaching on charts-how to set them up and how to read them, invest in The Wizard Training Course.   It took me 11 consecutive months of stock market education showing all my trading strategies on on 10 DVDs.

ESLR, Evergreen Solar looks interesting here under $9.  Target profit potential is around 20% from here.  It would be good to buy long around $8.50-8.75 for it.  Look at this pattern here.  $8.50 looks like we are getting support as a sort of floor.  I don’t see this as a fast mover because it is likely to take a while to get moving.  Stop loss at $8.10 with a $0.40 trailing stop loss.  This is ESLR’s daily stock chart below (Worden Brothers Telechart).

This  chart is a snapshot of ESLR ending today, July 10, 2008.

I’ll be posting a short tutorial on video today and how to look at a daily stock charts with respect to the stock picks I have been talking about the last few days.  If you are really serious about making money over the remaining years of your life, I really urge you to invest in the Wizard Training Course, not because I am trying to sell you something but because there is a very thorough teaching of how to use stock charts.

This is a study like any worthy endeavor.  You won’t be an expert overnight but you will be quite proficient in 3-4 months of consistent study.

I’ll email you another report as well as my model portfolio in mutual funds this weekend in preparation for Monday.

Have a great day tomorrow and God bless you and your family! 

NOTE #1:  I have posted the instructions to set up your stock charts how I like them to look.  In order to download these instructions, click on this link and create a FREE account.  It is the FREE TRIAL tab on the website.

http://www.tradestocksamerica.com/create_account.php

The five main brokerage firms and their Trading Platform software:   Schwab StreetSmart Pro, Power Etrade Pro, Fidelity Active Trader Pro, TD Ameritrade APEX and Scottrade Elite.

NOTE #2:   I will be publishing a "model portfolio" of mutual fund holdings that matches my personal outlook of where we are going to make money with our mutual funds as well as protecting ourselves during these difficult market conditions.  I will update this on the website for Daily Stock Report subscribers on the 1st and 15th of each month.

We are seeing a tremendous growth in ETF’s, Exchange Traded Funds.  These are mutual funds that are traded on the NYSE or AMEX in the form of a stock.  They represent a basket of stocks the same way a mutual fund invests in but the advantage is that ETFs are sector specific, like oil and gas, biotechs, consumer durables, etc.  Another advantage is that you can buy and sell throughout the day as opposed to buying or selling a mutual fund at the end of day prices.  So your timing can be more precise and hopefully profitable.  Another advantage is you won’t have restrictions with the frequent purchases throughout the year as mutual fund investment companies impose upon you.