Daily Stock Picks Report Archive

November 12, 2008  Wednesday Evening                                                                                                                                 www.TradeStocksAmerica.com

The stock market was down again today for the 5th day out of the last 6 trading days with an accelerated drop along with increasing volume.  The ratio of down trading volume to up was 26 shares were being sold today for every 1 share being purchased on the NYSE.  That is extremely negative.  This is the kind of action that sets up for a rebound.  This is a very critical position for the stock market with the Nasdaq Composite right at the lows of October 2008, and  S&P 500 almost at there too.  The Dow is approaching October lows and it won’t take much for any of these indices to drop below October lows, which is a very negative sign from a technical point of view.  The theory is that a new leg down could occur but it doesn’t necessarily mean that would happen.

It is more likely we see a very substantial bounce upward on stocks in general and could start tomorrow after a negative opening.  INTC, Intel, gave an earnings warning after the market which spooked stocks in the aftermarket.  The stock market will probably react with a small negative opening and it would not be surprising to see a substantial multi-day bounce start tomorrow or Friday.

It is also very dangerous situation considering we keep seeing the lows again and this is the third major low we have had in the indices [Dow 30, S&P 500, Nasdaq Composite]. In the last 5 weeks.  Although we are more likely to see a substantial rebound, the world has so much fear that it is causing more redemptions again and margin calls too.

When Secretary Treasurer Hank Paulson described in a press conference on television  that he is using the $700 billion bailout package money differently than first believed, the market got spooked and sold off substantially more.

Asian markets are down heavily tonight but they are just following our markets.  At this moment, the US markets are likely going to lead us upward the next couple of days and other global markets will follow.  I am looking for a rebound upward similar to the last move up that lasted for 6 days but this next rebound probably won’t be as strong or at least I probably won’t stick around as long to find out.  A few days up would be a prudent swing trade strategy on the long side on many stocks.

SKF, Proshares Ultrashort Financials, moved up 11.5% today to close at $173.93.  This was $112 last week.   We are also getting signs that this is close to peaking as well.

GS, Goldman Sachs didn’t give us a good bounce today until around noon and that was only $1.75 off the bottom of $65.  This gave up all of yesterday’s gain and then some.  I still think this is the stock to be long in the following weeks.

HIG and PRU continued downward today but this is also shaping up to be a decent long position.  I’d be looking at PRU, Prudential close to $25 as a possible long and HIG, Hartford, close to $9 before trying to buy as a swing trade.

The VIX, Volatility Index moved up 8.1% to close at 66.46.    We should see the VIX drop as the stock markets tries to move upward these coming weeks.

Intermediate Trade Positions:  If you still have stocks long and did not sell in this latest rally, be prepared to hold for a couple of months to move to higher highs.  It is a little too late to be selling now.  Many stocks look attractive to buy but it is wise to wait to see some buying to occur first before trying to catch a falling knife.  Look at the stocks below for intermediate trade ideas as well.

Swing Trades:  GS, Goldman Sachs is most interesting as a long swing-see note above.  BLK, Blackrock is an investment brokerage firm and looks very interesting as a long purchase tomorrow.  These other stocks that were listed as swing trades long in last night’s report:  FCX, AXP, AAPL, TOL, and BAC all dropped below their previous support level so many stocks have become more dangerous with risk of lower lows!

Day Traders/Intraday stock ideas:   The drop and pop pattern that we have been using on the intraday trades hardly worked today with a tremendous selling that occurred today.    Although caution is prudent, the trading pattern of drop and pop technique for LONG intraday trades should be excellent the next couple of days starting tomorrow.  with AMZN, AAPL, RIMM, FSLR, GOOG, BIDU, CME, ICE and POT.   Plus many other stocks will work well using this technique – look for most popular, highest volume and largest range for the day between high and low stock prices.

Last Note:  We are still in a bear market with a strong downtrend.  This recent rally we just had in stocks was just a counter rally within a bear market.  They are powerful and can be very profitable, as you just have witnessed (and hopefully experienced).  We use whatever stock trading technique the market requires from day trades to swing trades (2- days), intermediate trades for months, short selling and long positions.  We can buy stocks, stock options, ETFs or occasionally bonds.

Other ideas:  Make a note to yourself to keep watching YHOO, Yahoo, hit $10 and may continue lower $9, $8.50 etc..  I am probably going to buy a little of YHOO tomorrow anticipating a move upward.  I’ll try $1.00 stop on this $10 stock.    

Also keep alarms on FSLR triggered at $110 per share; this stock along with many others could have an explosive move upward these next couple of weeks.

Keep checking your email tomorrow throughout the day, I may send an additional email if I see some tremendous opportunity.  Note the time posted in the email because email services are notorious for not delivering email in a timely manner.

Try not to let the negativity surrounding our economy get you down, there are still plenty of was to make money, almost everyday in the stock market, if you know what you are looking for.  It reminds me of when a couple asked me what I was looking for on the beach when I had my fishing waders, a small net and a shovel.  I told them I was " looking for holes in the sand."  I was razor clamming.

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 be more than 25-30% 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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