Daily Stock Picks Report Archive

November 13, 2008, Thursday Evening                                                                                                                          www.TradeStocksAmerica.com

The stock market started out this morning being the 6th down day out of the last 7 and but had the substantial bounce that I described in last night’s newsletter.  Stocks like AMZN, AAPL, RIMM, FSLR, BIDU and POT rebounded from 10.4 to 21.6% from the bottom today alone!  Remember I said "FSLR could have an explosive move upward" on last night’s newsletter, FSLR moved up $22.65 off the bottom or 21.6%.  That is why I use alarms, with FSLR waking me up at $110.  It has been a really "perky" stock along with AAPL this year.  Certain stocks act that way until they go out of favor and even though the stock prices have dropped dramatically these past 2 months, these are still favorite stocks of investors, at least for a while.  Then there will be other favorites as some are popular and some are not.

Even AXP, American Express, went up 30.7% off the bottom today, FCX up 20.9% and many more moved sharply up.  This is a buy program controlled by computers initially, then other people jump in on the buying.  The coal stocks moved sharply too, PCX, Patriot coal was up 26.5% from the bottom, FCL– 17.5%.

Now here is what I am thinking for tomorrow and Monday.  It’s strange talking about this day by day but the market is moving up and down with such volatility, the percentage profits that can be made with these moves are so substantial that it is important we discuss this day by day.  When the stock market stabilizes, we won’t be talking strategies so much with such a short time horizon.  But this is what is making us money, so we keep doing it.

Stock prices moved up so much off the bottom that it is likely that we see some selling early and probably some buying will be attempted but nothing close to what we saw today.  Let’s face it, the market has so much fear and turmoil that other people are thinking the same thoughts what we are, to be close to the sell button.  If the market has a weak attempt at buying at the regular opening, we may see another cascade of selling just like we saw yesterday.  I’d like to see a healthy continuation of the market going upward tomorrow but I am a little skeptical about that happening considering we saw a big move up late in the session.  The Dow 30 ended up 552 points for today.

It doesn’t matter what the Asian markets do tonight because they are following us at this point.

SKF, Proshares Ultrashort Financials, moved up to a high of $195.51 10am Pacific time and SKF got crushed on this buying we saw.  It dropped 48 points to $147.12 at the low.  Now folks, that is one beautiful option play if you are into stock options.  The premiums are extremely high on these but they still would have tripled if you bought a put option at about 10am. But most of that play is over now.  By the way, I keep the SKF intraday chart up during the day on crazy days like this.  I watch it closely because that tells you what the market is doing.  The VIX, Volatility Index, has a delayed reaction so I use the SKF instead for this purpose.  It is kind of a pulse of the market as a contrarian indicator.    

GS, Goldman Sachs was a disappointment for most of the day but finally did rebound 15% off the bottom.   I still think this is the stock to be long in the following weeks. I am looking for low $90s in a few weeks, maybe into January.

HIG, Hartford Life Insurance did get below $9 ($8.62) and moved up 26% off the bottom.  PRU,  Prudential Insurance, moved 26.4% off the $20.14 bottom to move to 25.40.   Don’t trade PRU anymore, this opportunity is over, do you read me, over? 

The VIX, Volatility Index came down 10% today to close at 59.83 from yesterday’s close of 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.  Consider reducing tomorrow some of your stocks, maybe 15-20% of your total positions, unless you don’t mind the volatility and can have a longer time horizon for these.  The odds are we get lower prices late tomorrow and on Monday. 

Swing Trades:  GS, Goldman Sachs, still has much more to move upward in the coming week or so (See note above).  BLK, Blackrock is an investment brokerage firm and looks like it could continue to move up tomorrow-look for a drop at the open first though.  I am cautious about buying long and holding over the weekend again.

Day Traders/Intraday stock ideas:   Continue to look for drop and pop intraday trading technique working tomorrow.  If the bottom is really obvious after a steep selloff in our favorite stocks, then buy long.  If the stocks fizzle early and turn down, sell immediately at that point and stay out, we could have a lot of selling tomorrow like we saw on Wednesday and Thursday.  I think it was yesterday that drop and pop technique didn’t work well because selling dominated the day.  I am not saying we will have a lot of selling but it is a possibility based on the patterns we have been seeing.  Drop and pop stocks  AMZN, AAPL, FSLR, BIDU, RIMM, MON, MOS, POT and PCX.

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:  Sleep, rest, take it easy or go razor clamming this weekend in Washington beaches.

Concluding thoughts:  I still think we are going to have a lot of opportunities both long and short with continued volatility.  This makes intraday and swing trades the highest probability for the most profit in stock trades.  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.

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 Sunday night.

Mitch King

www.TradeStocksAmerica.com

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