Daily Stock Picks Report Archive

November 24, 2008, Monday Evening                           
www.TradeStocksAmerica.com

That’s more like it, a sharp predictable up day.  That’s the good news.  The bad news is don’t let your guard down and think this will continue very long because the stock market is likely to turn over again, just like we saw on November 4th.  The shorts are covering, the hedgies are going long, the value investors or managers are buying and soon the retail investors will be convinced to buy, just in time for the market to start selling off again.

The financial stocks have more to go on the upside more than any other sector.  My best guess is another couple of up days on the financials and maybe into next Monday.  No trading occurs on Thanksgiving and the stock market closes three hours early at 10am pacific time on Friday.  The only other half day of trading of the year is after Christmas and both tend to be volatile days, usually both are bullish type of days. 

By the way, those half days tend to have a stock or two that really goes wild, where speculation on the long side really gets going with no sellers, until Monday.  Not all the players are in the market on those half day Fridays.

I woke up this morning with nice profits on the financials that gapped up.  The Citibank bailout news ignited the financials and most all sectors.  Then when the President-elect spoke with authority and confidence today announcing his economic team he appointed, the market really powered up and is likely to continue tomorrow, especially in the financials.  As I suspected, stocks didn’t sell off much at all with most of them gapping up, having a shallow pullback and then resuming to higher highs.

It is going to be an interesting challenge to interpret what the stock market will do this week.  The odds favor a real push and pull between the buyers and sellers but next week I think the sellers will win out and the stock market is likely to resume a downward trend next week.  But in the meantime, any long positions, especially the financials, will likely move up tomorrow and probably into Wednesday with some signs of selling and volatility showing up as time passes on.

Most sectors were strong except the ag-chemical stocks, [MOS, MON, AGU, MEE, CF, POT] particularly POT, Potash was weak.  Some of these ag-chemicals are already heading down and correcting on a strong day up, +393 Dow 30 points or 4.93%.  The tech heavy NASDAQ Composite stocks were up +6.33%.  Solar stocks were very strong along with coal, housing, steel, and independent oil and gas.  The largest oil stocks look pooped out as the price of oil went up 9.8% today alone to close at $54.50 per barrel.  The Chinese stocks are acting very weak and hardly reacted to the two up days we have had so far [FXI-Xinhua 25, LFC, BIDU, many others]. 

Intermediate Trade Positions:  If you have existing positions, be prepared to hold for several months to see substantial gains.  Consider reducing some long positions this week on this rebound and assume that we continue a downtrend next week.   Open gradually and no leveraged positions.  Tighten your trailing stop losses with about 2% or less.  Don’t give up much profit or reduce your losses by selling some long positions this week.  The market could easily and should get back on a corrective cycle soon, possibly as soon as tomorrow.

Swing Trades:  I would not be considering opening any new swing trades on Tuesday, November 25, 2008. 

Day Traders/Intraday stock ideas:   The drop and pop technique should work very well tomorrow.  Some sectors will drop tomorrow more than others.  My best guess is many stocks head up a little and then drop sharply followed by a healthy rebound.  The more sharper the drop, the bigger the rebound but take note if some stocks take large drops because that is often the signal of the resumption of the correction that I am looking for.  Tomorrow and Wednesday will be days you should do well on both the long side and short.  If you do sell short, wait for that rebound that you buy long [the pop after the drop] to be completed and the intraday 3 minute charts show a clear peak in the moving averages, confirmed by falling indicators in the stochastics (%K , %D), Williams %R and the MACD.

Concluding thoughts:  Many stocks are likely to continue to move upward the next few days in this bounce, especially the financial stocks.  Look for a peak in stocks this week, possibly as early as tomorrow with some sectors like large oil stocks [XOM, CVX, COP, BP], correcting sooner than other stocks.  I’m looking for a top to start opening short positions that will be very small at first and next week profit from a downtrend that is likely to resume.  It is hard to predict whether we see lower lows than the recent lows we say on last Friday morning, November 21, 2008, but that isn’t important right now except to know we are in a steep downtrend and this is only a rebound within that downtrend until the stock charts look different.  If tomorrow is another big day up, (which is doubtful), I’ll be looking to open short positions as early as tomorrow.  Take note of the little bit of selling the last 15 minutes today, see video clip.  We should see more of that tomorrow.  Don’t sell short until stocks show they are heading down; the worse thing you could do is sell short for your first time while stocks are still rising.   You need to let the stocks break down first and show signs of weakness before opening a short position.  It is a good practice for even well-seasoned traders.

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 15-20% 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 this weekend..

Mitch King

www.TradeStocksAmerica.com

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