Daily Stock Picks Report Archive

November 30, 2008, Sunday Evening                           
www.TradeStocksAmerica.com

The market is in a vulnerable situation where we could see a trap door open under the market’s feet and stocks could start falling again this week, just like we saw on November 4, 2008.  Whether the stocks see a lower low, that is difficult to tell and not really important right now.  They have risen up 30-40% in this last rally and the weakest stocks in the last couple of months will likely be weak again on any pullback.  The odds are getting higher and higher we have a pullback starting this week and we see some stocks turning over already (see below).

The important thing to remember is that you should be making decisions on what to do with your stocks based on how the market is acting, not how you or I expect the market to act.  I expect the market should drop this week but I would like to see confirmation in the stock price chart itself before committing larger amounts of money first.  It would be really good for you to keep switching to 15 minute 7 or 10 day charts to find the swing trades on the short side.

There is the saying that has a lot of truth to it, that when a lot of people are looking for stocks to go down (in this case), that stocks continue to move up.  The logic behind this is that a lot of cash is sitting on the sidelines and need to be invested.  Since there may be fewer buyers that have stock to sell compared to many who are either short or on the sidelines in cash, there could be less pressure on the stocks to drop.  That is why I caution you that stocks should go down this week but may go up for a day or two first before substantial selling occurs.  When stocks do start selling, my best guess is that it will be similar to the November 4th top and could get vicious again, but not likely as bad as this last round of selling from November 4th to November 20th.

My suggestion is to short the stocks that are the weakest or are already selling now or before most of the others.  Here is the

A little more upside on ag-chemical stocks MON and MOS; POT and MEE are already turning over. 

More upside:  financial stocks like BAC, JPM, GS, BLK, C.

Turning over and/or looking vulnerable:  WFC, STT, CNX, BTU, MT, AMZN, GOOG, BIDU, CLR, WLT.

Coal looking vulnerable:   CNX, PCX, ACI, FCL, JRCC.

Insurance stocks like PRU, HIG, MET are still moving up but MET should break down first of the three.

Housing stocks are turning over:  DHI, CTX, KBH, BZH, TOL, PHM, LEN, HOV.

Stocks turning over:  AAPL, AKS, POT, MEE.

Repeat from Monday Evening November 24th but still relevant:  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.

Stocks already dropping:  AAPL, AKS, POT, MEE, DHI, CTX, KBH, BZH, TOL, PHM, LEN, HOV, CNX, PCX, ACI, FCL, JRCC.   It is worth noting stocks that are dropping first after this 4-5 day upward climb we just had.  It may indicate that they will correct harder as the market has a pullback that may start tomorrow.

Intermediate Trade Positions:  (REPEAT)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 this week.   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 and some stocks have started to drop already (see above).

Swing Trades:  I would not be considering opening any new swing trades long.  The financial stocks are a little dangerous to be shorting and if you choose any from this sector, let them correct sharply first and then short after they have bounced from that first big drop.  [For example, look at AAPL 3 minute chart today].  Wait for short signals to occur this week, possibly as early as tomorrow, Monday December 1, 2008.  Swing trades on the short side look best with the housing, coal, and ag-chemical stocks-in that order.

Day Traders/Intraday stock ideas:   (some repeated from November 25th report)  The drop and pop technique worked very well in both directions, as expected and will very likely continue tomorrow.  This should be excellent trading both short but wait longer for stocks to drop if you buy long tomorrow on intraday trades.  Some sectors will drop tomorrow more than others.  Note the stocks above under stocks already dropping.  My best guess is many stocks open slightly down tomorrow 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. 

Concluding thoughts:    I’m looking for a top to start opening short positions-especially in stocks that started to turn over last week.  These stock positions will be very small at first and next week profit from a downtrend that is likely to resume.  Remember that we are in a steep downtrend and this is only a rebound within that downtrend until the stock charts look different.  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 tomorrow. 

Mitch King

www.TradeStocksAmerica.com

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