Daily Stock Picks Report Archive

December 8, 2008, Monday Evening                                                                                                                              www.TradeStocksAmerica.com

It was another nice bull run today with intraday charts showing "buy on the dips" strategy working.  We much less volatility although the VIX, Volatility Index dropped on 2.4% today.  The SKF, the Ultrashort Financials ETF dropped 12.53% today and this could be a decent swing trade long soon, possibly a decent entry sometime tomorrow.  (See tonight’s video).  We clearly got more confirmation that sentiment is gradually shifting.  An underlying feeling is building among mutual fund managers that they "can’t be left out of the market" for fear of their peers out-performing them if they have less cash on the sidelines.  This could prop up the market further with more support going into the end of the year.  The mutual funds want to show one good quarter and limit their big losses to the 3rd quarter of 2008.  Although I would not count out the bears selling power, almost ready to pounce upon the longs at a moment’s notice.

The financial stocks were very strong today with the index up 5.73% today.  WFC, Wells Fargo moved up 9.1%, JPM, JP Morgan Chase up 9.4%, BAC up 17.1%, MER up 17%, GS up 9.1%, AXP, American Express up 12.2%, BLK, Blackrock up 7.6% and STT, State Street Securities up 8.9%.  It looks like we could see a slight pullback in the financials for a day or two and if the market is really strong, this group could resume upward to higher highs.  This isn’t a tradable comment and isn’t the kind of high probability trade that suits my style so I can’t recommend you try this.  Look at these charts of the financial stocks; most of them have moved up off the bottom 60-80% already and are closer to being shortable than being bought long.

Virtually all the sectors moved up today except the housing but they were getting over extended.  Oil stocks, ag-chemical companies, heavy construction, solar, tech stocks, pharmaceuticals (pharma), and coal and steel stocks were really strong, moving up from 12-31% (PCX).

The insurance stocks, HIG, PRU, MET, LNC, PFG,  were mixed with more pressure down.  See notes on Intraday and swing trades below.

Oil prices moved up today 7% and started that technical bounce of some sort that I was looking for.  Interesting that oil prices moving up continues to move stocks upward but eventually this relationship will change back to a normally inverse one, probably sometime in 2009.

Food and beverage stocks (PEP, K, KFT, GIS, KO) are just churning, with no real pattern.  Note that MCD, MacDonald’s continues to get higher same store sales as cost conscious consumers are returning to the fast food chains.  This pattern is likely to continue and this spike of $6 in the last 4 days (a lot for MCD) is a very bullish sign that usually precedes future direction of the stock.

Everyone is expecting the automakers to be bailed out and is now fully priced into the stock market.  If there is any hiccup with the approval, or Congress requires a substantial change in the terms or causes a delay (as politicians usually do), this could cause some more power to any selling.

Intermediate Trade Positions:   FXI, Xinhua 25 ETF got more buying today and continues to support the mildly bullish daily chart pattern.  Any pullback with FXI is likely to be shallow and short-lived and could give people who were left out of the trade to go long on the next 2 or 3 day pullback.  (REPEAT:  The FXI etf has 40% financials, 20% telecomm, 25% energy stocks and this should be watched as a potential long purchase on an intermediate term (weeks to months).  The technical indicators are and price chart are not very steep so the risk of a big sell off isn’t high.  Conservative investors may wait for a pullback while aggressive traders could take a small long position immediately.  PTR, Petro China also looks good using the same analysis as above.

Swing Trades:    If you bought XTO, COG, EOG, or NBL, these independent oil and gas companies could be sold tomorrow to capture that nice 7-15% profit in two days that they are up.  Still watching the housing stocks such as DHI, TOL, PHM, LEN, are eventually going to be good short candidates as they move up.  All is not right with the world in this housing sector because it has had a nice run up in stock prices.  The life insurance sector (HIG, PRU, MET, LNC, PFG)  already started to correct into a swing short trade, especially the lower priced and lesser know companies like LNC, Lincoln National and PFG, Principal Financial Group.  Keep position sizes small, especially if you are new to selling short.

Day Traders/Intraday stock ideas:   Intraday trading pattern has changed to "no drop, and no obvious pop but just a steady climb upward."  The bullish sentiment covered over any drop and pops in the intraday chart but it is likely we see a drop and pop re-appear tomorrow morning but nothing close to the big drops we have seen in the past.  We probably will see shallower drops followed by big pops and LONG is the smart way to use this technique now.  We might see a slight sell-off tomorrow anyhow so the drop and pop could coincide well with the market.  The insurance companies should be a group to watch for short scalps tomorrow followed by long scalps but give it a lot of time before going long.  Notice how long PRU took to hit bottom at 10:42am Pacific time before bouncing 10% in the following 90 minutes.  This is an excellent group of stocks (HIG, PRU, MET, LNC, PFG) to trade tomorrow using intraday trades short and long OR swing trades short for a 2 or 3 days.

Concluding thoughts:    The market continues to show more and more bullish signs and could be establishing a new trend for the coming weeks or months, although that is still slightly premature to be sure.  Hold your intermediate and swing trades longer than before

Thoughts:  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.  Trade what you see, not what you hope for.

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 represent more than 10-15% 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 is the founder of TradeStocksAmerica.com.  All material presented herein is believed to be reliable but we cannot attest to its accuracy. All material represents the opinions of Mitch King. Investment recommendations may change without notice and readers are urged to check with their investment counselors before making any investment decisions. Opinions expressed in these reports may change without prior notice. Mitch King and/or the staff at TradeStocksAmerica.com may or may not have investments in any stocks cited above before or after this newsletter is prepared. Opinions expressed in these reports may change without prior notice.

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