Daily Stock Picks Report Archive

December 10, 2008, Wednesday Evening                                                                                                                                 www.TradeStocksAmerica.com

Even though all eyes are on the auto bailout it looks like it’s going to be delayed and this is the few days that the stock market is likely to get some selling.  The dollar amount has been lowered from the original $25 billion to $14 billion and it is very likely the market sells off even if or when the Senate gets the vote through successfully by Friday.   The most likely sectors to sell down are financials, housing, insurance and ag-chemical stocks.  For sure the odds go up that tomorrow is a down day and that should accelerate the selling we started seeing in financials and housing.

For the most part, I think we are past the stage where we saw forced selling caused by margin calls, redemptions and outright panic but it is still possible we get another dose of that.  At the moment, the viewpoint is "buy on dips" will start working again for this countertrend rally that appears to have started.  The odds are increasing that a mild rally could last for a couple of months into next year with interspersed periods of selling for shorter and shallower pullbacks (also known as selling).

Oil prices moved p 3.4% today, which basically means nothing.  We have not seen enough consistency in the buying or any trend reversal to make anything of this sector except to reiterate we are in a steep downtrend.  The long positions in the independent oil and gas stocks’ swing trade continued to move up, a pleasant surprise.  Soon we should see this trend reverse.  Don’t forget about this sector and that we need to have intermediate term LONG positions at some point.  But let’s wait for the turn upward to begin first.  Remember, don’t be a hero.

Intermediate Trade Positions:   FXI, Xinhua 25 ETF is moving up with higher highs and the uptrend is well established with both this index etf and the Chinese stocks.  This should be a shallow and short-lived correction already came and went  and all indicators are still pointing upward for both FXI , PTR, Petro China and SNP, China Petroleum.  Note that LFC, Life China is also moving up but that’s been a long forgotten stock from over a year ago that I was trading that long.

Swing Trades:    The housing stocks such as DHI, CTX, TOL, PHM, LEN, are moving down nicely now.  Hopefully you have established a short position or perhaps some of the more experienced investors or traders may have purchased put options.  If there are no shares available to short, consider buying put options that expire well into 2009, February or March with close strike prices.  . Look at the downtrend lines at the lower highs and lower lows on the daily chart shown in the video tonight.

It was successful trading the life insurance sector (HIG, PRU, MET, LNC, PFG) mostly on the short side with some excellent long scalps as well.  PRU and MET acted the weakest and it was easier to trade these two vs. the lower priced stocks of HIG, LNC and PFG.  This whole group of life insurance companies should be selling off for several more days.  

The coal sector stocks (FCL, ACI, MEE, CNX) are likely to sell off in a mild manner these coming days.  This group is worth a small swing short position. 

FCX, Freeport McMoran should be good for a 15% swing short .

AMZN, Amazon.com is gradually turning over.  This is a more difficult stock to trade short compared to other sectors like coal, ag-chemicals or housing stocks but this is worth a very small short position. This is a decent swing short to $44-$46.  

JPM, JP Morgan Chase and GS also acted good as swing short positions.  GS has been weaker than the whole financial stock group.  WFC, Wells Fargo is also accelerating its drop as well.  Ignore BAC either way.

SKF, Ultrashort Financials ETF moved up over $118 today from yesterday’s low of about $101. I’m still looking for  SKF to get to $130 as financials continue to sell off the next few days.  Keep position sizes small, especially if you are new to selling short.  This allows you to have staying power with your positions and not create such high emotions for you. 

Take note that the steel sector has been on a really strong run the last 3-4 days.  It could be changing the trend with this sector but it is too late to buy this sector on this particular run.  SCHN, X, AKS, RS, MT, NUE, STLD, AND IIIN are moving up hard.  Watching and waiting.

Day Traders/Intraday stock ideas:   Drop and pop is back in the financials  and some tech stocks like AMZN and AAPL.  Wait longer than normal for the drop in financials before going long.

Concluding thoughts:    Don’t look for huge drops in stock prices as rapidly or sharply as we have seen in the past few months.  This pullback should only be a shallow one so taking profits earlier than normal on swing shorts is a smart idea. 

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

www.TradeStocksAmerica.com

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