Daily Stock Picks Report Archive

December 14, 2008, Sunday Evening                                                                                                                            www.TradeStocksAmerica.com

The Dow 30 opened down on Friday morning and rebounded right from the open.  This is clearly a bullish sign and the fact that the futures are up tonight along with the Asian markets even with the news that the White House says deal with automakers is not imminent.  Just a couple of weeks ago, this headline would have the S&P futures down sharply so the market is getting immune to bad news and appears to be moving up in spite of such negative economic headlines.

Most stocks opened down at the open Friday and surged up sharply with some moving over 20% off that bottom on the news that the White House is considering extending bridge loans to the US automakers until the Senate gets a package deal they can agree on.  They didn’t sell off much as they used to in past weeks and this is another sign that the market wants to go up.

The financials corrected nicely at the open and WFC and JPM dropped further than expected and didn’t rebound as much as other stocks. This swing short position is over, no further benefit.   

The ag-chemical stocks MON corrected hard with no bounce and MOS had a lesser correction.  These swing short positions have been completed and have no further benefit.

We are at a point in the market where the odds no longer favor short position and that we are entering "no man’s land" lasting at this week but at some point, the market is going to try to come to grips with further negative economic news and headlines like unemployment rising, more earnings forecasts being lowered, a new topic of economic fear like credit card losses, or the Fed panicking with lowering interest rates to .50%, or whatever.  It is still not convincing that the market can have a sustained uptrend for a couple of months that may be starting now, in light of the overwhelming negative global economic situation. 

Intermediate Trade Positions:   These three intermediate long positions are still looking good, FXI, Xinhua 25 etf, PTR and SNP.  Even though oil dropped, these stocks rebounded strongly off their Friday morning opening prices and are holding the uptrending technical indicators including the most important indicator, the fast moving average.

The steel sector has been very strong lately and should be noted that there may be a possible opportunity to go long this sector after a substantial pullback in the coming week or two.  Start setting alarms for prices to alert you after a 15% pull back from here on X, SCHN, and AKS.

Swing Trades:    The shipping stocks DRYS, Dryships, EGLE-Eagle Bulk Shippers, and DSX, Diana Shipping corrected nicely at the market open on Friday and that was the low price of the day.  If you didn’t cover at Friday morning’s opening prices and are still short, these are likely to open higher slightly on Monday and they could go either way with a slight bias toward the downside.

The housing stocks such as DHI, CTX, TOL, PHM, LEN, are still in a corrective phase.  Look for another 10% in this group on the short side.

The life insurance sector (HIG, PRU, MET, LNC, PFG) should continue the selling for several days or more but watch for any bullishness that may tell you this group may want to stay up and move to higher highs. 

The coal sector stocks (FCL, ACI, JRCC, MEE, CNX) really acted strong Friday and could be another commodity sector starting to show signs of at least a countertrend rally within a bear market.  Normally we would look for the oil to lead us out of the historic commodity sell-off since mid July 2008 but that seems to be on its own track.

FCX, Freeport McMoran still looks weak and the odds are good that FCX continues to sell off. 

AMZN, Amazon.com didn’t correct much on Friday at all and responded very strongly to the buying we saw after Fridays open.  AMZN has been very responsive to any buying so this one still belongs in the intraday long category as a "perky" stock along with AAPL, and FSLR.

Repeat from above:  JPM and WFC corrected nicely and this short position is over with no further benefit.

SKF, Ultrashort Financials ETF peaked at $141.05 on Friday which it reached shortly after the open when stocks were down (Remember when you buy SKF, you are short the financial sector stocks).  SKF capitulated by moving up sharply and reversed sharply.   No further trade in SKF now.

Day Traders/Intraday stock ideas:   Continue the drop and pop stocks like AMZN, FSLR, RIMM and AAPL.  There may be a shallow pullback with a strong move upward on the pop.

Concluding thoughts:    The stock market is looking like it is responding to more good news than it is reacting to bad news making the bias with our trades toward the long side.   We could be starting a longer trend up with sectors that were badly hurt related to commodities.  Steel, metals, mining, building materials, heavy construction stocks are acting surprisingly strong, considering how negative the news still is with the economy, housing and credit problems.  The next couple of days may be a good time to take a rest from the market as we are entering a point where the odds do not heavily favor either way.

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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