By Mitch King
Well it is nothing new to see the government botch up a perfectly good opportunity. There was not full disclosure on the banking bailout plan and the stimulus package had more pork fat than a cheap grade of bacon. The wording today was that "private money needed" to bailout banks, we are going"stress test" the banks to see if they can survive first. Haven't they already been failing the stress test? No white knight in shining armor came today that the world was looking for. At least the media was making the stimulus package and banking bailout plan as the solution to our pain.
The reality of the world's banking problems and economic crisis is that this problem would likely resolve faster if left up to the market forces without intervention. But the government's attempt to soften the blow is probably extending the amount of time before full recovery. So for weeks now we all have been trained like Pavlov's dogs to look to the government to bail us out and when the package is not above expectations, stocks start selling off. Not a surprising scenario.
The stock market sold off today 4.62% on the Dow30 and probably overreacted to the downside but this gives us second helpings on stocks we either missed to get in or want to make money again on the long side. All stocks were either sold or stopped out today with only one remaining position and that is a short on JPM, JP Morgan for a short swing trade.
The housing stocks got whacked the last 2 days, as the pattern has been for at least 18 months. PHM, TOL, DHI, LEN, CTX, KBH and BZH got whacked. No trade here, just an observation.
Below is a list of trade ideas on an intermediate term position (over a week to 6 months) and Swing trades which are 2-7 days.
Oil prices has drifted slightly lower to $38.16; USO stopped $28.33. Totally mishandled the oil trades on this last helping on the long side.
Intermediate Trade Positions: New ideas: IBM, International Business Machines is worth a small long position tomorrow on a dip. C, Citibank is also worth a small long position. C will take more patience on the investor's side to see it move. C won't move like BAC, WFC, or JPM did on the last run we just sold a few days ago.
HNT, Healthnet is worth a small long position as well but not sure if it will get a big bounce. This was stopped out this morning but looking for an entry to buy long if it drops.
RIMM, Research in Motion is worth a small long position, especially if it drops more the next 2 days.
Swing Trades: USB, US Bancorp overreacted on the selling and is worth going long here for a swing trade long that may last for only days.
Day Traders/Intraday stock ideas: Emeril Lagassi on Food TV says "Pork fat rules" and I have been saying that intraday trading or scalping has been ruling. Watch for a nice bounce on BAC, Bank of America, if it drops hard tomorrow morning. Keep scanning amongst these and other
past favorites for good drop and pop signals. We will also see reversals Continue to watch ICE, BLK, CME, POT, MON, MOS, AMZN, AAPL, FSLR, BIDU, WFC, JPM and any high volume, high volatility stocks.
NOTES: We are going to have second helpings on the long side with some of these stocks that have been sold off the last few days. Be patient, use small positions and use wise money management and trailing stops in intermediate trades.
I am still expecting some sort of substantial rally in the stock market sometime this year mostly driven by the massive stimulus that has already been poured into the system plus the planned stimulus package being proposed now. Longer term though, in a couple years down the road, no doubt the taxpayer is going to have to pay for such the high debt amounts that the US government (and other countries) have taken on. So tax rates probably will rise in coming years, interest rates will very likely have to rise as inflation surfaces and likely the bear market resumes sometime down the road. But we don't have to be stuck in a miserable cycle like most investors. With the techniques and approach to the market, we will still thrive.
If you have been uncomfortable shorting stocks, which most people are, learn to get used to it, this will be a useful tool in the coming years.
When I list several stocks from the same sector, like the housing industry for example, don't short all of them unless you are well diversified and it represents a small percentage of your total stock account (in that same account). REPEAT: Keep an eye out for biotechs; they are building momentum and often do well in January.
SWI (SWING): 2-7 days INT: Intermediate term position 8 days to several months. Open Price: price paid on opening long position or price sold on short position. Bold notes on table above represent changes from previous day. Current positions are highlighted in yellow.
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. Intermediate trades are really important to have trailing stop losses set. 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. Don't force anything to work for you, let the setups develop and then take advantage of that. Be patient. Stay in position sizes without letting any intraday trade represent no 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
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