Trade Ideas of 8/28/08

Another day of back-and-forth. Both SPY and SDS once again look about even. I thought the bears had a chance to seize control, but instead it's more consolidation. However, a pattern of declining tops is forming on the S&P, while support at the mid-126s has been tested a lot. I'm not into drawing triangles on the charts, but this one is of note, because the slope of the down angle just has that look. Today's less-than-spirited fightback from the bulls only serves to make the pattern more clear. Meanwhile it looks like there might be rapid movement upcoming in the basic materials sector: oil, mining, coal, precious metals, etc; which I think is more deserving of attention than the general market.

Today VISN was just stopped out on a close below 19.00. My intraday chart shows VISN closing at 19.07 but I'm going with the published closing price on Google Finance and Stockcharts. If you still hold it, stop is at 18.49. EGO gapped up at the open and then faded. As I mentioned in my prior post, selling the gap up is a strategy certain traders employ to great success. Therefore, we are wary of gap opens. I will track buys if prices gapped and ran into the buy price (but not if it gaps over the buy price), however, it is not to be interpreted that I would go for such a purchase, certainly not at full risk. Despite the gap-and-crap, EGO, and the gold sector in general, looks primed for a run of 10+%. Watch your stops, though—gold is the hardest sector to trade.

Current Holdings
Ticker	Basis	Closing Price	Perf.	Sell-Stop	Additional Exit Guideline	Chart
EGO	8.11	7.81	-3.1%	7.29, or at market on a close < 7.49	Best would be to see price get higher than 8.15, but it's also OK if it hangs out between between 7.80 and 7.50 for a few hours. I'd be worried if it got below that for any significant length of time.	Chart

Not many charts look good to me for tomorrow (outside of gold, which we have exposure to), but here are a couple that are OK.

Update: basic materials just look too primed for a swing run, so I'm adding one more trade idea. Don't take PCU unless you can accept the double exposure to basic materials— it could move in sympathy with EGO.

Ticker	Entry	Exit A	Exit C	Chart
AAPL (Apple)	177.51	171.65	169.66	Chart
SRS (UltraShort Real Estate)	94.74	89.99	88.13	Chart
PCU (Southern Peru Copper)	26.71	24.64		Chart

PCU target price is the 200-dma around 32.83. Sell 70-100% upon attaining the 200.

Please refer to "How To Trade The Ideas" (right-hand side) to read this table.