Trade Ideas for 9/2/08

Friday's market action really set up the case for the bulls. What a nice, gentle pullback in the major indices, and suddenly the Dow, S&P & Russell are well-positioned for price increases come Tuesday. So let's see if the bulls can take advantage of this setup.

BPOP popped big time on news Friday; I hope some of you were able to get a piece of the action. At one point the stock was up 27% before pulling back pretty sharply. The funny thing is, the initial reaction to the news was negative, so the stock actually started down for the day before beginning its incredible run. I've seen this a few times before: the market getting the initial reaction wrong. It's a gift, because then we have an opportunity to buy in. The general rule is to sell the news, so what to do about BPOP now is a bit tricky. It's 50/50 whether the run will continue; therefore I recommend selling 1/2 the position to book some of that profit.

The encouraging setups in the major indices may spell trouble for our other holdings, as lately basic materials have performed inversely to the major indices. However, these relationships are fluid; there was a time not long ago that higher oil meant higher S&P prices, for example. It's a matter of sentiment; if the market gets in a buying mood, very little can dampen its spirits. Both of our basic materials holdings do look good to me, so let's stay the course.

Current Holdings
Ticker	Basis	Closing Price	Perf.	Sell-Stop	Additional Exit Guideline	Chart
EGO	8.11	7.93	-2.2%	7.49	Stay the course	Chart
PCU	26.71	25.53	-4.4%	24.64	Stay the course	Chart
BPOP	7.67	8.15	+6.3%	6.89	Sell 1/2 to book profit and reduce risk.	Chart

Given that the major indices look good to me, it's no surprise that I found a raft of nice-looking charts for Tuesday, and I've listed a few that I like. A bit more than normal, but this reflects my enthusiasm. Of course, I could be wrong, so be sure to continue to manage risk; however, this is the first time in a while that I might give some thought to the Aggressive setup figures. Of the major indices, the Russell has performed the best, followed by the Dow and S&P. So if you'd rather not go for UWM, DDM and SSO are the UltraLong equivalents for Dow and S&P, and the unleveraged versions are IWM, DIA, and SPY. The NASDAQ-100 index actually looks pretty bad, but the NASDAQ exchange itself looks good—go figure.

Trade Ideas for 9/2/08

Ticker	Entry	Exit A	Exit C	Chart
UWM (UltraLong Russell 2000)	54.81	53.12	50.22	Chart
NDAQ (Nasdaq OMX Group)	33.23	32.21	30.99	Chart
LYV (Live Nation)	16.63	15.89	15.19	Chart
LVLT (Level 3)	3.54	3.29	3.18	Chart

Book 1/4 - 1/2 of NDAQ near 200-day moving average around 37.50. I currently own shares of LVLT and UWM.

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