Bringing you some promising trade ideas each trading day

NEW ADDRESS: chribstrades.blogspot.com

Sunday, November 30, 2008

Trade Ideas for 12/01/08

Not a whole lot of action Friday as the market took a little breather in the half day it had, and I'm not sure we can read much into it. Monday will be an important day, as it sets the tone after a week that could easily be dismissed as a holiday week. By my read, the charts look very encouraging, and even more encouraging is the sudden lack of pundits saying that we have hit a bottom. Just a weird thing about the stock market; if a majority of people think something will happen, it probably won't. A lot of people have felt so burned lately that they have gotten pre-emptively short, expecting the next big drop.

Although I'll be surprised if we don't get a pullback sometime Monday, simply because we've had so many up days in a row, I am short-term bullish on the market. I've been waiting for the sucker's "rally" to begin, one that lasts on the order of weeks rather than hours, and I think we might be in it already. The steepness of the climb since two Thursdays ago shows bullish determination. Then again, the bears have showed so much strength in the past two months that it's unwise to count them out.

Current Holdings
Ticker Basis Closing
Price
Perf. Sell-Stop Additional Exit Guideline Chart
GLD 74.27 80.31 +8.1% 79.27 Look to add on a break above 81.73 Chart
LNG 2.94 3.14 +6.8% 2.64 Consider selling on a close < 2.79 Chart
AN 7.01 8.54 +21.8% 7.95 None Chart
ACM 21.84 26.49 +21.3% 25.63 Consider selling on a close < 25.83 Chart
UGP 22.62 22.04 -2.6% 21.24 Consider selling on a close < 21.59 Chart
DBA 24.86 24.68 -0.7% 23.99 Consider selling on a close < 24.43 Chart
AMZN 43.46 42.70 -1.7% 39.59 Consider selling on a close < 42.22 Chart
EWT 7.63 7.78 +1.9% 7.31 Consider selling on a close < 7.64 Chart


Many charts, more than ever, are set up the way I like for Monday. A big part of this is due to Friday's low-volume consolidations, so I take it with a grain of salt. A couple of our current holdings look good for re-adds.

Trade Ideas for 12/01/08
Ticker Entry Exit A Exit C Chart
GLD (SPDR Gold ETF) 81.73 79.27 N/A Chart
LNG (Cheniere Energy) 3.19 2.79 2.64 Chart
HMY (Harmony Gold) 8.78 8.29 7.99 Chart
PCL (Plum Creek Timber) 37.53 35.58 33.75 Chart

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

Thursday, November 27, 2008

Trade Ideas for 11/28/08

We had a broad rally Wednesday: most, if not all, sectors rose, and some rose quite a bit (solars). We bought three new positions. The market has strung together a series of winning days for the first time in a very long time. I'm now inclined to believe that we'll see higher highs before we see a lower low (specifically last Thursday's panic low). That said, in order to recharge its momentum, the market needs to pull back.

The pullback might not happen Friday simply because of the holiday effect. So Friday might be a good time to do some profit taking; you can always re-enter the sold positions after the pullback is over on potentially lower entry prices (but, potentially higher as well). It's worth noting that the double inverse ETFs have pulled back to circa their 50-day moving averages, which provided support during the early November bull trap. The time is right for the bears to reassert themselves soon. I have to emphasize that I don't think they'll get very far, so the most I'd do is get flat; I would not go short because of what I perceive to be limited profit potential. The short side is a tired-looking chart; the last impulse took a long time to make a slightly higher high; this is a common look for 5th-wave moves that mark the end of an impulsive phase.

Current Holdings
Ticker Basis Closing
Price
Perf. Sell-Stop Additional Exit Guideline Chart
GLD 74.27 80.38 +8.2% 79.27 None Chart
LNG 2.94 3.12 +6.1% 2.63 Consider selling on a close < 2.86 Chart
AN 7.01 8.20 +17.0% 7.36 Consider selling on a close < 7.56 Chart
ACM 21.84 26.78 +22.6% 23.37 Consider selling on a close < 25.63 Chart
UGP 22.62 23.85 +5.4% 21.24 None Chart
DBA 24.86 24.80 -0.2% 23.99 Consider selling on a close < 24.45 Chart
AMZN 43.46 43.96 +1.2% 39.59 Consider selling on a close < 40.28 Chart
EWT 7.63 7.71 +1.0% 7.25 Consider selling on a close < 7.50 Chart


The other possibility is that the pullback has already happened. Tomorrow's ideas have charts that speak to this possibility. GLD looks good for a re-entry. For more risk, look to DGP (double gold, but not even indirect ownership of physical gold) or SLV (silver). Silver tends to outperform gold when gold is rising. Alternatively, use CEF, which is a fund offering indirect ownership of a mix of gold and silver bullion. To keep record-keeping simple, of these permutations I'm only going to recommend GLD. I'd wait until after the first 45 minutes to enter any new positions.

Trade Ideas for 11/28/08
Ticker Entry Exit A Exit C Chart
GLD (StreetTracks Gold) 81.41 79.27 N/A Chart
IBM 82.41 78.59 78.21 Chart
CATY (Cathay Bancorp) 21.01 19.29 18.41 Chart

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

Tuesday, November 25, 2008

Trade Ideas for 11/26/08

Today we got across-the-board pullbacks, the ones that were bound to happen sooner than later. What's encouraging is that the pullbacks were shallow, but also that stocks finished closer to their highs than their lows. Particularly in the commodities stocks. Since my read of the commodities is that they remain in a structural long-term bull market, I'm watchful of the point at which their path will diverge from that of the general market (which began a structural bear over a year ago).

That's well and good, but the big question is whether the pullback is over. I don't know; volume is on the light side, but there's still a good chance of a Thanksgiving rally. Fortunately my system is designed to rack up positions quickly when the setup is right, and right now the setup is right. If the market continues its upward path, we get stopped in to new positions as prices rise, and take part in the rally. If the pullback should continue, we either don't get stopped in (because prices don't make their way higher), or we get stopped in and quickly out on a whipsaw. What we don't do is attempt to anticipate a move higher prior to the actual breakout, nor do we buy a position and hold onto it even as it falls to new lows.

AN and ACM hit their major moving averages, and while both subsequently fell back, the latter managed to climb back up and is looking good. I realize I mis-blogged yesterday as AN was nearing its 50-day moving average, not 200- (as was the case for ACM). For my part, I dumped both of these positions just below their moving averages. We bought UGP at the end of the day.

Current Holdings
Ticker Basis Closing
Price
Perf. Sell-Stop Additional Exit Guideline Chart
GLD 74.27 80.87 +8.8% 79.27 Consider making the sell-stop a close-below price if you want a looser leash Chart
LNG 2.94 2.70 -8.2% 2.49 Consider selling on a close < 2.64 Chart
AN 7.01 7.75 +10.6% 6.33 Consider selling on a close < 7.37 Chart
ACM 21.84 26.77 +22.6% 23.37 N/A Chart
UGP 22.62 22.16 -2.0% 18.45 Consider selling on a close < 20.99 Chart


Many, many charts have the setup that I'm looking for, so my challenge tonight is to narrow that list down to a manageable number that is in line with my risk tolerance. For you guys, I'll provide a representative sample.

Trade Ideas for 11/26/08
Ticker Entry Exit A Exit C Chart
EGO (El Dorado Gold) 5.72 4.99 3.87 Chart
DBA (PowerShares Agriculture ETF) 24.86 23.99 23.22 Chart
AMZN (Amazon.com) 43.46 39.59 N/A Chart
EWT (iShares Taiwan) 7.63 6.89 7.25 Chart

I currently hold shares of EGO.

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

Monday, November 24, 2008

Trade Ideas for 11/25/08

Nice rally today, but I'm not buying it. Probably the most telling indication is that volume has been trailing off since Thursday's low. Granted, we are in a holiday-shortened week, but in all likelihood we'll get a pullback tomorrow. The real question is how the pullback's going to look. Under the bullish scenario, this incipient rally merely takes a breather before continuing upward. Under the bearish scenario(s), something else happens. Edge to the latter, unfortunately.

We bought all three signals from yesterday, and two of them look ready to be plucked as they near their 200-day moving averages. Check the Additional Exit Guideline column for more info.

Current Holdings
Ticker Basis Closing
Price
Perf. Sell-Stop Additional Exit Guideline Chart
GLD 74.27 80.91 +8.9% 75.44 Consider taking some profit if you haven't already Chart
AN 7.01 7.56 +7.8% 5.79 Consider booking profit as AN nears its 200dma ca. 8.30 Chart
ACM 21.84 24.65 +12.9% 21.24 Consider booking profit as ACM nears its 200dma ca. 26.50 Chart
LNG 2.94 3.00 +2.0% 2.49 N/A Chart


After today's rally, not many charts look safe enough to enter. A pullback will help set us up for the next move.

Trade Ideas for 11/25/08
Ticker Entry Exit A Exit C Chart
UGP (Ultrapar Participacoes) 22.62 20.99 18.45 Chart

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

Sunday, November 23, 2008

Trade Ideas for 11/24/08

The market rallied Friday afternoon after all, much to everyone's relief. It certainly took its time, though, and several sectors, such as the financials, even put in fresh lows before turning around. In my opinion, this doesn't bode well for the recovery. If, as many believe, there's a lot of pent-up demand for stocks, why didn't this demand manifest itself sooner?

One sector that bucked the trend was gold, which soared from the get-go. The biggest winners in the sector were the gold majors, i.e., the largest gold mining companies in the world, such as Gold Fields (GFI, +36%), Goldcorp (GG, +27%), and Barrick (ABX, +31%). In the hottest phase of a gold bull, the gold juniors lead the way, followed by the mid-tiers and majors, then silver and finally gold itself. Right now the order is almost in reverse, and gold has been in a near-term downtrend since the spring. There's no evidence that gold is not going to hit a lower low before it rises to a new all-time high. But rise it will—and sooner than later—for any of a number of reasons, the most important technical one being that gold is in a long-term structural bull market (along with the rest of the commodities), and this in contrast to all other sectors of the market that come to mind. Therefore, while gold may be held for the long term, sectors such as technology and retail must only be played for short-term bounces.

The question facing us now is, did we just begin one of these short-term bounces? The short answer is that we wait for the market to show us. The long answer is that one could argue for and against the likelihood that a bounce will come. On the con side, the market just hit a lower low, and the downtrend thus far has been textbook: lower highs and lower lows. Therefore, to think this time will be different is to be delusional. Furthermore, every rally attempt thus far has been short-lived despite promising initial momentum. On the pro-bounce side, we hit a lower low, and in a way, that means the other shoe has dropped. It can be interpreted as an all-clear signal. Shorts will be booking their profits as many were targeting the October 10th lows, taking away one source of supply. Psychologically, a double bottom flummoxes enough people that one could say the market has done its job of maximizing the pain. If a meaningful rally materializes, we could see gains of 30+% in the major averages.

Gold soared above the re-up price, so we stick with the original lot. This burst of momentum will surely dissipate soon, and gold did hit its 50-day moving average at Friday's close. Ideally gold does a shallow pullback for a couple days and then shoots up again. The near-term target is the 200-day moving average of ~$900/oz. Alternatively, gold could be rebuffed sharply by its 50. To hedge your bets, consider booking some profit.

Current Holdings
Ticker Basis Closing
Price
Perf. Sell-Stop Additional Exit Guideline Chart
GLD 74.27 78.85 +6.2% 75.44 Consider booking some profit now that gold has attained its 50dma. Chart


Cheniere still looking good, and a couple others that are nicely positioned to take advantage in the event of a sustained market rally. No gold-related recommendations since we already have one in our current holdings, but if you're looking to add, I'd look at mid-tiers such as El Dorado Gold (EGO) or SLV, the silver ETF.

Trade Ideas for 11/24/08
Ticker Entry Exit A Exit C Chart
LNG (Cheniere Energy) 2.94 2.49 N/A Chart
ACM (Aecom) 21.84 19.75 18.95 Chart
AN (AutoNation) 7.01 5.99 5.36 Chart

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

Thursday, November 20, 2008

Trade Ideas for 11/21/08

I hope this post finds all of you hanging in there, surviving if not thriving in this onslaught of wealth destruction. Unfortunately, selling begets selling (just as buying begets buying), and there's no telling how much selling is left. Perversely, as the number of people expecting a bottom decreases, the likelihood of a low being put in increases. Cold comfort if you're long this market, but it's another of saying that between here and absolute zero, there will be kickback rallies.

Today the Dow finally broke through the October 10th lows, joining the rest of the market. The major indices are all very oversold, and while risk is now to the downside as a result of the breakdown, there's no easy setup for going short because of the oversold condition. Our only holding is gold, which held up well today.

Current Holdings
Ticker Basis Closing
Price
Perf. Sell-Stop Additional Exit Guideline Chart
GLD 74.27 73.45 -1.1% 68.79 Consider selling on a close < 72 Chart


For those who didn't get in the first time, a re-up on gold, and LNG still holding strong above a flat 50-day moving average despite oil's collapse.

Trade Ideas for 11/21/08
Ticker Entry Exit A Exit C Chart
GLD (StreetTracks Gold) 75.21 72.42 68.79 Chart
LNG (Cheniere Energy) 2.94 2.49 Chart

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

Wednesday, November 19, 2008

Trade Idea for 11/20/08

Serious distribution today as fresh lows were made in the S&P and NASDAQ. Early on, and out of nowhere, gold surged in a major way, stopping us into a position in GLD, only to fade just as quickly. This was one of the most perplexing technical events of the day, and while it's infuriating, gold actually put in a relatively strong day.

Tomorrow promises to be another wild and woolly Thursday. The indices are at such a point that the risk/reward ratios for going either long or short don't make sense for position trading. It could be a bonanza for traders who are quick and can get in and out of positions within a short period of time, however.

Current Holdings
Ticker Basis Closing
Price
Perf. Sell-Stop Additional Exit Guideline Chart
GLD 74.27 72.26 -2.7% 68.79 Consider selling on a close < 72.00 Chart


My idea for tomorrow is a chart that has held up surprisingly well. Nevertheless, it's not a time to be risking a lot.

Trade Ideas for 11/20/08
Ticker Entry Exit A Exit C Chart
LNG (Cheniere Energy) 3.12 2.49 Chart

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

Tuesday, November 18, 2008

Trade Ideas for 11/19/08

The markets once again tested their lows and were once again rebuffed. There's a weariness to all this; how many times can the lows be tested and hold? It seems like too many to count already, and the attempts are being made closer together in time.

While time is not on the side of the bulls in a bear market, a rally is still possible. If the market is to rally, it'll wait until the maximum number of people have given up hope. On the flip side, it could be ready to fall apart again. So we wait for a breakout, rather than anticipate, in order to avoid getting as hurt by the gyrations.

Trade Ideas for 11/19/08
Ticker Entry Exit A Exit C Chart
SSO (Ultra S&P 500) 26.33 22.99 N/A Chart
GLD (StreetTracks Gold ETF) 74.27 72.12 68.79 Chart
DIG (Ultra Oil & Gas) 32.04 28.41 N/A Chart

I own shares of DIG.

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

Monday, November 17, 2008

Trade Ideas for 11/18/08

We had a boring day; which direction the market will take next is now up in the air. Nothing was purchased. On the plus side, gold is giving us a setup that's usable. If you're feeling lucky, DGP is the 2x gold vehicle; however it's an ETN, not an ETF. That means it's a note, similar to a bond. In this case, the note's value depends on Deutsche Bank's promise to pay holders of the note a lump sum upon maturity (in 2038 I think) equal to the monthly performance of DB's gold index, subject to adjustments. In other words, you don't own physical gold, not even indirectly, when you buy DGP. On the plus side, it promises a double return.

Trade Ideas for 11/18/08
Ticker Entry Exit A Exit C Chart
GLD (StreetTracks Gold) 74.27 72.14 68.79 Chart
PPL (PPL Corp.) 34.19 31.72 29.35 Chart

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

Sunday, November 16, 2008

Trade Ideas for 11/17/08

We got a pullback Friday after all, right on cue around 3pm, an hour before close. This after a rally to Thursday's peak. Futures at this point are predicting a lower open for Monday. In terms of Thursday's range, Friday's pullback was about 50%, and the average chart finished at the lows of the day. Is there any reason to hope for a rally?

By my read, the potential is there. The charts look good in light of the huge surge in bullish appetite on Thursday. A 50% correction of the upward move, while deeper than I would've liked, is par for the course. However, this same setup has happened twice before in the past five weeks, and each time the prospect has looked bright for a rally that would eventually end up around the 50-day moving average. Each time the prospect turned out to be a false one. It has paid to be pessimistic, or at least cautious in one's optimism.

We didn't buy anything Friday officially, but several stocks broke through their Thursday highs only to have negative days. For these stocks, sell-stops remain at Thursday's lows, and additionally consider selling them (or a portion) if they should close much below their Friday lows. As for Monday's ideas, I'd wait a bit before taking any of them. If they should break out after the initial 45 minutes of trading, I'd feel more comfortable with the idea that they're headed up to those 50-day averages.

Trade Ideas for 11/17/08
Ticker Entry Exit A Exit C Chart
EWC (iShares Canada) 18.38 17.49 16.33 Chart
ANR (Alpha Natural Resources) 28.64 25.59 22.99 Chart
RL (Ralph Lauren) 44.12 41.49 37.92 Chart

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

Thursday, November 13, 2008

Trade Ideas for 11/14/08

For the 3rd time in the past 5 weeks, we had capitulation. This time it occurred around 1pm ET, and for the 15 minutes leading up to 1pm it felt like the world was going to collapse as the Nasdaq and S&P fell through their prior lows. I said yesterday that the market was either going to fall apart or rally today, and in fact it did both. Once again tricky Thursday lives up to its reputation.

I started buying in my personal accounts soon after the moment of capitulation. It really didn't matter what I bought (excepting short funds), I knew it was going up. The key is identifying that capitulation had occurred, and that therefore it was safe to go long once more. For me, it was easier to come to this conclusion watching the chart of the short funds. The QID, for example, went parabolic around 12:40pm:


The rule for the parabola is to set your sell-stop at the bottom of each candle; the first close below the prior candle marks the end. At 1:05pm it looked like the parabola was done for as the prior candle's low was violated (~88.60). It took me about 10 more minutes to register the idea that the low had probably been put in. That's when I started buying. I mostly bought stocks and a few call options; next time I'll concentrate on options alone as the returns are phenomenal, and the risk is low. It wouldn't have been out of the question to quintuple your options investment in the space of 3 hours. It didn't occur to me to buy calls until 3pm, and I still managed a near-triple. The sell-stop on the options would be a violation of the peak of the parabola (i.e., a new low in the indices).

Let's talk about the timing of the various capitulations the past 5 weeks. The first time we had capitulation (October 10th), the Dow, S&P and Nasdaq all put in their lows. The second time, October 27th, the Nasdaq put in a new low, but the other two managed to stay above their October 10th lows. Today, the S&P and Nasdaq both put in new lows. The only October 10th low still standing is that of the Dow, which is the most important index for Elliott Wave purposes because it goes back the farthest. The low in the Dow should hold for the remainder of the B wave; when that low breaks, it'll be for real. No buying call options at that point!

We sold QID today for a decent to great gain, depending on when it was sold. Officially we would've been stopped out at 75.99, but using the systematic parabola timing method described above, 88.60 would've been the exit. I myself sold mine in lots, the best lot at 85.30 on the way up the parabola (I didn't have the guts to hold on). FDO fell through the Exit C price early on before mounting a comeback, so it doesn't have a place in the table of current holdings. If you bought, sell-stop is today's low.

For tomorrow, buy anything, as long as it's on the long side and displayed strength today: GOOG, AAPL, DIG, GDX, UWM, FXI, etc. Use today's lows as the sell-stop. We may or may not get a pullback so buy on a breach of today's high to enter. What follows is just a couple of ideas out of hundreds that would work. If you feel twice bitten, thrice shy, don't. This may be the third bottom, but you must buy each time or else you will definitely miss the recovery.

Trade Ideas for 11/14/08
Ticker Entry Exit A Exit C Chart
EWZ (iShares Brazil) 37.78 31.11 Chart
TBT (UltraShort Treasury Bonds) 63.57 59.94 Chart

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

Wednesday, November 12, 2008

Trade Idea for 11/13/08

I've noticed that Wednesdays tend to be continuation days, and today was no exception. Prices drifted steadily lower throughout the day, accelerating into (and after) the close. The market is now terribly oversold, and tomorrow it's either going to fall apart completely or start rallying. Thursday is tricky and can be the day of reversal; but we'll just have to wait and see.

QID performed admirably today, but it has also traced out an a-b-c off its 50-day moving average. The risk is high that its move is nearly done. Accordingly, I have moved the stop up tightly, and furthermore will sell the position on a down close. On the flip side, if the market should fall apart in the coming days, QID will greatly benefit.

Current Holdings
Ticker Basis Closing
Price
Perf. Sell-Stop Additional Exit Guideline Chart
QID 73.47 81.40 +10.8% 75.99 Sell on a negative close; consider selling a portion at market open. Chart


One chart has been acting as though nothing of importance is happening.

Trade Idea for 11/13/08
Ticker Entry Exit A Exit C Chart
FDO (Family Dollar) 28.21 26.99 26.32 Chart

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

Tuesday, November 11, 2008

Trade Ideas for 11/12/08

Heavy selling on a gap down opened this Veteran's Day, and then a holding pattern as price stayed within a narrow range. In the afternoon an unexpected burst of buying activity got price all the way up to fill the opening gap. Sure, this rally disappeared as quickly as it began, but it makes what should have been a straightforward distribution day harder to read. Was that rally the last gasp of the bulls or a sign of reversal? The potential reverse head-and-shoulders pattern remains viable.

What this means for QID, which we bought today, is a bit of caution. In a bear market, you let your shorts run, and there are more false rallies than there are reversals. Therefore, don't be too quick to sell QID if you bought it. At the same time, realize that it won't be smooth sailing even if it does work out.

Current Holdings
Ticker Basis Closing
Price
Perf. Sell-Stop Additional Exit Guideline Chart
QID 73.47 74.30 +1.1% 66.17 Consider selling on a close < 71.57 Chart


A couple ideas in case the market should catch a bid tomorrow.

Trade Ideas for 11/12/08
Ticker Entry Exit A Exit C Chart
LNG (Cheniere Energy) 3.36 2.74 Chart
GGB (Gerdau) 6.91 6.06 5.79 Chart

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

Monday, November 10, 2008

Trade Ideas for 11/11/08

After a gap up open, the market sold off for the rest of the day. Stocks pretty much ended up where they finished Friday. It seems like every other day we get a false counter-trend move in the first 15 minutes of trading, to the point that it's reliable.

PBW gapped up with the rest, then fell down to the buy price and kept falling until it hit the sell price. So again no current holdings. It now becomes a waiting game to see which move the market will make next. When that move will happen is anyone's guess.

Trade Ideas for 11/11/08
Ticker Entry Exit A Exit C Chart
QID (Ultrashort QQQQ ETF) 73.47 66.17 Chart
ABX (Barrick Gold) 26.22 24.11 22.99 Chart
LNG (Cheniere Energy) 3.41 2.88 2.74 Chart

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

Saturday, November 8, 2008

Trade Ideas for 11/10/08

Friday the market spent all day forming a base before breaking to the upside in the final 30 minutes of trading. The bull argument is that the market is forming the right shoulder of a reverse head-and-shoulders pattern, with a target at the 50-day moving average. And perhaps that will happen. On the other hand, the charts of the inverse indices look very well set up. So will it be up or down? The bear argument is stronger because the basic trend analysis supports it. We pretty much have downtrends in the long, medium and short terms.

SIRF fell through the exit price early on Friday but surged in the final 15 minutes of trading. It's up 11% from the buy price, but it fell too far early on to be included in the list of current holdings. If you bought, the sell-stop is 1.09. However, I would also recommend that you sell at least half at Monday's open because it surged right to its 50-day moving average. Most stocks in this environment have been pulling back at least a little bit upon hitting their 50s, and sometimes a lot. Thus, to be safe, book some profit. Otherwise, the system is in cash for the moment.

For Monday I'm playing both sides of the fence. If the market surges, the beneficiaries will be the most speculative sectors. If it collapses, I'd pick on tech.

Trade Ideas for 11/10/08
Ticker Entry Exit A Exit C Chart
PBW (PowerShares Wilderhill Clean Energy ETF) 9.93 9.33 A Chart
QID (Ultrashort QQQQ ETF) 73.47 68.41 Chart

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

Thursday, November 6, 2008

Trade Idea for 11/07/08

No rally materialized, and everything pretty much finished at their lows. After punishing the bears on Tuesday they decided to kill the bulls yesterday and today. Tomorrow's action will let us know if we're headed to the lows of October 10th or whether the market can form the right shoulder of a reverse head-and-shoulders pattern and thereby rally. That's a lot to ask from a Friday, but the jobs report does come out in the morning. Whether it's good or bad, there's the possibility that the market will treat the data as a reason to buy (or sell, for that matter).

Today's action illustrates why taking a loss early is much better than holding through the sell-stop. What seemed bad went on to become much, much worse. The nature of this B-wave rally is starting to take shape, and it's not pretty. It looks like one of those sideways range-bound B-waves, which can't really be called a sucker's rally since there's no rally. A good example of a similar B-wave was the market action this past summer.

THO got sold, and BVN was bought and sold. Early action in BVN was very confusing. There were trades in it, but the bid-ask spreads were huge, which made it seem like there wasn't a market. So I hope you weren't caught in that action. Upshot is, no open positions. As for tomorrow, very few charts look good, and the one I have is very low volume. If you plan to trade it, trade carefully (e.g., wait until 10:15 ET, risk less, etc.)

Trade Idea for 11/07/08
Ticker Entry Exit A Exit C Chart
SIRF (SIRF Tech.) 1.36 1.19 Chart

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

Wednesday, November 5, 2008

Trade Ideas for 11/06/08

As expected, we got our pullback today. Only I imagined it would be more like Monday's pullback; a light drifting down. If I'd known it would a bear raid, I would've sold everything at the open and bought it back at tomorrow's open. As I mentioned before, I much prefer the corrections through time than through price. We got the latter today, and as a result all our existing positions got closed out as the market moved against us.

If the market's true to form (always a big if), then we just got the type of sharp correction that'll be followed by an equally sharp rally soon afterward. And what day should be up next but tricky Thursday. Chances of a reversal get a boost from that alone. If you want to buy the morning pullback, be aware that it may turn out to be more than a pullback. All the positions that got stopped out today closed lower, excepting FCX (which ended up trading lower after hours anyway). Buying them back on the pullback, at prices lower than those at which they were sold today (risking to their initial sell-stops), is a tempting idea. The only thing is, buying closed positions back without a setup based on strength is just not a long-term winning strategy. It's also known as revenge trading. Whether you do so shall depend on how much you believe that today was only a test and not an omen of further downside to come. If we get a lower close tomorrow, then further downside becomes the more likely scenario.

We did buy one of yesterday's trade ideas, THO. It gapped up and then traded down to the closing price. Chart looks pretty good though.

Current Holdings
Ticker Basis Closing
Price
Perf. Sell-Stop Additional Exit Guideline Chart
THO 18.63 17.76 -4.7% 16.98 None Chart


Tech has been stinking of late. The fact that tech is not leading the bull charge is a bad sign. Or rather, it's just further evidence that this is a bear market rally, and not the beginnings of the next big 20-year bull market. So I'd avoid tech stocks.

Trade Ideas for 11/06/08
Ticker Entry Exit A Exit C Chart
NRG (NRG Energy) 25.01 23.23 22.25 Chart
BVN (Compania de Minas Buenaventura) 15.41 13.99 Chart

I currently own shares of BVN.

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

Tuesday, November 4, 2008

Trade Ideas for 11/05/08

The breakout came a day earlier than I expected, so the pullback will be postponed. Buying on pullbacks would work in the current market environment, so if that's the way you prefer to trade, have at it. I would look at former hot sectors like coal, solars, energy, ag chemicals, Brazil, China, and anything else you can think of that was a darling of the stock market the past couple years. Be sure to have a pre-selected sell-stop though. As positive as today's action was, remember that we are in a bear market rally, aka bull trap, aka sucker's rally. The rally won't take us as far as we'd like, and it'll be over much too soon.

What a day for gold and the miners. We bought FCX, which ran up 14%, but a slug of miners did even better than that (SIL, AEM, OZN). We also bought AAPL, which popped and went back to close at the breakout point. Unfortunately EWZ gapped up and ran, so it's not going to appear in the table. We officially sold PQ at the open at 9.88 for a nice percentage gain but only a 1.68R return, since the spread between entry and initial exit was fairly wide. If you still hold it, stop's at 9.09. It's a fairly good setup to add to tomorrow on a breakout to 10.24, although I have a different oil & gas stock among tomorrow's ideas.

Current Holdings
Ticker Basis Closing
Price
Perf. Sell-Stop Additional Exit Guideline Chart
AMAT 12.47 13.31 +6.7% 12.89 None Chart
SSO 32.31 34.25 +6.0% 31.49 Consider selling on a close < 33.33 Chart
XLK 16.92 17.35 +2.5% 16.49 Consider selling on a close < 17 Chart
AAPL 110.81 110.99 +0.1% 104.85 None Chart
FCX 30.61 32.94 +7.6% 29.99 Consider selling on a close < 31.68 Chart


The ideas for tomorrow are ones that pulled back or rallied weakly today, which is not such a good sign. In other words, they're weren't front-runners in the rally. Aside from that distinction, their charts are decent.

Trade Ideas for 11/05/08
Ticker Entry Exit A Exit C Chart
DRYS (DryShips) 23.94 20.25 Chart
WLT (Walter Industries) 39.88 37.21 34.62 Chart
THO (Thor) 18.63 17.34 16.98 Chart
PTEN (Patterson-UTI) 13.76 12.99 12.41 Chart

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

Updated Stops

Feeling the urge to book profit? This is the flip side of the urge to keep holding as a stock is falling. Both impulses, perfectly human and natural, are specifically geared to make us stock market losers: cutting winners early and letting losers run.

With today's breakout, here are updated sell-stops. I'm providing these as a way to encourage you not to book profit. As price rises, so do the sell-stops, and you can think of that increase as banked profit. This method allows me to actually reduce my total risk exposure even as price rises. If you must sell, I recommend taking no more than 50% off the table in each position.

Current Holdings
Ticker Sell-Stop
PQ (assuming held) 9.09
XLK 16.49
SSO 31.49
FCX (if elected) 29.99
AMAT 12.89
EWZ (unofficial—gapped too high) 38.78

Monday, November 3, 2008

Trade Ideas for 11/04/08

The market took a breather today—about time! So far it's digesting its recent gains through time rather than price, which is a good thing. I'd rather see 2 or 3 days of sideways action before it takes off, rather than a sharp pullback / blast-off combo over a shorter period of time.

Bottom line, if the market ends up taking off, it'll happen soon. Yesterday I mentioned that now is the time to consider taking on more risk. To quantify that, what I try to do every night is come up with the loss I'd take if all my positions went against me and hit my sell-stops. During October, that number was very small; less than 3% most of the time. I was usually over 70% cash and had few positions. Right now the at-risk figure stands at 5-1/2%, and I'm willing to take it as high as 7-1/2% over the next couple of days. So I'm not saying leverage 3-to-1, but I also think now is a time for greed, not fear.

As for how it will play out, I'm going to guess that tomorrow will be a repeat of today (sideways) simply because most eyes will not be on the market. It appears that the market has priced in the odds of an Obama victory, given the huge gains in the stem cell stocks (ASTM, GERN, STEM) and in alternative energy (SOLF, CSUN). I myself wrote in Ron Paul on my mail-in ballot; just doing my part to stave off the dollar collapse and worldwide depression to come (even though it's pretty much inevitable).

Amid the mild pullbacks among stocks, some went a bit too far—GOOG, for example, which we sold today for a loss. I also just found out that PQ moved up its earnings release date to tomorrow before market open (up from Wednesday), so it looks like if you own it, you'll be holding through earnings (unless you sell pre-market). I try to avoid taking on earnings risk if I can; wide swings in price are not my friend. I'll assume a PQ sale at the market open tomorrow for purposes of tracking the current holdings, but I'll give an update in tomorrow's post as well.

Current Holdings
Ticker Basis Closing
Price
Perf. Sell-Stop Additional Exit Guideline Chart
PQ 8.07 9.40 +16.5% 8.99 Consider selling pre-market to avoid taking on earnings risk Chart
AMAT 12.47 12.96 +3.9% 11.92 Consider selling on a close < 12.77 Chart
SSO 32.31 32.48 +0.5% 27.49 Consider selling on a close < 29.58 Chart
XLK 16.92 16.65 -1.6% 15.74 Consider selling on a close < 16.27 Chart


These mild pullback days offer excellent setups, but it's a fine line between a sweet pullback and one that goes on a bit too long (which leads to the stock rolling over). That's why I'm thinking it's either breakout or bust for tomorrow's ideas.

Trade Ideas for 11/04/08
Ticker Entry Exit A Exit C Chart
AAPL (Apple) 110.81 104.85 Chart
EWZ (iShares Brazil) 39.71 37.49 36.99 Chart
FCX (Freeport McMoRan) 30.61 28.12 27.49 Chart

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

Sunday, November 2, 2008

Trade Ideas for 11/03/08

As a trader, these are the times I live for: incipient rallies. Sure, there are easier times to make money in the market, particularly in the middle of strong, steady moves, but there's something exciting about the end of a basing period as the market launches into the next phase. Especially after a difficult period; our reward for slogging through it is the rally at the end. Looking through my list of charts, pretty much all of them have either popped twice in the past few days or are consolidating after popping once. On the flip side, if a stock hasn't gone up this past week, it probably isn't going to.

The long-term trend is still down, but what has changed, by my read, is sentiment. Just as inflation is largely determined by expectations of inflation, so, too, does the market move based on how market participants expect it to. The tone has shifted to one in which people are talking about opportunities and not wanting to miss out; just a couple weeks ago it was gallows humor ("I opened up my brokerage statement and thought it was my telephone bill," etc.). It is now a time to be more patient with your holdings, consider risking more per trade, consider taking on more trades. Risk management works both ways: reduce your risk during adverse times, but increase your risk during times of opportunity.

We bought SSO and XLK Friday; these might pull back a bit before going up as they have hit a pocket of resistance, but I think it's OK to use a looser leash based on how the market has been holding up.

Current Holdings
Ticker Basis Closing
Price
Perf. Sell-Stop Additional Exit Guideline Chart
PQ 8.07 9.95 +23.3% 8.99 Consider selling on a close < 8.36 Chart
AMAT 12.47 12.91 +3.5% 11.92 None Chart
GOOG 371.01 359.36 -3.1% 346.19 Consider selling on a close < 352 Chart
SSO 32.31 32.04 -0.8% 27.49 Consider selling on a close < 29.58 Chart
XLK 16.92 16.65 -1.6% 15.74 Consider selling on a close < 16.27 Chart


So many great looking setups tomorrow. We may get a pullback into Tuesday or we might just pullback intraday and then take off. It's that kind of environment. I'm only offering a couple ideas, not because there aren't enough to go around, but because we're starting to have too many to keep track of.

Trade Ideas for 11/03/08
Ticker Entry Exit A Exit C Chart
IVN (Ivanhoe Mines) 3.06 2.59 Chart
EWZ (iShares Brazil ETF) 39.71 36.99 34.39 Chart

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