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.