Trade Idea for 9/16/08

At first today looked like it would be a repeat of past days, with a gap open getting faded. Not this time though—the disappearance of major Wall Street firms Lehman and Merrill thoroughly outshadowed what would have been major news in its own right: the collapse of AIG. This was the event doomsayers have been waiting for back in the era of easy money; they predicted that major banks would be gone by time the financial crisis all got sorted out, and they were not going to be denied today. The major indices finished emphatically at their lows, plunging through support, and even now falling as futures point to further downside tomorrow morning.

At this point the indices have been beaten badly, and a bounce will materialize, probably sooner than later. It's not just that buyers come back in, it's also that the shorts want to book their profit. I booked myself. Fearing a gap and crap, I took profit on 50% of my short positions (SDS and DXD) at today's open, and I bought back that position when setups appeared mid-day (after the fade attempt lost steam), only to re-book the profit in after-hours trading. Looking to buy on a pullback is one way to play the short side if you want to initiate or add to your SDS (or other short) holdings. I think a pullback to the 70-72 area in SDS is possible, and I am looking to buy my half position back yet again if I see a good intraday opportunity. I'll be looking for a gap and crap open tomorrow, as overnight orders to sell long holdings hit the open, and 15 minutes later traders come in and start fading. Be patient, be humble.

Current Holdings
Ticker	Basis	Closing Price	Perf.	Sell-Stop	Additional Exit Guideline	Chart
SDS	67.81	74.01	+9.1%	67.39	Look for opportunities to add, preferably waiting for a pullback, risking to 67.39	Chart

Not a lot of charts look good in either the long or short direction. After such a monster move today, we await a breather to yield some usable setups.

Trade Idea for 9/16/08

Ticker	Entry	Exit A	Exit C	Chart
KRY (Crystallex)	1.07	0.87		Chart

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