Trade Ideas for 10/21/08

The charts look better today than they have at any time in the past six months. So many charts are forming a sharp W pattern, which often marks market bottoms. This afternoon's surge really seemed to change the tone of the market; we'll see tomorrow if the bulls can hold on to that momentum. But I think it's time to jump in if you haven't already. Not for the long haul, but for trades of up to a month's duration, depending on how the charts unfold.

My list of trade ideas for tomorrow is overflowing, and it would be even longer if not for the large number of companies releasing earnings this week. It's imprudent to hold shares of a company that's about to release earnings. The risk of discontiguous prices is heightened, so it's much more difficult to control risk via sell-stops. Therefore, I recommend that you sell your stocks in advance of earnings. In particular, Wachovia (WB) releases earnings Wednesday BMO, so if you hold it, sell it tomorrow by the end of the day. If it doesn't go below the sell-stop, the official sold price will be the closing price.

Current Holdings
Ticker	Basis	Closing Price	Perf.	Sell-Stop	Additional Exit Guideline	Chart
WB	5.21	6.07	+16.5%	5.82	Sell by market close to avoid earnings risk	Chart
RIMM	62.38	53.91	-13.6%	52.49	None	Chart
FORM	18.46	18.28	-1.0%	16.85	Consider selling on a negative close	Chart
IPHS	21.51	23.25	+8.1%	21.11	None	Chart
SVVS	8.06	8.94	+10.9%	7.85	None	Chart
SPR	14.01	14.24	+1.6%	12.57	Consider selling on a close < 13.60	Chart

So many ideas for tomorrow; I'm offering a few that are narrow risk, but major index ETFs like QQQQ, IWM, DIA, etc. look great too, just wider ranges between entry and exit. As good as the market's prospects look, it's still crucial to manage your risk. Don't take on more positions or more risk than you can handle. Stick to your sell-stops. Figure out how much you stand to lose if all your positions went against you and hit your sell-stops; make sure that the total number is not more than, say, 6% of your portfolio equity. That way, if it turns out this was all just one big fake-out by the market, you'll still have 94% of what you own today; at the same time you'll have enough skin in the game to profit well if the market takes off.

Trade Ideas for 10/21/08

Ticker	Entry	Exit A	Exit C	Chart
KRE (Regional Banks ETF)	34.13	32.46	30.29	Chart
HW (Headwaters)	10.66	9.99	None	Chart
SID (Companhia Siderurgica)	15.36	14.26	13.23	Chart
EWT (Taiwan iShares)	9.34	8.81	8.39	Chart

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