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.