Trade Ideas for 12/12/08

Today started out with a lot of promise, as new highs in this budding uptrend seemed within reach. The market rallied early on and seemed to be consolidating, getting ready for the next push upward. In reality, the buyers were slowly losing their nerve over the course of the day. In the afternoon, sensing this, the sellers took charge. The key point came at 1pm, as depicted on this 2-day chart of the SPY:


The shame is that the bulls had a real shot at this. It remains to be seen whether today's action was a setback or something worse.

Now, we as small players have no control over the market, but we always have control over how we respond to the market. And even though I wished it didn't have to be this way, especially after hitting a new all-time high intraday, I started selling my laggards for losses in the afternoon. Some of them hit their sell-stops, but in addition I pre-emptively sold several holdings just to limit my risk. This was a precautionary measure, in response to the market behaving in a way that was not in line with my theory of a new uptrend high. Should we reverse abruptly and get a strong day tomorrow, I just hope the market will let me in by not gapping up above the highs attained so far this week. Speaking of gaps, one encouraging development was the closure of an island gap:


Small comfort, but one nonetheless. As for our holdings, we sold our big winners AN and DAL, managing to hold onto most of the gains in their respective runs (+36.4% and +18.1%) thanks to yesterday's tight stops. We also sold ORI and PNK for losses and bought some issues that got taken down this afternoon: FLR and LIHR.

Current Holdings
Ticker	Basis	Closing Price	Perf.	Sell-Stop	Additional Exit Guideline	Chart
JWN	13.06	12.62	-3.4%	11.25	Increase sell-stop to 12.34 in the afternoon. Whether it goes up or down from here, it looks like it could pull back in the morning, so give it a little room.	Chart
MELI	16.12	15.55	-3.5%	13.88	Consider selling on a close < 15.20	Chart
FLR	53.26	50.69	-4.8%	49.42	None	Chart
LIHR	16.21	15.68	-3.3%	14.88	Consider selling on a close < 15.59	Chart

Unlike yesterday, I do discourage taking on more risk than usual with tomorrow's ideas. A more defensive posture is warranted as today's action could be more than just a hitch. We'll find out soon enough.

Trade Ideas for 12/12/08

Ticker	Entry	Exit A	Exit C	Chart
LNG (Cheniere Energy)	3.51	2.99	2.89	Chart
CHS (Chico's FAS)	3.81	3.23	2.99	Chart
XRX (Xerox)	8.01	7.33	7.25	Chart

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