Trade Ideas for 02/23/09 and Roadmap

So we started what appears to be our relief rally today. I don't know how long it'll last; my guess is between 2 days and 1-1/2 weeks, depending on how furious a rally it ends up being. That is to say, the more furious it is, the shorter in duration it'll be. Let's take a look at the chart of the DIA.

The potential upside from here is 10% or so. After the rally's over, Elliott Wave points to a final descent. Whether it'll be a descent into an abyss or merely to a slightly lower low, is a bridge we'll cross later. The main goal is to catch that move down when it begins. When that move's done, we'll probably see lower 52-week lows in the S&P, but the Nasdaq has a fair chance of being spared that fate. By the way, the new lows will mark the end of the putative Primary A. The possibility that November marked the end of Primary A, to be followed by an a-b-c rally, was killed Tuesday when the Dow broke down. So the good news is, after the descent, we'll have that a-b-c rally to look forward to.

[Interesting the reversal of fortune here. When the October 10 lows were put in, the Nasdaq was the first to violate, followed by the S&P, and the Dow only violated at the November lows. Now the order of strength has been reversed, with the Dow already having violated November, the S&P close to doing so, while the Nasdaq sports an extra cushion of support (January lows) above.]

We sold EWV at open for a nice quick profit. As for the other shorts, a couple ways to play. My official line is to sell them at open Monday, as I believe the market has turned. But if you have a longer time horizon, you can hold them through the market turn. I'll provide stops for that case in the additional guidelines.

Current Holdings
Ticker	Basis	Closing Price	Perf.	Sell-Stop	Additional Exit Guideline	Chart
RWM	73.96	76.88	+3.9%	Sell at open	Consider holding through, stop at 67.49	Chart
DOG	75.51	79.92	+5.8%	Sell at open	Consider holding through, stop at 71.89	Chart

As with all the bear market rallies, this upcoming (potential) rally may be relatively hard to trade on the long side. It may be high risk and may require good timing on entry as well as exit because the duration is so short. Chances are, you won't get much of a second chance to sell if the timing on the exit is off. The reward is the feeling of fast money. It's up to you whether you want to even attempt to trade it. Keep risk low if you do.

New Trade Ideas

Ticker	Entry	Exit A	Exit C	Chart
DXO (Ultra Crude Oil)	2.01	1.79	1.72	Chart
HP (Helmerich & Payne)	23.71	22.16	N/A	Chart
PM (Philip Morris)	36.06	35.24	N/A	Chart

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