Trade Ideas for 03/20/09

The rally stalled out today at critical resistance near the 50-day moving average (for S&P 500), and some sectors, such as the financials, took pretty steep tumbles. Today's high formed a double top with yesterday's high. It could have marked the end of the uptrend, and (by my count) the beginning of a meandering Wave 5 down to new lows. Remember, although the past two weeks have been up weeks, prior to that, 8 of the past 9 weeks have closed in the red. Alternatively, today's consolidation could simply have been a minor blip on the march to even higher highs, in which case my wave count is incorrect. Tomorrow is quadruple-witching day, which typically translates to a choppy, range-bound trading session. But this week has shown that we're in a volatile time of year, and anything is possible.

The reflation trade is the new angle on Wall Street, meaning money is flowing into commodities. Among our holdings, this is evident in the performance of DXO and BHI. If the commodities blast off even more over the next few days without pulling back, then we must tighten stops because the risk of a sharp correction greatly increases. The best case scenario is a gentle pullback, which would allow us to stay in the trade with lower risk. We bought RIMM today.

Current Holdings
Ticker	Basis	Closing Price	Perf.	Sell-Stop	Additional Exit Guideline	Chart
ITU	9.66	10.92	+13.0%	10.49	N/A	Chart
DXO	2.51	2.93	+16.7%	2.53	N/A	Chart
JBHT	19.71	23.13	+17.4%	22.10	N/A	Chart
BHI	29.67	33.26	+12.1%	31.77	Consider selling on a close < 32.40	Chart
AVA	13.47	14.20	+5.4%	13.94	N/A	Chart
RIMM	42.19	42.34	+0.4%	38.76	N/A	Chart

In case the commodities do take off without pulling back, let's give GLD a shot. This is risky because when stocks really jump in price, they tend to fall quickly without offering much of a chance to exit. In addition to gold, some short ideas if the market tanks, and a long idea if it continues defying gravity.

New Trade Ideas

Ticker	Entry	Exit A	Exit C	Chart
SRS (Ultrashort Real Estate)	66.31	55.24	N/A	Chart
JEC (Jacobs Engineering)	41.88	39.70	38.34	Chart
GLD (Gold ETF)	94.78	92.89	90.43	Chart
REW (Ultrashort Technology)	67.36	64.59	N/A	Chart

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