The markets were down in the first hour with over 100 points on the Dow30 but after some favorable “economic reports suggesting that the economy may be approaching a bottom,”  the Dow reversed  by 250 points in the following 2 hours.  We are also in a new quarter for the calendar year and mutual fund managers typically buy more aggressively the first few days of the quarter to make their performance figures look better.  We are getting more and more positive economic news not that the economy is recovering but that the expected numbers are not as the worst case scenario.

 

We also have the emergency G-20 summit that is likely to announce some sort of stimulus agreement between countries and this positive spin is likely to help the market move up the next few days.

 

What the trading action does tell us the last two days is the market has some enthusiasm and buying power on the sidelines ready to react to any favorable news.  This is a change in sentiment compared to earlier periods these past 5 months where the market was looking for any bad news or any excuse to push the sell button.

 

This is what I’ve been explaining recently that we should be looking to see how stocks act in comparison with the positions we’ve taken or with the assumptions we have made about what the stock market should be doing.

 

The market is getting enthusiastic or “bouncy” and could keep moving up.  The purpose of the short positions with the banks and 2 life insurance companies was for a short period of time, maybe 1-2 weeks but if the market keeps moving up, your hard and mental stop losses might be kicking in. 

 

Depending upon your own risk tolerance and style of investing or trading, that is what determines how much loss (or give back profit made) you are willing to take.  A good general rule for swing trades can be 4-7% stop loss and your potential profit would usually be about 3 times that.  So a 3 to 1 profit vs. loss if stopped out, would be the minimum ratio you should be using.  The ideal scenario is you have a defined limit of losing $1 but have the potential to make $4.

 

So it is looking like these short positions are going to have to be reduced or covered if they continue to climb, especially the stronger ones like JPM, JP Morgan and USB, US Bancorp.  The Asian markets are up sharply tonight with Hong Kong up over 5% and Japan over 4% as of this writing.

 

More evidence that we could be starting the rally sooner than expected is the “wish list” of stocks below have really moved up the last two days, many of them moving up to higher highs with hardly a recognizable pullback. 

 

My impression is that tomorrow’s rise in the US markets could put us uncomfortably over our threshold of limited losses.  It could be that Monday gave us the lows in these financials after the two down days of last Friday and Monday.  The challenge is always going to be with swing or intermediate trades that lasts from days to weeks is to allow a stock to move one way or another which to give it time and space to confirm it is or is not doing what is expected.  And you will have to decide for yourself what comfort level or risk tolerance you have to absorb a stock going against you.

 

I’ve suggested 4-7% stop losses but depends upon what your style, personality, financial situation and strategy for that stock.  I personally have higher risk tolerance and like to give a stock a chance to do what I forecast so it usually involves a larger loss if I am wrong than what many people can take for themselves.  Yet at the same time, I am right about a lot of stocks that give a lot of profits, as you can see from the trades on these banks going long, short, long and now short.

 

What we have had for months is an underlying potential for stocks to really move up sharply and the talking heads on the financial websites and TV networks have come out of the woodwork saying how many trillions are under peoples’ mattresses available to invest. 

 

So the sentiment and the talk that is increasing in frequency actually can help build a momentum of buying.  That hasn’t happened yet but for months I have had on the bottom of this newsletter that

I am expecting some sort of substantial rally that could be caused by the stimulus spending and the initial spark could just be an oversold condition and in the current environment, good news is starting to be rewarded.

 

The actual news may not have any substance to it and the overall economic outlook may be bad for another year but the stock market could go into rally mode even with that overhanging dark cloud.  My hunch (only an educated guess) is that we could start getting into rally mode but it is really hard to tell right now.

 

Oil had no change today and will likely follow the market as it has been for the last 6 months.

 

Intermediate Trade Positions:   Consider very small long positions in the following tomorrow:  MA, Mastercard

TNH, Terra Nitrogen.

BIDU, Baidu

CREE, Cree Inc

FCX, Freeport McMoran

 

Keep studying these stocks, charts and fundamentals.

 

UTX, United Technologies (Swing)

MA, Mastercard

IBM, International Business Machines

TNH, Terra Nitrogen

AAPL, Apple Computer (SWING)

BIDU, Baidu

AMZN, Amazon.com

BMC, BMC Software

RAX, Rackspace Hosting

STEC, Stec (SWING)

SY, Sybase

RIMM, Research in Motion (SWING)

CIEN, Cienna

CREE, Cree Inc

DIOD, Diodes (semiconductor)

SWKS, Skyworks (semiconductor)

UEIC, Universal Electronics

RADS, Radiant Systems (SWING)

SWHC, Smith & Wesson

FCX, Freeport McMoran

BR, Broadridge

GS, Goldman Sachs

MS, Morgan Stanley

MRVL, Marvell Technology

WFR, Memc

S, Sprint

GOLD, Rangold Resources

RS, Reliance Steel & Alum.

CMG, Chipotle Mexican Grill (MacDonalds subsidiary,SWING)

BKE, Buckle Apparel

ARO, Aeropostale

DNR, Denbury Resources (Oil & Gas)

VQ, Venoco (low priced oil & gas)

TLM, Talisman Energy (Oil & Gas)

NOV, National Oilwell Varco

PBR, Petrobras

USO, US Oil Index ETF

DBC, Commodity Index ETF

GSP, Total Return Index ETF

SMH, Semiconductor ETF

 

 

REPEAT:  Let market pull back before getting too heavy in LONG positions.  It could take several weeks before this bottom is well established.  Stocks that have been the strongest and pull back the least amount with more of a sideways action are the ones to be watching for long intermediate trades. 

 

Swing Trades:   New Ideas: 

 

Cancel this idea:  BIG, Big Lots discount stores. 

 

Day Traders/Intraday stock ideas:  We had a big reversal today in many stocks.  Look for good intraday trades in FSLR, ICE, BLK, CME, POT, MON, MOS, AMZN, AAPL, BIDU, USB, WFC, JPM and any high volume, high volatility stocks.  Note FSLR was up on renewed interest in solar stocks and a contract awarded to FSLR. 

 

IMPORTANT NOTICE:  You are currently paying $59 a month for The Daily Stock Report to be delivered to you via email and full access to all reports and videos in the Members Area at www.TradeStocksAmerica.com.  Your fee will never go up as long as you remain a member but you will see that our rates for new members will go up substantially over the coming two months.  Be assured that your rates as current subscribers will not change.  If you know anyone that is considering subscribing to our service, please let them know to consider subscribing at the current rate.

 

REPEAT:  Many of you have emailed me with questions about not having the $25,000 to do intraday trading.  You can have 3 intraday trades in a 5 business day rolling period without having $25,000 in your account.  Above $25,000 you can do unlimited intraday trades as long as your account equity is above $25k.  You can have swing trades like we have been having the last 2 weeks and make a smaller amount of money, let’s say $10,000, to build up with swing trades.

 

Thoughts:  Keep steady, calm, decisive, aggressive.  Have no fear and no greed.  Keep looking at what to be doing next in a calm manner.  Don’t focus on the past or beat yourself up what you did or didn’t do or what you should have done.  Just keep playing the next shot, which in this business your next shot could be just sitting on the sideline.

 

I am still expecting some sort of substantial rally in the stock market sometime this year mostly driven by the massive stimulus that has already been poured into the system plus the planned stimulus package being proposed now.  Longer term though, in a couple years down the road, no doubt the taxpayer is going to have to pay for such the high debt amounts that the US government (and other countries) have taken on.   So tax rates probably will rise in coming years, interest rates will very likely have to rise as inflation surfaces and likely the bear market resumes sometime down the road.  But we don’t have to be stuck in a miserable cycle like most investors.  With the techniques and approach to the market, we will still thrive.

 

If you have been uncomfortable shorting stocks, which most people are, try to learn this technique, it will be a useful tool in the coming years.

 

When I list several stocks from the same sector, like the housing industry for example, don’t short all of them unless you are well diversified and it represents a small percentage of your total stock account (in that same account).

 

Ticker Symbol	Type	Notes	Target Open Price	Target Close Price
GS, Goldman Sachs	LONG-SWI	Not ready to buy yet; wait longer.
MS, Morgan Stanley	LONG-SWI	Not ready to buy yet; wait longer.
IBM, Int’l Bus. Mach	LONG-SWI	Not ready to buy yet; wait longer.
FCX, Freeport McM	LONG-INT	Not ready to buy yet; wait longer.
MOS, Mosaic	LONG-SWI	Limited potential, try TNH
BIDU, Baidu	LONG-INT	Get ready to buy small position long next few days.
RIG, TransOcean	LONG-INT	Worth very small long position now.
PBR, Petrobras	LONG-INT	Little more downside but getting close to ready	28
WFC, Wells Fargo	SHORT-SWI	Holding a little longer to see if short will work.	16.25	12
KEY, Keybank	SHORT-SWI	Stopped out.  Reduced risk.	7.10	6.60
USB, US Bancorp	SHORT-SWI	Should break down but set stops; hold short	15	12
GE, General Electric	SHORT-INT	Still looks weak; hold short	10	8
PRU, Prudential	SHORT-SWI	Reduced short position; holding ½ position short	25+	16-17
HIG, Hartford	SHORT-SWI	Looks weak; indicator for other life ins. cos; hold short	8	7
CME, CME Group	LONG-SWI	Wait for pullback before buying.	187	237
AZO, Autozones	LONG-INT	Just keeps moving up; hold long position	152	?
AAPL, Apple Cmptr	LONG-SWI	Wait for pullback before buying.
BAC, Bank of Amer	SHORT-SWI	Gotten stronger; reduce short; hold ½ to 1/3 short	8.25	5 -
MET, Metropolitan	SHORT-SWI	Cancel short idea now; no trade idea.	26	25
SKF, UltraShort Fincl	LONG-SWI	Should start moving up a little.	102	144
TOL, Toll Brothers	SHORT-SWI	Close short position if not covered today.	18
KBH, KB Homes	SHORT-SWI	Close ½ of short position; hold short remaining position	12	?
SRS, UltraShort RE	LONG-SWI	Hold if still long; still looking for mid $70’s.	62.50	74
USO, US Oil Index	LONG-INT	Worth small long position now.	28-29
PBR, Petrobas	LONG-INT	Reversing now could make higher highs, worth small pos.	31?
CETV, Central Europ	SHORT-SWI	Looks done going down.  Nice short profit though.	14+	11.50
JPM, JP Morgan	SHORT-SWI	Stopped; strong reversal.	28.50	26
DB, DeutscheBank	SHORT-SWI	Stopped;	42+	40
WFR, MEMC	LONG-SWI	Dropped below $16 for entry point to buy; hold long	16	19
RTN, Raytheon	LONG-INT	Waiting for more pullback before buying long
ASH, Ashland	LONG-INT	Took off without us.

 

SWI (SWING): 2-7 days            INT: Intermediate term position 8 days to several months.  Open Price:  price paid on opening long position or price sold on short position.  Bold notes on table above represent changes from previous day.

Current positions are highlighted in yellow.  Green colored lines are next probable positions to consider.  Red, take action or watch closely.

IMPORTANT:  The notes in this stock list is how I have been writing notes to myself about stocks for 16 years.   They are general guidelines as to how I am approaching a particular stock and conditions may change during the next trading day that may cause a change in opinion before the next evening report is written.

Thoughts:  Best odds only, be decisive, aggressive, mentally flexible, stay in position size, don’t overtrade and wait a little longer to buy and wait a little longer to sell.  You will find that will make you more money on your trades.  Trade what you see, not what you hope for.  Intermediate and swing trades are really important to have trailing stop losses set.

Don’t trade unless the setup is there for you, then use the charts to tell you when the odds are heavily in your favor.  Don’t force anything to work for you, let the setups develop and then take advantage of that.  Be patient.  Stay in position sizes without letting any intraday trade represent no more than 10-15% of your total account value.  As you build your account, your position size percentage should get smaller and smaller to lower your risk.

 

Have a great day and I’ll talk to you this tomorrow. 

Mitch King

www.TradeStocksAmerica.com

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Mitch King is the founder of TradeStocksAmerica.com.  All material presented herein is believed to be reliable but we cannot attest to its accuracy. All material represents the opinions of Mitch King. Investment recommendations may change without notice and readers are urged to check with their investment counselors before making any investment decisions. Opinions expressed in these reports may change without prior notice. Mitch King and/or the staff at TradeStocksAmerica.com may or may not have investments in any stocks cited above before or after this newsletter is prepared. Opinions expressed in these reports may change without prior notice.  Disclaimer – Stock investing or stock trading has large potential rewards, but also large potential risk. There is risk of loss as well as the opportunity for gain when buying or selling stocks, bonds, option contracts or engaging in any strategy listed in the Daily Stock Report, The Wizard Training Course, The Trading Room and our seminar or workshops.  You must be aware of the risks and be willing to accept the risks when investing or trading in any financial markets. Don’t trade with money you can’t afford to lose. This website is neither a solicitation nor an offer to Buy/Sell stocks. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed on this website. The past performance of any trading system or methodology is not necessarily indicative of future results.