05 March The Daily Stock Report

March 5, 2009 Thursday Evening

Just when I thought it was safe to go swimming, the stock market got whacked badly by the banking stocks as well as the discussion of bankruptcy by GM, General Motors auditors today as a viable alternative. Add on top of that, news that 12% of all US homeowners with mortgages are either in foreclosure or delinquent on monthly mortgage payments, a record 5.4 million homeowners late or 1 out of 8 homeowners. Other headlines today was unemployment reached 8% as worst job losses since 1940’s, C, Citibank stock prices go below $1, first time ever, MNC-Monaco Coach files for bankruptcy protection (I had one of those diesel coaches), and Asian banking stocks continue selling death spiral. Clearly the market is not done adjusting for where the economy may end up.

As far as a countertrend rally that appeared to be starting yesterday and day before, today’s trading action and sentiment is what we were really looking for as far as the sharp drop in stock prices caused by more news events, panicky feeling of despair, and irrational “sell first, ask questions later” mentality.

The stocks that we are long should continue to be held long and more money should be allocated tomorrow on new long positions, holding over the weekend. Stock prices are likely to drop more tomorrow giving you better prices to go long. It is doubtful that a big buy program will be initiated on Friday for fear of a Black Monday where stocks go down sharply. But that is when you want to buy, when fear is at its height.

The stock list has added new buy signals. Read notes and understand color coding.

Note the remaining short positions in banking stocks should be covered tomorrow, STI, KEY, USB, noted in red highlight.

Oil had little change and closed at $43.86 per barrel.

Intermediate Trade Positions: New ideas: Read notes in stock list below.

Swing Trades: New Ideas: Read notes ins tock list below.

Day Traders/Intraday stock ideas: Excellent intraday trading today and likely to continue tomorrow. FSLR, First Solar is moving up so the drop is likely to be shallow with a bigger pop. Continue to watch ICE, BLK, CME, POT, MON, MOS, AMZN, AAPL, FSLR, BIDU, USB, WFC,
1000
JPM and any high volume, high volatility stocks.

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, learn to get used to it, this 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).

REPEAT: Keep an eye out for biotechs; they are building momentum and often do well in January.

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 tomorrow.

By: Mitch King

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