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The Daily Stock Report for April 26, 2009
Stocks were buoyant on Friday as the market reacted in a positive way toward earnings exceeding the extremely low expectations set by analysts for this first quarter of 2009. The positive reactions are likely to be muted compared to normal earnings seasons where companies who beat expectations are normally doing so by increasing and growing top line revenue and bottom line profits.
It is temporarily sort of a Goldilocks situation where the market wants to react favorably to anything good as mutual fund money wants to get back to work into the market yet there is underlying fear that a trap door can open anytime. We still are at an exact technical point where the case can be made for stocks to move either way.
A downward direction would just continue the downtrend that has been established for 9 months or so and a move upward would have to be triggered by a series of positive news events as powerful as economic reports showing the government actions taken these last 6 months are starting to work. If PROOF of such actions are quantifiable and convincing, a whole new wave of buying is conceivable. Data such as housing starts regaining strength, housing inventories decreasing, unemployment rates improving, lending activity increasing substantially or large unexpected gains in profits would be examples of such news but this it is way too premature to see such data right now.
So the question that remains is what stocks will do at the end of the earnings seasons, which mostly ends this week. We have the professional money managers who still want to get invested because a rising market while a mutual fund has large cash positions is a career ender for managers. So we have that force playing as well.
The odds still slightly favor a gradual decline but the last few days of market action has been quite positive. We still are in a phase where we want to keep our invested monies relatively small and keep the risk of losing to a minimum until a more definable trend gets established from here.
The Asian markets are down substantially tonight most likely caused by the US government giving some of ultimatum to the US auto makers as well as the swine flu outbreak not being well understood yet. This shows how fragile the markets are with the US futures down 1.5% for the opening on the Dow30 and the SandP 500.
REPEAT: There is no substantial change in the T2108 chart by todays action and this strongly supports the idea of a downtrend in the coming weeks that may last into the summer. My interpretation is that we are still on a downtrend that is likely to resume on this peak here that we are in and is very possible to take us to the mid 700s on the SandP 500 (currently 850) and the Dow30 as low as 7300. The Nasdaq is much stronger of the three indices so technology stocks are likely to continue to outperform as a sector. As with any forecast, we look for evidence to either support or disprove this and take different strategies when necessary.
The Oil index continues to make lower lows with a gradual downtrend. No change today, 48.66.
Intermediate Trade Positions: Do not open new long positions if market is expected to decline slightly; wait longer before opening.
Swing Trades: Only swing shorts are 3 short positions, STP, CSIQ, SCON.
Day Traders/Intraday stock ideas: Look at CMG, Chipotle as an intraday short idea. Intraday trading is where the profits are now. Look for good intraday trades in FSLR, ICE, BLK, CME, BIDU, AMZN, POT, MON, MOS, COG, EOG, XTO, AAPL, WFC, JPM, BAC, WFC, JPM, C, and USB or any high volume, high volatility stocks. You can try using various software programs within your brokerage firms trading platform that could provide you the highest beta stocks in order and review those on daily and intraday charts. The stocks above are just a few of them and this list often changes.
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 us 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. Do not focus on the past or beat yourself up what you did or did not 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.
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, do not short all of them unless you are well diversified and it represents a small percentage of your total stock account (in that same account).
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.
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, do not 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.
Do not trade unless the setup is there for you, then use the charts to tell you when the odds are heavily in your favor. Do not 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 will talk to you this tomorrow.
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