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Sell First and ask Questions Later February 11, 2009 Wednesday Evening

The reaction of the stock market to bounce back was expected as yesterday's 4.5% drop in the
Dow30 was stretching the bungie cord that had to return to a more neutral position.  There appears to
be some positive energy in the market in anticipation of the final details and initiation of the stimulus
and banking bailout package yet the overall charts are pointing in a downward direction and are likely
to accelerate to the downside.

The market has still been in the mode of "sell first and ask questions later" and yesterday proved that.  
The trend is clearly a downward one in the S&P-500 and Dow30 daily charts with the Nasdaq
composite acting stronger yet likely to follow the other indices in the downward direction.  The odds
are increasing that we visit the November 21, 2008 lows and it will be that steep accelerating
decline that would set up excellent opportunities to go long for large percentage gains.

And even if it takes awhile for these high probability set-ups to develop, we really stack the odds in
our favor as well as avoid losses by following this procedure.  This takes a lot of emotional discipline
and control to not do stupid trades in the meantime and this is what will make you a great investor or
trader, the mental and emotional control.   

For now, be satisfied with the hit and run guerilla warfare tactics we have been taking from 2 day
swing trades, ½ sized positions on intermediate trades and excellent intraday trading using 3, 5, and
15 minute real time charts.  Don't be thinking that we need "the big kill" in order to create wealth.  We
make money with these stock ideas in waves or cycles that take time find, monitor and to setup
before we harvest.  Thankfully harvest time comes more often for us than a farmer!   We do get those
occasional big kills like we saw on banks like the 68% move with BAC in two days last week.  But
usually it is the tortoise that wins in this process with small positions that are consistently
profitable.

The small rebound that started today in the stock market is more of a backing and filling action to the
neutral position with a downtrend as the underlying theme.  Today's small up day could easily be
followed by more selling with intermittent good news days like the stimulus and bank bailout
packages.  But so far, it has been "sell on the news" type of behavior the investors have been
displaying.

Banks have been the most volatile sector but haven't breached the November 21st
lows that market
the lowest point in this sector. This sector should still be watched  and new lower lows don't have to
be made in order for opportunity to show itself.  JPM, GS and WFC would be top picks in this sector
to be the leaders and GS, Goldman Sachs is showing that now.

Oil prices has dropped sharply lower today by 5.6% to close at $36 per barrel.  What is important to
watch is if we continue to stay above the January 21, 2009 low of $32.75.  But how low can oil go?  
Hard to tell but $32.75 is a 78% drop from the $147 high set last July 2008 and statistically, a bounce
and reversal to the upside is getting more likely.  I am still in the camp of "it is just a matter of time oil
goes up," although I mishandled the oil stocks on this last helping of USO and COP.  Still watching oil
and gas stocks and the smaller independent ones like XTO, APA, APC, EOG, COG, HAL and many others are likely to move first before the behemoth ones like XOM or CVX.

Intermediate Trade Positions:   New ideas:   

Cancel the RIMM idea, Research in Motion released a negative outlook on future earnings and in
this market, has continually been punished with further selling and weak rebound attempts.

Swing Trades:   USB, US Bancorp gave that expected bounce up today and my suggestion is not to
try to look for higher highs in this market.  Use a 15 min-5 day chart setting to give you signals to sell
this swing trade.  This is probably going to fizzle out and stall in the next 2 days or so; suggestion is
not to hold over the weekend.   Remember, it is guerilla warfare tactics that are working now, not
blindly buying and hoping.

Watching ICE, Intercontinental Exchange again for swing trade long that could just last days or as
long as a couple of weeks if we get some commitment by investors.

Speculative trade idea:  ABMD, Abiomed.  Worth a very small amount of money on the LONG side
of this stock.

Day Traders/Intraday stock ideas:   We got that nice bounce on BAC, Bank of America a 10%
one that hopefully you closed your position as a day trade.   Keep scanning amongst these and other
past favorites for good drop and pop signals.  We will also see reversals Continue to watch ICE, BLK,
CME, POT, MON, MOS, AMZN, AAPL, FSLR, BIDU, WFC, JPM and any high volume, high volatility
stocks.   

NOTES:  This isn't the time to "buy and hope."  It is the time to use them and lose em.  Be patient,
use small positions and use wise money management and trailing stops in intermediate
trades.

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 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.   
Mitch King

About the Author

For more tips and information about Stock trading online , check out http://www.tradestocksamerica.com/daily-stock-pick-results.php

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