After Market Close November 2, 2007 |
Uh-Oh!
The markets early are panicked, world wide. What do we do? I'm am reminded of one of my old saws; Don't just do something, STAND THERE! The market is merely correcting. In fact, much of it isn't even doing that. The Nasdaq is actually on a solid Buy. The action is clearly corrective and the Bears are coming out of the woodwork. Looking at shorts is OK, especially if we're wrong, but my experience says that the "bad news" is really a great buying opportunity. More below.
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DJIA: The Dow mounted a very respectable reversal, but we'll see some weakness today. |  |
SPX: The S&P looks to be ready to test the lows. |  |
NDX: The Naz is a pillar of strength. |  |
RUT: I am so wishing we had seen one more up day before the break...the Russell will continue to underperform. Think Nazdaq of 1972. More on this later. |  |
HUI: The Miners still look strong, for now. |  |
AZPN: Aspen held, but it's gone and we may be glad. |  |
DRI: Darden continues to fall. Look for more. |  |
CECE: Ceco was amazingly strong. |  |
ARAY: Accuray may be a victim of the market, but the stock still looks Bullish. |  |
WIND: Wind River managed a rally. |  |
AMGN: Amgen will trade with the market. If it breaks up, though, it should outperform. |  |
COGO: Comtech broke the wrong way. |  |
NAK: Northern Dynasty tried to break up. I'm surpised it didn't move for us. |  |
GFI: Gold Fields looks explosive and is a laggard. |  |
VRGY: Verigy looks like a classic Buy. |  |
FCEL: Fuelcell seems to warrant a tricky play here. If you think I'm wrong about a correction, you can pass, but if I'm right, this one will trade down and explode higher. |  |
AGP: Amerigroup looks possibly strong. |  |
NWL: Newell Rubbermaid looks like it oculd go either way. Play it that way. |  |
TTES: T-3 Energy actually looks weak here. What the heck, if it breaks down, there's a lot of air beneath. |  |
MANH: Manhattan Associates looks potentially weak. Much lower targets if it breaks. |  |
Summary:
When the world is worrying about the financial stability of major banks and the liquidity in the Sub Prime market, you know that the Fed is going to pump liquidity. Some of that will find it's way into the stock market. We also know that the news will embolden "fundamental bears" and cause them to overexpose to their shorts. All of this suggests that we will bottom this down move on the market rather quickly. Hedging is reasonable, but don't be too Bearish.
Be Well, and Trade Smarter Than the Average Bear!
-The ChartSmarts Team
Current Positions:
Short 50% DRI at 42.64, stop at 43.77
Long 25% CECE at 15.07, stop at 13.92
Long 50% ARAY at 18.12, stop at 18.12, sell at 21.54
Long 50% WIND at 12.02, stop at 11.59
Watch List:
AMGN: Buy 50% on a print of 58.96, stop at 56.57
NAK: Buy 50% on a print of 12.32, stop at 11.79
GFI: Buy 50% on a print of 17.96, stop at 17.21
VRGY: Buy 50% on a print of 23.26, stop at 22.33
FCEL: Buy 50% on a print of 9.08, stop at 8.71
AGP: Buy 50% on a print of 35.47, stop at 33.86
TTES: Short 50% on a print of 44.13, stop at 47.97
MANH: Short 25% on a print of 28.36, stop at 30.63
Changes in Current Positions:
We are stopped out of 50% AZPN at 16.52 breakeven
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*30 Minute Trading Rule:
In order to prevent whipsaws, we use a 30 minute trading rule. This means that, as a general rule, we are going to "sit on our hands" during the first 30 minutes of trading, this includes the lifting of stops during this 30 minute period as well. Additionally, if after the first 30 minutes of trading the range of the stock pick is within the stop and buy/short boundaries presented, the trade recommendation is valid. If the stock's range is outside of the buy/short and stop boundary, the trade recommendation is VOID. E.g. if the recommendation is "Buy a print of 10.25, with a stop of 9.95," and the stop trades up to 10.50 during the first 30 minutes, we would pass on the trade. Similarly, if that stock were to trade down to 9.90 before 10:00, the trade would also be void.
There is no 30mn rule on limit orders, but if price gaps out of the buy/stop range the trade is void.
Rule on stops: As a general rule for the model portfolio, we will lift all stops on existing positions for the first 30 minutes of trading. As a practical matter, subscribers may wish to leave their stops in place if they expect to be incommunicado or unavailable during that time to monitor positions.
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