July 23, 2008, Wednesday Evening

There are 3 videos tonight.  They are worth your time to watch, length of videos are about 5, 6, and 3 minutes. [subscribe to view the videos]

VMC was stopped at $64; I moved it down from $64.50.  I have been trying to make the trades work on a longer time frame, like 4-7 days but many of the ideas I’ve identified have been good for an overnight swing trade.   I have been ignoring my own statements that I made last week that what has been working are the short term trades -- about an 1 to 2 day positions.  Considering how much volatility, range in price andwe have had.  I will get back to taking profits on a shorter time frame again.

You should see the videos tonight.  On the first video, I reviewed the 1 min charts of MKTY, the technique called Bullshorts that I introduced to you on last night’s report.  It was a classic bullshort that ran up another 10% after the open this morning, then it peaked at $5.49, then dropped 31% by the end of the day. [subscribe to view the videos]

It looks like MKTY will drop some more in the morning and the short can be covered somewhere around my target price of $3.00-$3.20 for a potential profit of 71% at $3.20.  Keep in mind this particular example has cooperated perfectly where many of these bullshorts continue to run up further against you after you open a position.  This is why it is so important to start very small, maybe 1/4th of your planned position size as your first order and gradually build up to your planned position size as the stock usually goes against you.

This is almost opposite of what we have been talking about the last 2 weeks on setting stops that are tighter to your entry point.  With the bullshort pattern, you have to give it much more latitude.  This is really difficult to teach in a short text report and short video.  This really takes many hours of teaching over a longer period of time but I wanted to introduce you to this concept.

The financials should peak in the next couple of days.  BAC and WFC in particular should start turning over (going down) although BAC had news after the market closed that they have approved a repurchase of 75 million shares in the next year.  Share buybacks don’t always mean it will happen, there is no obligatn the company must buy their own shares even after an announcement.

That might have a slightly positive effect on the stock early in the session although there was another news piece that the city of San Diego is suing BAC to attempt from issuing anymore foreclosures. 

Not likely a legal victory for San Diego but it could be a potential fear that the stock could react to.  We all know that legal cases like this take years to play out but it is how investors react to any news that really counts.

Airline stocks (ALK, LUV, UAUA, DAL) should also start weakening soon.  I am just not convinced that oil will keep dropping.   I am looking for a rebound in oil that retraces one-third to one-half of the loss we have seen in the last 7-8 weeks in oil stocks.

Again, we are seeing an over-reaction in the first big drop after record highs in oil prices as we saw with the over-reaction in the speculative highs.  This is the kind of behavior in the market that gives us so much opportunity and these types of events keep repeating itself over and over. 

This is the kind of thinking that I would like to pass on to you that has the potential to build wealth for you.  Combine this kind of thinking with the trading techniques that I’ve learned and use the latest tools available from the brokerage firm I have shown you on these short video clips and then train yourself how to capitalize on it and you have a very winning formula.  All of this will take some time but this is a very worthy pursuit—stick with the process!

TXT is turning up and could start accelerating its rebound.

CEDC is still on track to move up.  It looks like a slow mover.

AGU, MON, MOS and POT really got whacked today dropping anywhere from 5.5% to 9.4% today alone.   There might be a tradable rally for a 2 or 3 day swing trade, especially if it heads down tomorrow morning to give us a better price.  This is a very short term trade with limited potential.  These stocks are turning over and heading down so look out for lower lows and lower highs.  Any swing trade long should be kept with idea of making smaller and quicker profits.

The lower oil goes on this drop, the better the odds become that it will have a sharp snapback.  Bungee cord theory (I know that is a pretty lame description of a technician’s theory!)  But the same statement applies as with the commodity stocks above—that is, sharp rebound upward within a correcting stock.  Let me stick my neck out and say that the momentum in these stocks is coming out of this sector.  It was a fabulous momentum sector especially in the last 12 months.  If you don’t want to hassle with the individual stocks in oil, you can always consider DIG, a long ETF, particularly appropriate for a retirement account.  I personally still like CVX, BP and now XOM.  COP looks like it could keep dropping a little more than the other three.

GENC is another stock I am watching for a potential short.  If it moves up over $16 tomorrow, then I will sit on the sidelines and watch how far it moves up and how it acts before opening any short position. 

See you tomorrow.

Mitch King