Daily Stock Picks Report Archive

The financial stocks got crushed again today.  From the peak stock prices of the day to the close were very big swings in most all stocks, not just the financials.  FNM had a high of $13.50 and a low 8.65 today. During Pre market hours FNM opened down 35% from Friday’s close, climbed 10% to $14.50, then corrected 36% very swiftly to $9.26 in 90 minutes.

FRE had a similar story as it climbed 46% from Friday’s close of $7.75 to a high of $11.16, then corrected 45% in the following 4 hours to a low of $6.07.  FRE closed at $6.92.

BAC followed suit and gapped up almost 5% at the open, then sold off almost 15% by the close.  I mishandled this and sold at $21.85 for a 4% profit from the $21 purchase Friday.  I say mishandled because it had reached $22.85 earlier.

There is a sentiment of slight panic in the financials even though this action with FRE and FNM will still result in hard times in those two stocks.  And FRE and FNM are critical to the health of the housing and mortgage business.

ESLR had a slight up day along with the solar sector stocks.  CSIQ, Canadian Solar, really spiked u[ when the company raised revenue guidance but after the market closed they issued a press release that they are selling 3.5 million shares in the US on a public offering so it is anyone’s guess how the stock will react.  Usually, the reaction is negative on this type of news because this dilutes the shares, especially if the market sentiment is very negative.

FSLR, First Solar moved up nicely as did other solar stocks LDK, SOLF, and SPWR.

The agricultural chemical companies continued their rebound upward which started last week. CF and  MOS are among the strongest of the group along with POT.  MON is still moving up but lagging.  AGU is also very strong.  The question you have to think about is "Will these stocks make new highs or sell off before then?"

If the pattern continues as it has most of the last year, new highs would be the normal pattern.  But I have a nagging concern that these commodity based stocks cannot sustain this rise in prices.  What will be the catalyst to turn the stocks downward as well as what will keep them going up?

Commodities like corn, wheat soybeans, etc., have been on a very big run.  Prices have tripled in the last year and are on a steep parabolic curve upward and these situations just don’t continue.  People like me have made a career out of capitalizing on panic buying.

I’ll try to answer the questions above but think about the answers yourself this week.

ICE, Intercontinental did gap up $2.60 this morning and also sold off like most other stocks.  It did not get below that $85 price I wanted to buy long so I am waiting and watching for a decent entry price tomorrow or Wednesday.

I still have an eye on HK as a potential short but it isn’t developing into a great idea.

I have reactivated my alarms on SQM.  Just keeping an alarm on it on a watch list.

I am still looking for a substantial rebound in the financials as well as the general market although these financials dropped below important support levels on a technical level.  When you see stocks like this start a new leg down, it is usually best to stand aside until you get a really good buy signal on a 15 minute chart. 

The market is deeply over-sold but let me explain that any sharp rebound upward in stock prices can be a rebound within a general downtrend.  In other words, we could still be in a bear market trend.  These rebounds can be a sharp and powerful move upward after such prolonged selling as we have had and be met with equally sharp reversals to the downside, resuming the downward trend.  That is the most likely scenario we are in.

I am currently focusing in time frames that are short term, anywhere from days to weeks-because that is what is working now.  This is when short term investing works best with swing trades lasting days as opposed to months.  The long term buy and hold is not working.  You have to be nimble and open minded.  The trained individual investor or trader has a huge upper hand these past months and I see that continuing for some months to come.

You all have read about Iran developing nuclear weapons.  Iran denies it of course.  Iran has said they see Israel as their enemy and has more than beat the war drums.  If these reports that are starting to circulate are true and Israel or Bush takes the initiative to take military action, then the market is going to be really volatile, probably some of the highest volatility we are going to see.

Having had some active duty as a Naval officer, my logic says that it would make sense that President Bush would either support or initiate action before his term is up.  I am sure he is outlining what his Presidential power is to take action without Congressional approval.  My way of thinking is that it would make sense to support Israel who takes the lead in knocking out the nuclear sites as opposed to the USA taking the lead.  And it would make sense for a decision to be made after the November elections here in the USA.  Let’s just hope Russia’s Putin stays out of any conflict.

 I am not normally political except when I see this scenario could affect our financial well-being.

Any conflict of this nature is going to make you wish you were not a long term buy and hold type of person with 401k or mutual fund holdings in long positions (meaning, you want stocks to go up to make money).

If I were long mutual funds or 401k with an employer, I would use this rebound in stock prices that I am anticipating this next couple of months to reposition into a cash or neutral position (both long and short).  I am not sure if many 401k’s allow short fund holdings because that is a lot more sophisticated than most employers allow for an investment strategy.

The short term investor or trader is going to do far better than a buy and hold strategy in the current environment and the scenario above.

Mitch King