Great Trades

Great stock trades based on fundamentals and technical analysis.

Thursday, February 19, 2009


In cash and partial oil

When the Dow broke to a new intraday low and the S&P 500 closed below our 780 stop level, our trading model moved to cash as planned, along with half our 10% oil position (20% for speculative traders) taken this morning near the low. While we took a relatively small loss on stocks, our oil position had a huge one-day move. If oil pulls back enough, we may re-add the half of our oil position we took profits on.

After 4 straight down days on the S&P 500, the market is now in an extremely short-term oversold condition. However, the market was also extremely oversold short-term in October in the middle of the seemingly endless sell-off, where the S&P 500 was down 8 straight days.

Given the downside momentum and lack of panic (as evidenced by the recent extremely low put/call ratio we pointed out last week ), the market could still go much lower, despite the short-term oversold readings. It's a dangerous environment for both longs and shorts, so our trading model remains in cash awaiting a good risk/reward entry, with tight stops limiting potential losses. There are a number of indicators pointing to a bounce starting tomorrow, so we may try another long entry if the set-up is right.

Open Positions: 5% long oil, speculative traders long another 5% oil via leveraged ETF's.

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Disclaimer: Great Trades may have a position in all or some of the stocks discussed in this blog, but is not paid by any company to promote their stock. Great Trades contains opinions, none of which constitute a recommendation that any particular security, transaction, or investment strategy is suitable for any specific person. Great Trades does not provide personalized investment advice.

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