Always Go Where The Emotion Is Highest

Well, the trading wheel just keeps on spinning. While yesterday was far more conducive to position trading, given the trending nature of the day, there were several great HVT setups during the morning and afternoon session.  For me this is truly a pleasure to come to work each day, trade like a madman for the first hour and a half, walk away for a couple of hours, only to return for the last two hours and find more volatility. 

I have been around this game long enough to know that mid-morning HVT is usually a crap shoot. So back up the Brinks truck in the morning and afternoon only. Many people have a tough time doing this. It's as if they feel they will miss something. Nothing could be further from the truth, all that you will miss is choppy trading, burning commissions and being completely exhausted when the good trading shows up in the afternoon.

To borrow a line from Dave Landry, "Where do we go from here?" For me it is the status quo. Trade very assertively in the morning, then back off, unless the market is just humming. Naturally the "hot" place top be recently has been the bank stocks, as well as tech. If you look back to last week, you will notice that even during the pummeling that the indices were taking, tech, specifically, the SOX held in well. Whether this is indicative of anything is anyone's guess, but it has certainly made for some good long entries intraday. 

Always go where the emotion is highest, that is where the best trades are found. I continue to focus on stocks like Citigroup (C | Quote | Chart | News | PowerRating) and JP Morgan (JPM | Quote | Chart | News | PowerRating), as well as Texas Instruments (TXN | Quote | Chart | News | PowerRating),  KLA Tencor (KLAC | Quote | Chart | News | PowerRating)) and Maxim Integrated Products (MXIM | Quote | Chart | News | PowerRating). Compare their one-minute charts with that of the one-minute S&P or Nasdaq futures. They are carbon copies, that is what makes for an ideal trading stock.  Additionally, the range on each intraday rally and sell-off makes for very effective "scalps."

Luckily, with the range we are getting intraday, position trades have been playing out real well. The ones I have been posting here in the column and on the nightly service have been panning out real well. I have provided you with a few tonight as well:

Longs:

Maxim Integrated Products (MXIM | Quote | Chart | News | PowerRating): buy stop above 35.50

Shorts:

Country Wide Credit (CCR | Quote | Chart | News | PowerRating): sell stop below 47.95

A look at the daily charts last night showed some great setups. Naturally these are longer term in nature, but may make for some nice gains over the next few weeks if the market continues its' bullish ways.

General Electric (GE | Quote | Chart | News | PowerRating): buy stop above 31.30

Kellogg (K | Quote | Chart | News | PowerRating): buy stop above 36.58

Wachovia Bank (WB | Quote | Chart | News | PowerRating): buy stop above 35.84

Wells Fargo (WFC | Quote | Chart | News | PowerRating): buy stop above 50.13

Washington Mutual (WM | Quote | Chart | News | PowerRating): buy stop above 38.10

Notice a trend developing with those last three stocks?

The setups from yesterday's column are playing out very well, the long entry on Eli Lilly (LLY | Quote | Chart | News | PowerRating) and The Dow Diamonds (DIA | Quote | Chart | News | PowerRating) are in the money.  Make sure you have a protective trailing stop in place.

Gold? Yes, gold. The beaten-down metal is now hovering just above $300 an ounce, the so-called "all critical" price.  Is there a future there? I believe yes. The rout over the last couple of months has been bad and somewhat confusing. Prior to that, you may recall, gold stocks were trading contra the market. It made for some excellent trading. However, the recent slide in the market also took gold and gold stocks with it. Many stocks have retraced better that 60% off their year highs. 

So, do they represent a buying opportunity? Technically, not yet, but if your belief that this recent rally in the general market as well as the sell-off in gold being overdone, we are getting close to some buying opportunities. I frankly think that the reasons for gold are still relevant. Nothing in the past few weeks has really changed from a fundamental perspective. And while that may or not play out, one needs to be cognizant of it, because once those scenarios start swirling again, and they will, gold will appear attractive. Stocks I am watching are, Newmont (NEM | Quote | Chart | News | PowerRating), Gold Fields (GFI | Quote | Chart | News | PowerRating) and Agnico Eagle Mines (AEM | Quote | Chart | News | PowerRating).

Key Technical Numbers: (futures)

As always, feel free to send me your comments and questions. See you in TradersWire and enjoy your weekend.

David