Watch List for Friday, March 6, 2009

Thursday’s Recap:  So much for that one-day rally on Wednesday …. Things got back on to the downside in a hurry today, recording 5 down days out of past 6 trading sessions.   Historic record for lows kept falling  with both Dow and S&P.  Nasdaq barely closed above November 21, 2008 low.

Bad news were abundant – survival of GM in question, continued worries with GE capital, City trading like a penny stock, banking sector woes getting worse and now spreading to somewhat healthier banks, poor jobs data, deteriorating housing value and mortgage crisis, confusion abound from law makers, Obama administration still mum on banking solution, disappointing news from China on additional stimulus, market wizards on CNBC huffin’ & puffin’,  etc etc etc.  Hardly anything positive.  Result – another day of bloodshed on the street and end to yesterday’s sucker rally. 

Even though the decline was wide spread across sectors, the financial stocks were mercilessly clobbered.  JPM and WFC recorded multi-year lows and City now trades like a penny stock.  The disappointing news from China on additional stimulus did not go well for Basic materials, transportation, energy, and shipping stocks.  They lost way more than what they gained on Wednesday on the heel of positive rumor. 

Dow closed at 6594 (-4.1% or -281.4 points), S&P at 682.5 (-4.3% or -30.3 points), and Nasdaq at 1299.6 (-4.0% 0r 54.1 points).

None of our picks for Thursday (JOYG, MS, MR, SOHU and WDC) triggered.  But, some stocks on watch list had a decent day.  BKE, WMT, and ADBE had nice gains.  We were stopped on PALM (-7.7%).

Picks for Friday, March 6, 2009:  I do not have any stock picks for Friday.  It is too risky to go long before the release of unemployment numbers.  Market is extremely jittery and full of negative sentiments.  DEFENSE is the name of the game.  I still believe that the selling is overdone.  There are a bunch of ‘good’ stocks that got punished unfairly along side some deservedly bad ones.  Sanity will prevail and these stocks will get positive attention eventually.  I’ve PATIENCE, I’ll wait.  I have some defensive plays in the mean time that might pay off while we wait …. I’m going to suggest some ‘option’ plays that would allow us to risk a lower capital.

1.  Buy BIGCC April 15 Call on BIG for $3.00 or less.  Unwind the position if BIG drops below 14.90 by April 3.  Thrifty discount retailer BIG reported great earnings yesterday.  The stock responded well to the report, and it closed at $17.04 today.  The option premium is relatively cheap.  And, there is a good potential for upside move.  My target is 70% before April 3. 

2.  Buy WDCDV April 12.50 call on WDC for $3.oo or less. Unwind the position on April 3 or earlier if WDC drops below $12.50 or you have 100% profit.  The option premium is relatively cheap. WDC closed at $14.50

You may want to look at NLY.  The stochastics on this stock is very oversold.  There is some level of support around $12.00.  NLY closed at $12.50 today.  It was in the positive territory for most of the day before losing steam just before the close.  NLY yields a hefty 15% annually or around $0.50 a share per quarter.  Best strategy is to buy the stock, and write “out of the money” covered call option - collect the premium, and collect that hefty dividend, while you wait for the stock to appreciate. 

Good luck and have a great weekend ….

TaurusTrader

http://www.taurustrader.wordpress.com

Hope Begins Next Week (2-23-2009)

 What  a week we had!  Bodies battered and bruised mercilessly during the holiday shortened President day week. 

Toward the end of the day on Friday, some sanity appear to enter in to the market with some rebound in banking stocks.  Bank of America (BAC) almost made all the way back in to the green after losing  around 30% and hitting an all time low of $2.53.  City (C) tried to do the same, but was not that lucky.  BAC and C combined, traded an incredible 1.4 billion shares!!  Amazing. 

When City hit $2.00 soon after open in the morning, I thought it will find a temporary halt at Around $1.90.  So, I bought some C at 2.03.  It held around $2.00 for a couple of hours.  Then came an idiotic comment by Sen. Dodd that Nationalization of banks would be an option.  Soon, C started dipping down rapidly to $1.60.  I thought I would bail out, but held on.   Then came the white house announcement around 2 PM, and banking stocks started rebounding …. Toward the end of the day, my City shares ended in a little green.  I decided to hold the shares over the weekend and gut it out on Monday.  I expect a good 10 to 15% rebound within the first hour of open in C, and will follow with a tight stop to preserve some profit.

Currently I also own MS, WFC, and NLY … These are good value plays with good dividend.  WFC took a beating last week, but will rebound when this Nationalization rumor is put to rest next week.  I like this stock and recommend adding for a quick 15 to 20% profit target.

Next week will be a turning point for the market.  President Obama has started talking positive and this should bode well for the market recovery.   Get ready for a good bull run.

I’m betting on Banking stocks to have a nice rebound.  I expect them to open with a nice positive gap at open. 

You may pick any banking stock, but I think C, BAC, WFC or UYG should give you a better bang for your buck.