One New Small Short Position For Wednesday’s Stock Market Session

February 19, 2008

As continues to be the pattern of this market, just like all bear markets, stocks gapped higher and then spent the rest of the day selling off. However, volume was lower than on Friday, thanks to the long weekend, and that is the reason there is only one short candidate tonight. The few stocks that did show up in my short scans are either down too much too fast and/or are topping but are still too early (like the chemical stocks). And that is another thing I want to mention. The chemical stocks must all be covered here as the topping chart pattern has failed and the inverted head and shoulder patterns in the daily charts and the bullish macro backdrop makes these stocks way too risky to be short. Especially when Ken Heebner is still long MOS and POT. I should have known better but these stock chart patterns looked exactly like most stocks do before they top. The amazing thing about these stocks is that everything is in their favor. These products are needed in everything that is related to the global commodities boom. Continue to keep the shorts small as this market is extremely nuts. CASH IS KING and remember this too shall pass. If you ever feel down and feel like this rough market is never going to end, please go to my past big winners page. These charts WILL show up again. It might be a REAL LONG TIME but they will show up again.

new small short position: SIGM

SIGM is breaking down below the 200 day moving average, without ever making it back above the 50 DMA, on very strong volume. The BOP has recently started to spend a lot of the time below the zero line this year and with the stock breaking down on a surge in volume and a surge down by BOP toward the max red area this stock becomes a very nice looking short. Despite the nice setup by this stock it is not only down too far too fast but it is also very volatile on a daily price basis. The potential reward is a drop to the $20 area compared to the 10% risk involved in this stock. So the odds make the play worth it but since not a lot of newbies can handle that kind of loss it is not the best short to take (if you are shorting–most of you should not be doing this). Cut your first loss with a close above the 200 day moving average and your final cut loss with a close above the 46.24 level or the 50 day moving average, whichever comes first, if the stock does not move lower immediately.