Stocks To Watch For The Week Of 07-13-09:

I am posting the "Stocks To Watch" list for next week very early since I am changing the format of the list. Historically, I have posted all of the stocks that I am familiar with reporting earnings that week and I assigned a color coding scheme to those stocks (see previous posts for explanation). Going forward, the list will be much smaller. I will only post the stocks that I will be trading.

This change will enhance my focus and allow me to provide a more analytical thesis and rationale for trading certain stocks. I believe that this change will also be more beneficial to everyone following and reading my blog as my trading strategies will be more clear as I will provide specific technical trading details on all of the trades. As I have said before, the goal is to show the general trader (like me) that this can be done without a PhD in finance, etc. Regular folks can trade successfully using only the tools provided to them by their brokers (I use TDAmeritrade).

With this in mind, here are the stocks that I will be trading for the week of 07-13-09:

07-14
GS (reports before mkt opens and conf. call that morning @ 11:00 AM EST) - Last quarter GS moved about 15.00USD after reporting earnings. Although I am always inclined to use high volatility strategies (i.e. strangles, straddles) - these strategies are not recommended with GS as the stock does not really gap wildly and if applied, you will be fixing a bad trade the following day. I must add that all stocks that are traded in the NYSE are dangerous for high volatility strategies as they are "manipulated" by their respective NYSE specialists on the floor. Be aware of this!

GS will gap up or down and move more in the same direction - this is your chance to make some quick cash; that additional move after the gap. Keep in mind that GS also moves very slow and may make new lows / highs right before market close.

The trades - Set up your intraday tech signals as follows:

Time Period: 1 Day
Chart Hours: Regular Hours
Chart Style: I use OHLC - like to see the red and green colors indicating sells and buys
Chart Frequency: 5 Minutes
Click on "Show Previous Close" - this is good from a tech trading perspective
Upper Indicators: SMA = 10 and BOLLINGER BANDS = 20
Lower Indicators: Select MACD, RSI & Momentum
Trend: Use your trending pencil to anticipate price and time in-traday

And open your trade based on tech signals (specially MACD, CCI and RSI) - you may continue to trade throughout the day based on both oversold and overbought intraday signals.

07-15
LUFK (reports before mkt opens and conf. call that morning @ 10:00 AM EST) - This stock trades in the NASDAQ and unlike GS, it may move wildly before market open. I am looking for at least a 5.00 swing on this one. And as of today, I am inclined to set up a strangle trade prior to earnings release - we'll see. Set up tech signals as shown above - this is a constant (same for every stock).

07-16
GOOG (reports after mkt closes and conf. call the same day @ 4:30 PM and Q&A @ 6:00 PM EST) - We are all very familiar with this stock. I recall buying a call for .60 and selling the following day for 16.50 and the quarter that GOOG moved 90.00USD+ an associate of mine bought a call for .50 and sold it for 49.50 the following day. Those were the good, old days when GOOG gaps on a tech graph were 30.00USD (so they stock would open up or down at least 30.00USD); however, nowadays, GOOG's gaps have closed significantly (down to 15.00USD - see http://investertech.com/tkchart/tkchart.asp?stkname=goog&px=3&wt=0 so you can easily get burned on a strangle trade. Therefore, we want to trade GOOG the same way, I am suggesting we trade GS.

The one thing to remember is that all three stocks will move more in the same direction in which they will gap.

The general trend of any stock that moves wildly after reporting earnings is as follows:

GAP UP - The given stock will gap up; then, reverse a little to a certain support level and then take off to a new high from that support level and reach an overbought point at which time, it is a nice chance to make some quick cash with puts - if the move is very strong, the stock may push forward again to more new highs. The stock will then settle down and all tech signals may hit bottom at which time may be a great opportunity for more calls after the Bollinger Bands tunnel has closed and the stock is ready for the next move up.

GAP DOWN - The given stock will gap down; then, short covering may take place and drive the stock up a little to a certain resistance level (may be a time to buy puts for a quick trade) - watch out for the CCI signal, if a stock shows a CCI of negative 300 and opens down huge, it will recover / reverse, rain, snow, sunshine, not withstanding. Once all tech signals have hit bottom and the stock has reached a major support level based on both tech and fundamental analysis; then, a nice reversal may be enjoyed (time to buy calls for a quick trade). If the gap down is on heavy volume; the reversal will eventually die and the stock may come back down again (time to buy puts for a quick trade). The reversal in this instance may die right around where the Bollinger Bands tunnel closes and the stock gets ready for another swing down.

When day-trading, keep in mind the following:

a) Volume is king. Stock swings have to be supported by heavy volume in both direction (up or down). Stocks that go up without volume (basically on short covering) are actually South bound and vice versa.

b) A stock may open green with a nice gap up and heavy volume; however, it cannot go below its opening price on that same heavy volume - at that point, that huge volume is negative and the stock may continue to move down (time to buy puts for a quick trade). The same may be true for a gap down - once the negative volume turns green, we are North bound, baby!

c) Every morning before you start trading, look at where the following tech signals are for your given stock: RSI, CCI, MACD and Stochastic - these four signals may assist you in determining how to actually trade the stock.

d) Be careful about day-trading before the earnings conference call is over. Specially for those companies that hold the conference call while the stock is being traded - you may easily get trapped in the wrong trade.

Good luck and enjoy trading next week!