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Two Ways To Play: Motor City Bailout


Strengthen your portfolio in good times and bad.

A bailout of the automakers is taking shape. According to the Wall Street Journal, the United Auto Workers Union, or UAW, said it would make contract concessions in order to help the Big Three win federal aid. In return, the union may get an equity stake in General Motors (GM), as well as a seat on the company's board.

Meanwhile, members of Congress acknowledged that a bipartisan rescue package would likely be unveiled soon. It would inject roughly $15 billion into the Detroit automakers, helping them soldier through the first quarter of 2009.

Shares of GM and Ford (F) surged on the news.

From the Bull Pen: It's foolish to think that a bailout of the automakers was the catalyst that sparked a broad-based rally in stocks. Today's performance was probably just another move in the context of a bear market - and we may be due for a correction tomorrow. But the lows are, by all accounts, in for the 2008. Bulls can consider a stock like Disney (DIS), catching it on a pullback toward $23.

From the Bear Cave: Is Amazon (AMZN) due for a pullback? It's sitting at its 50 DMA after a nearly 30% move this month. Those attempting the downside can set a buy stop above that level.
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No positions in stocks mentioned.

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