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Early Bird Trading: Discouraging Both Bulls and Bears


Even the most hard core of bulls will view a light volume bounce with a skeptical eye looking for the next leg to drop.


Good morning Minyans.

One of the most discouraging things Mr. Market could do at this juncture is move higher. I know that sounds rather counterintuitive however it is very true. Clearly it would discourage the bears who believe the market will continue to falter, however it would also discourage many bulls. Prudent trading and investing is all about proper entries. Even the most hard core of bulls will view a light volume bounce with a skeptical eye looking for the next leg to drop. Those with cash on the sidelines want to feel comfortable that they are getting good entries, not just trying to catch a falling knife.

Friday's sharp sell off on high volume wreaked havoc on many charts and the overall technical picture. Despite some key levels holding, technical analysis 101 says that the first bounce after a high volume drop will fail, which will keep many on the sidelines waiting patiently. But what happens if that isn't the case? What happens if we start to steadily head higher once again? I know for a fact this would discourage a majority of the market players and is therefore something I am keeping my mind completely open for.

I have raised an appropriate amount of cash and feel good about my positioning regardless of what is coming down the pike, however I will not bury my head in the sand and will continue to keep my options open. We are rolling through earnings season and quickly coming upon a time of year that is historically very kind to stocks. We have the fed working for us and I suspect Oil will come in a bit, easing the economic landscape.

I am eagerly building a list of names that have already reported solid earnings and should be in play for the next several months. Despite my desire to avoid the financial and investment arena, one such stock that has landed high on my radar is Blackrock (BLK). The company recently a 116% jump in EPS on a 302% increase in revenues. The stock has a full year 2008 estimate of $9.33 which gives the company a forward P/E of 20 on 20% growth. It is a little lofty however the technical picture is very attractive. The company recently broke out of a multi-month consolidation range and has since closed the gap from its post earnings jump. My strategy here would be to leg in slowly with a stop below $180. I would like to see how this stock trades for a while before adding.

Another theme I think is interesting and I have been nibbling on a bit are airlines. This morning Jet Blue (JBLU) reported a solid quarter and the stock is popping 10% in pre-market trading. UAL Corp (UAUA) also beat on a report that looks very good. Should these numbers be real and oil continues to drop, I would definitely be looking at the other carriers such as Delta Air Lines (DAL) and AMR Corp (AMR)

Last night's Apple (AAPL) report has the early mood rather giddy, however the character of late has been to sell strength. I am very curious if this continues today.

Stay open minded today Minyan's and don't let the noise keep you from listening to the tape.
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Position in UAUA, DAL

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