Focusing On The Long Side For Tuesday

We ended Monday above the support lines I drew in Monday morning’s post. Many traders will be looking for a rally on Tuesday, given the extreme action Monday and end-of-day buying that took place. Perhaps some value investors will be looking for (what they consider to be) bargains as well. It may not happen, but odds do appear to be better for long side trades. In particular, I am looking for stocks that have seen extreme selling, and had buyers emerging late today, especially past earnings winners. The commodity- and energy-related sectors are proving quite a few of these chart types. Furthermore, if we do get a strong rally, expect many of these names to move over 10% in a single day, providing some great trading opportunities in the process.

- A-Power Energy Generation Systems (APWR) saw considerable buying volume after its initial drop, and closed well off its low of 4.51. The 52-week high is 31.89. Considering strong past earnings and revenue growth, the selling looks overdone, with the price now back at early 2007 levels. I started a long position at the end of the day today.

- Walter Industries (WLT) closed nearly flat after being down over 20% in early trading. I am holding a small long position overnight.

- Companhia Siderurgica Nacional (SID): The selling in steel stocks seemed a bit overdone. SLX, the steel ETF, has dropped from a 52-week high of 114.12 to close today at 40.54. I liked the intraday action in SID today, especially the late day volume.

- Continental Resources (CLR): This oil and gas exploration company closed positive after an intraday low of 23.98.

I will be running through many more charts, and will try to post more later. For clarity’s sake, I am not calling a bottom, nor am I highly confident we will get a rally here. However, if we do, I am out of all short and put positions, and I want to be able to ride some of these high beta names for profitable day trades. I do not see this as a good place for long-term or value investors to buy stocks. It would be literally impossible for anyone to know the true extent of our problems, given their scope and complexity, and therefore adding long-term positions now is simply a bad gamble.

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