RARE PHOTO FOUND OF “FAST MONEY” PRE-SHOW MEETING

Despite the fact that you should be printing money again today for following my setups from last night ($WPRT is acting like it had 20 K Cups this morning), I would like to repeat the fact that you need to adjust to the market at this point.  Now is not the time to be making aggressive bets on stocks that have already gone parabolic.  You also need to emphasize stop losses.  Again, if you followed my charts last night, you’d be up in $AMR, $JBLU, $GS, $HOG, $AOL and even $MEE if you chose to take the plunge. Of course, $WPRT is the big winner today.  Also, I have been telling you to monitor the high bull flags I charted last week–namely $DPZ, which is going higher.

And yet, despite the success of my picks, I am not sitting here beating my chest and acting like a cocky degenerate. Instead, I am strongly advising you guys to tighten up right now on your longs.  Cut your laggards. Raise your stop losses. Raise cash. SLOW DOWN.   It bothers me that we have not touched the 20 day m.a. on the $SPX for many weeks now.  I can live with staying well above the 50 day for quite some time, but the lack of relation to the 20 day gives me pause. Beyond that, I still want that retest of the 1150 area, before we see 1220.  If we fail to close above 1187, we will have made a series of lower highs over the course of the past few days.

Bottom Line: Discretion is the better part of valour (sic).

Making slight adjustments to the market is essential.  Stocks ebb and flow, and sometimes you need to tinker with your strategy on a short term basis to extract the most amount of money from your trades.  I want to emphasize the importance of using stop losses going into the rest of this week. Despite my view we are in a cyclical bull market, the fact remains that we have covered a lot of ground in a short amount of time since February.  Retesting the 20 or even the 50 day moving average can happen at any time.  While I did very well in individual names today despite the broad market selling off, I cannot afford to become a cocky loser and disregard the fact that around 70% of the short term movement in stocks is a derivative of the action in the broad market.

Tonight, we will start off by looking at two stocks where I think you should consider buying them on this dip, so long as you have a stop loss in place.

Should Massey gap down hard again tomorrow morning, I would look to jump in here. We have just seen two full days of intense selling on huge volume after the terrible mine explosion and deaths over the weekend. Many people who wanted out of the stock are already gone.  Yet, on a weekly basis the stock remains in its uptrend and has done no real technical damage.  IF, and only if, you can get this stock at $43.50 or lower, I think you have an excellent risk/reward setup. Place your stop loss just below $40, which would be a big psychological level for the stock in my opinion if it broke.

Unlike Massey, you can look to buy this one right away.  Westport broke out and is now retesting the break out on rather unimpressive volume.  This is a very good set up if you missed the initial break out. Many day-traders and late-comers are getting shaken out right now.  The idea is to buy their shares.  If the break out was true, the stock really should not go below $16.80, but I would keep a stop loss around $16.15 to make sure you don’t shake yourself out too soon.

Ok, enough trading lessons. Here are charts to watch for tomorrow.  Feel free to pick and choose whichever charts fit your individual trading style.

LEARNING FROM MY WINNING STREAK

You have to remember that trading IS, indeed, gambling because you are essentially wagering on an outcome that has yet to be determined.  Rather than deny or shy away from that fact, you are far better served to embrace this notion and engage in strategically and theoretically correct gambling strategy.  By far, the most profitable strategy is one of selective aggression.  In Texas Hold ’em poker, you should be folding a far greater amount of hands than you should be playing.  Similarly, in the stock market a profitable trader is taking a pass on a much higher number of potential setups than one would think.  You simply must be extremely selective in which stocks you choose to trade. Beyond selection, when you do decide to trade a stock, you should take aggressive action before you miss your entry point. Trepidation can often be just as damaging, if not worse, to a trader’s profits and psyche than hyper aggression.

Beyond correct strategy, however, there are times in all things gambling when you will be luckier and more “in the zone” than others. Trading will seem easy, and the money will seemingly roll right off of the printing press and into your wallet.  Frankly, right now is one of those times for me.  Many of my setups have seen incredible gains over the past few weeks, especially today in the face of an overall weak tape. To be sure, I am–and you should–enjoy the hell out of those times, for that is when trading is the most fun. However, it is also when many traders become sloppy and complacent, and can lead to them making disastrous mistakes.  They decide to go all-in on one stock because they “just feel it,” or they buy a stock which has already gone parabolic because they know it will not come crashing down.

Strategy and discipline ALWAYS matter, even when it seems like you can hit every three point shot with one arm tied behind your back, and Yao Ming running at you with his arms stretched as high as can be.

MARKET SUMMARY

The $SPX finished down 0.59% to close at 1182, as we finally saw a day where , generally speaking, the complacent hot money got a little spooked.  Many commodity names gave back some of the gains they had made over the past few weeks.  Moreover, we tested the trend line of the rally since February. (See chart BELOW)

The bulls did a solid job of buying that dip–down to 1177–into the close.  It would have been very bearish in my view if we had closed on the lows of the day.  With that said, however, we could still see a test of the 20 day moving average which is currently at 1167 and rising.  Overall, I still see us in a vacuum up to around the 1225 level, as per my long term chart posted yesterday.  In the short term, we can easily see some backing and filling.

INDIVIDUAL TRADES

Despite the broad market being down, my trading account saw $AIG up 10.53%, $NEP up on huge volume 7.38%, $PSYS up 1.53% and $ETFC left literally unchanged on the day. Earlier in the session, I sold out of $HMA for a small loss.  In my long term account, $AOL was up 3.98% on strong volume to a fresh high since it became public again.  I have charted all of these stocks in my setups over the past few days, so make sure you check back in for my nightly chart-fest.

If you want to pay money every single month to read people who call themselves sharks, or Reverend sharks, or some form of that lingo, yet who also insist on whining about the market every single day and not giving you many trades, by all means go over to Cramer’s paid money site and waste your time.  If, on the other hand, you want to bank coin on a daily basis, you’d be wise to keep your browser open to iBC and The PPT all day long, constantly pressing the refresh button in the same jittery manner as a heroin addict, with ADHD and a caffeine addiction problem to boot, checks his phone while waiting for his drug dealer to return a voicemail.

Two of my top picks from last night should be making you rich right now, $NEP is up over 9% today on MASSIVE volume and is poised for higher prices as it is in the embryonic stages of a multi month breakout. $AIG is also up almost 2.5% and could get some serious momo to close the day.   Because only LOSERS average loser stocks, I am cutting ties with $HMA for a mere 2% loss, but will keep my $PSYS as a healthcare facility play.  However, I expect the latter to break out of its bull flag relatively soon or its fawkin’ dead as disco to me.   Remember, winners add winners, losers average losers.

Bottom line: Use today to cut ties with your laggards and raise cash, and only be long the strongest of names.  Don’t be so loose with your money.  Only those issues performing well deserve to be treated well, but let them run so long as they have momo.

UPDATE: $AOL is up over 4.50% today. READ MY SETUPS.

TOP PICKS: $NEP, $AIG, $ZAGG

All in all, today was a healthy consolidation day.  All of the whiners about this market have been regurgitating the same excuses for months on end: low volume, weak macro data, higher interest rates coming yada, yada, yada.  I showed you a chart in my previous post that explains the drift higher on low volume is because we are in a vacuum. We have some upside left before I believe we see some tough supply.  So, you have to ask yourself, am I a winner, or am I a whiner? Money never sleeps, buddy boy. There is still plenty of coin left to bank.

My top longs are $ETFC, $ZAGG, $HMA, $PSYS and $AIG. I do have cash and will look to put it to use. Here are my top setups for tomorrow.