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New Plays
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CAM None
CN  
CPHD  
INTC  

Play Editor's Note & Trading Philosophy for this Week.

The definition of a bear market varies depending on whom you are talking to but for most analysts a 15% to 20% decline is usually described as a bear market. Looking at the numbers in the wrap this weekend you can see that several significant sectors are deep in a bear market and the major indices are there or they're getting close. That means that in a bear market it should be easier to make money on the downside and we need to be looking for new entry points for bearish positions.

However, we have just endured the stock market's worst start to a new year in the market's history. We're extremely oversold and due for a bounce. Trying to launch new short or put positions now would probably be foolish.

Yet at the same time it's almost unanimous that we haven't hit bottom yet and we haven't seen any market capitulation. Hopefully that will be Tuesday this week or sometime this week. Here is my trading strategy for the time being. We want to be looking for stocks we can buy a bounce and ride for a few days but that's it. Don't get married to them. In reality any bullish play is just an attempt to capture a few dollars while we wait for stocks to roll over again. Investors are going to sell the rallies in a bear market. The only question then is how long will any specific bounce last before it turns into a new entry point for shorts and puts. The pattern to watch for is lower highs and lower lows. Relatively speaking we just hit lower lows so now it's time for a bounce but to lower highs.

We're going to try adding some plays this weekend with the expectation that we will see a market capitulation soon and if we're lucky we can get filled on an intraday dip before the oversold bounce begins. More conservative traders will be better off just stepping aside and watching from the sidelines. What we are effectively trying to do is "catch the knife" and it will be easy to get cut if you're not careful.


New Long Plays

Cameron Intl. - CAM - cls: 45.58 chg: +0.95 stop: 39.90

Company Description:
Cameron International provides flow equipment products, systems, and services to oil, gas, and process industries worldwide. Headquartered in Houston, TX, the company will be added to the S&P 500 GICS (Global Industry Classification Standard) Oil & Gas Equipment & Services Sub-Industry index. (source: company press release or website)

Why We Like It:
The action in CAM on Friday actually looks like a short-term bottom. The stock dipped to $43.29 near its November lows and bounced back and on big volume. However, we are expecting another big market decline to really put in a short-term bottom for the market. If that occurs we want to try and pick up CAM closer to support near its 200-dma or the $40.00 level. The 200-dma is at $41.65. We are suggesting an entry zone to buy CAM in the $42.00-40.00 range. If triggered we'll aim for a really back toward the $47.00-48.00 region, where the stock appears to have some resistance. This should be a quick play and we do not want to hold over the late January earnings report. FYI: This past week it was announced that CAM would replace HET in the S&P 500 index as of Monday, January 28th.

Picked on January xx at $xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 01/31/08 (confirmed)
Average Daily Volume: 3.3 million

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China Netcom - CN - cls: 64.92 change: +3.70 stop: variable

Company Description:
We are a leading broadband communications and fixed-line telecommunications operator in China. (source: company press release or website)

Why We Like It:
Shares of CN have been very resilient lately. Traders have been buying dips to its 50-dma and the stock rallied higher on Friday. We see two potential entry points to open positions in CN. One is a breakout over resistance near $66.00. The other would be a pull back toward support near $60. We do not know how CN is going to react on Tuesday when the U.S. market reopens so we're listing both entries and we'll take whichever one is hit first. If CN continues to rally then our suggested entry point to buy the stock is at $66.25 and our stop loss will be $61.99. If CN pulls back then our suggested entry point will be the $61.50-60.00 zone and our stop loss will be $58.75. Now remember, CN trades overseas and will gap open up or down every day when the U.S. market opens. We have two targets. Our short-term target is the $69.75-70.00 range. Our second, more aggressive target is the $74.00-75.00 zone. The P&F chart is bullish with an $81 target.

Picked on January xx at $xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 03/23/08 (unconfirmed)
Average Daily Volume: 318 thousand

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Cepheid - CPHD - close: 30.31 change: -0.21 stop: 24.95

Company Description:
Based in Sunnyvale, Calif., Cepheid is an on-demand molecular diagnostics company that develops, manufactures, and markets fully-integrated systems for genetic analysis in the clinical, industrial and biothreat markets. (source: company press release or website)

Why We Like It:
CPHD has been a relative strength winner this year. The stock continued to hit new highs until just a few days ago and even then CPHD has resisted any serious profit taking. If we get the chance we want to buy a dip. Broken resistance near $28.00 should be new support. We're suggesting readers buy a pull back into the $28.25-28.00 zone. If triggered our target is the $32.00 mark. More aggressive traders could aim higher. The P&F chart is very bullish with a $57 target. We are considering a more aggressive target near $35.00.

Picked on January xx at $xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 02/21/08 (unconfirmed)
Average Daily Volume: 1.2 million

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Intel Corp. - INTC - cls: 19.00 change: -0.33 stop: 17.89

Company Description:
Intel, the world leader in silicon innovation, develops technologies, products and initiatives to continually advance how people work and live. (source: company press release or website)

Why We Like It:
Shares of INTC have just been murdered this month. Shares have fallen from the December high of $28.00 and the year-end close of $26.66 to $19.00 (about 29% YTD). This sort of meltdown for a good company like INTC could be a buying opportunity. Now looking at the chart the pull back to $19.00 looks like an entry point. INTC had support in the $18.80-19.00 zone back in early 2007. Thus you could argue this is the place to buy it. However, we are expecting another dip in the major indices so we're going to try and target a new low in INTC. We're suggesting readers buy a pull back into the $18.50-18.00 zone. We'll try and limit our risk with a stop at $17.89. This is a classic case of trying to catch the falling knife. If you aren't willing to take the risk of having INTC plunge through our entry zone and hit our stop then don't do it. If INTC fails at $18.00 the next level of support looks like the $17.00 region and its 2006 lows. If we are triggered at $18.50 we will have two targets. Our first target is the $19.95-20.00 range. Our second target is the $21.75-22.00 zone. FYI: More aggressive traders may want to use an entry point at the $18.75 low.

Picked on January xx at $xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 01/15/08 (confirmed)
Average Daily Volume: 70 million
 

New Short Plays

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