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Play Editor's Note: Time and time again we have heard the old Wall Street maxim "don't try to catch a falling knife", which essentially states don't try to pick the bottom in a stock or a market. You'll end up getting cut. Unfortunately, that's all the market is offering us these days - a rain of knives!

Long-term investors can just hold their nose and close their eyes and wait for the selling to stop. Or if you're brave you can dollar-cost average as your market gets "cheaper" for you. This newsletter isn't about long-term investors. It's about trading.

I don't think traders have many options right now. If you can't watch your positions and the market during the day then you absolutely need to be sitting out. The volatility swings are horrific. If we don't sit out then we can either go with the trend, which is down, or we can try to buy dips near support. Lately, stocks have been slicing through support with barely a tap on the brakes.

Personally, as bad as the charts look, I do not want to short this market. That may be my emotion getting in the way but it would be too easy to see another +800 point day if something spooks the shorts into covering. That sort of violent rebound is what bear markets typically provide. Granted bear market rallies aren't normally as big as last Monday's move but you get the idea.

If we're not going to buy puts or short equities then we need to be looking for entry points to buy the dip and in this market that means trying to catch the knife! (Or you can sell puts, the strategy I mentioned yesterday and again in today's plays) All of the new plays I am publishing below should be considered very high-risk. It would be all too easy for the market to keep falling. I'm trying to play with a stop wide enough that stocks have room to move but not too wide. Stop loss placement is probably the greatest challenge in this market if you're not day trading.

In addition to tonight's plays I wanted to list a few stocks and where they might find support if the markets keep falling.

LLTC: A dip into the $20-19 zone for this semiconductor stock might be an entry point for bullish positions. Stop under $19.00.

MOT: The long-term chart for MOT is horrendous but investors defended the stock pretty hard when it dipped to $4.00 last week. I would be tempted to buy dips in the $4.20-4.00 zone with a tight stop under $4.00 (maybe $3.95-3.80).

CTXS: If this software stock breaks the $20-19 region of support then it's headed for the $15.00 level. A dip near $15.00 might be a tempting, albeit somewhat scary, entry point. Use a tight stop.

JNPR: This networking stock might be a buy in the $12.50-12.25 region.

YHOO: There is still speculation that someone will acquire YHOO. I would be tempted to speculate on some long-term options on a dip near $10.00. Of course I'd be a lot more bullish on a plunge toward stronger support around $5.00.

TRLG: This apparel stock appears to have very serious support in the $15.00-14.00 zone. I'd be tempted to buy a dip with a stop around $13.75ish.


New Long Plays

Intel Corp. - INTC - close: 14.99 change: +0.94 stop: 11.95

Why We Like It:
INTC recently reported earnings. The company beat by a penny and investors were unhappy with the company's outlook. If the globe is facing a widespread recession then naturally INTC's sales could be affected. Thus the longer-term trend may be down for INTC but that doesn't mean the stock won't see some oversold bounces. I suspect that INTC can bounce if it nears the 2002 low around $13.00. We're suggesting readers buy INTC in the $13.25-13.00 zone with a stop loss at $11.95. More conservative traders may want to use a tighter stop (say 12.50ish). If triggered at $13.25 our first target is $15.75.

Picked on October xx at $xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 10/14/08 (confirmed)
Average Daily Volume: 74 million

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Wal-Mart - WMT - close: 50.05 change: -4.39 stop: 41.95

Why We Like It:
The sell-off in WMT is crazy. The company's business didn't get 8% worse today. We're moving into a recession. Consumers might cut back on their spending but WMT will be picking up more customers. The plan here is to buy fear and sell the rebound. If shares of WMT are getting sold this hard then where will it stop? I think shares will find support in the $44-42 zone. We're suggesting readers buy WMT in that $44-42 area with a stop loss at $41.95. This is one stock where we will be tempted to hold over the company's earnings report in mid November. If triggered at $44.00. That's right, $44, another 12% lower from here, then we will have two targets. Our first target is $49.50. Our second target is $54.00. Nimble and aggressive traders could try and catch the drop but there is no guarantee WMT will hit $44.00 and the bounces are going to be sharp!

Picked on October xx at $xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 11/13/08 (unconfirmed)
Average Daily Volume: 25 million
 

New Short Plays

None today.
 

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