If you're tempted to buy this bounce in the market consider these two candidates.

Editor's Note:

My market outlook is still short-term bearish. Today's big bounce in the indices seems a little overdone. For many fund managers their year-end is tomorrow. Today and tomorrow could be window dressing and a last gasp effort to enhance their yearly returns. I wouldn't be surprised to see this bounce roll over in the next couple of days. If it does we can use it as a bearish entry point. However, if it does not and this is really a bullish reversal then we want to add a little bit more bullishness to the newsletters. I'm adding a couple of candidates but I would keep positions very small to limit risk.

The better trade may be no trade at all right this moment. I suggest more conservative traders just sit on their hands for the next day (or two).

FYI: One more bullish candidate I would consider it Target (TGT). While I'm bearish on consumer spending the retail stocks are rising anyway. TGT is not normally a volatile stock and a stop under this week's low could be a good play. I would not hold over its earnings report in November.


NEW BULLISH Plays

Dril-Quip Inc. - DRQ - close: 50.35 change: +1.58 stop: 48.60

Why We Like It:
DRQ looks like a bullish candidate here. The dollar is rolling over under resistance. If the currency does reverse it will be bullish for oil and that's a positive for the oil stocks. DRQ is bouncing from a test near its rising 50-dma. We can use a tight stop under Wednesday's low. I'm keeping our target modest and suggest we exit at $54.25. DRQ reports earnings late next week and we'll plan to exit before they announce.

I am suggesting very small positions. I don't trust the market bounce and we don't have a lot of time so let's keep positions small to limit our risk.

Annotated chart:

Entry on   October 29 at $50.35 (small positions)
Change since picked:     + 0.00   			
Earnings Date          11/05/09 (unconfirmed) 
Average Daily Volume:       348 thousand
Listed on   October 29, 2009    


Reynolds American - RAI - close: 48.63 chg: +0.51 stop: 47.40

Why We Like It:
RAI reported earnings a week ago. The company beat estimates and management raised guidance. Yet I suspect the real reason shares have been performing so well is the dividend. The company offers a big dividend on its stock so investors find it more attractive. The stock is currently yielding about 7%.

I'm suggesting a tight stop under this week's low. The $50.00 level has been resistance in the past. However, if the market is really reversing higher then I think RAI can breakout. Our target is $53.50. We are suggesting very small positions at this time to limit our risk.

Annotated chart:

Entry on   October 29 at $48.63 (small positions)
Change since picked:     + 0.00   			
Earnings Date          10/22/09 (confirmed)    
Average Daily Volume:       1.5 million 
Listed on   October 29, 2009