Securities Research Services

Thursday, October 02, 2008

Taking a Look at Recent Trades

Using the Risk Assessor as our guide it is our opinion that the recent downtrend has stretched too far from the 50-week average for a safe short trade. We would prefer to play the trends when risk is low, but when trends get extended, we would rather let others assume the extraordinary risk if that is their desire while we wait for the inevitable turn.

We keep an eye on a number of blogs and read a large number of analysts in our daily research. One common experience we have read over the past week has been that traders are getting stopped out by the massive volatility that exists in this market; and this includes those who are attempting to play the short side.

We, on the other hand, took profit on our short trades last week and started looking at areas where the heavy risk in this market could be mitigated. As a result we missed some of the sharp downside moves we have seen but at the same time we have not been experiencing painful stop outs either.

In fact, we have been able to turn a small profit in this environment.

Let's take a look at two of our trades this week:


Earlier this week we noted that attempting to pick a bottom in this market was akin to trading suicide. What we recommended instead was a focus on stocks that have both held up well during the recent downturn and which are experiencing institutional buying interest. Cambell's Soup (CBP) was just such a stock.

On Wednesday we put in an order to buy CPB at $38.25. As you can see on the chart above that order filled and then shot sharply higher. This market has been tough and it has rewarded those who are not greedy, so we plan to take profit at $41.10. We have moved our stop up above our entry point just in case something goes wrong.


THS is another stock that fit our criteria. This sector isn't prone to the same types of risk other sectors are prone to in this market. People don't stop buying food when the economy turns down. We attempted to buy THS at $28.60 on Wednesday. When that didn't fill we moved up our order to $29.50 today.

THS found early buying interest and our order didn't fill. Nevertheless, it serves as a great example of a stock that both works well in this market environment and one that does not require traders to stick their face in the buzz saw of risk that exists when the market is so extended like it is right now.

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