Stock Trading Advice Revisited

Well it has certainly been an interesting week on the Markets and this is how we see it at the Trading With Common Sense Desk. First of all with regards to the UK, the FTSE and of course Lloyds Bank, where do we stand?

Well to be honest one never knows exactly with these sort of shenanigans going on but here is an educated guess from the Trading with Common Sense Team.

I think most experts are in accordance with the fact that no one knows exactly how deep the hole is at HBOS (possibly even the HBOS management don’t know which is really worrying) but for a certainty I would bet that the LloydsTSB Hierarchy don’t know and that is what is causing the distress and uncertainty at the moment.

Regarding one of our “2 Sure Fire Winning Strategies” I hope those of you who had downloaded the free report in time took action as there was a nice range of about 40 odd points to aim at and there were profits to be had certainly. I know we didn’t make as much as we could have but the news caught everyone on the hop and I guess that was what added to the confusion and mark down amongst Traders.

Where to next? Well for those adventurous amongst us there has to be the rather enticing prospect of at least some sort of “dead cat bounce” so perhaps a long bought in the 50-55 pence region and then aim for a quick and dirty 10 points or so and get out when it hits the 60 pence region. If nothing else this could certainly help pay for this years family summer holiday and leave the rest of the bounce or so to the “deep pocket brigade”. I always advise on something like this to set your target, aim, fire and then get out before the shouting starts so to speak and also whilst still in profit.

Why do I think there is going to be some sort of “dead cat bounce”?

Well the logic goes as this. Firstly yes there is a hole; we don’t know how deep (possibly as I’ve said the management don’t either) but you can bet the top level management at Lloyds are going to be “working their butts off” to come out with some sort of positive news campaign to reassure the markets. How successful remains to be seen but they will definitely have to try and then let’s see what effect this has. There has to be some and the longevity of this approach depends upon how much “spin goodwill” credits the management team have with the media. I think they have more than most people realise and this is tied into my next viewpoint as to whether the rumours abounding about bank nationalisation are to be taken seriously.

I think Lloyds Banking Group and the entire Banking sector are going to need more cash as we have the full effect of the Alt-A fiasco to percolate through and most of this won’t emerge until after the first quarter of 2009. Secondly this will hit the banks hard but possibly not Lloyds as much as the rest as they were by and large (apart from HBOS) fairly immune to these sorts of transactions prior to the whole banking crisis starting.

Secondly to nationalise Lloyds Banking Group would be a massive act of bad faith on behalf of the UK Government as they did…….er …ask Lloyds to step in as a “White Knight” to rescue HBOS in the first place and to then “nick their shares” and shaft them afterwards for being so obliging in the first place would basically send a notice out to the markets that UK Govt Plc (especially Mssrs Brown and Darling) are not to be trusted ever again.

There will be a fudge (there always is, as that is what us Brits are experts in) and some sort of accounting “jiggery pokery” will take place but that is all. The share Price of Lloyds has been in this sort of range before and the key thing is that LloydsTSB via its retail banking operations is sitting on large piles of cash so Aunt Sals and Grannies annuities are safe for the foreseeable future.

With regards to the markets then it would appear that at the moment with the FTSE we have possibly reached one of the those “cusp” moments where it could so easily go either way. The fact that the market has remained so positive throughout the plethora of bad news since Christmas is indeed a positive thing and one that gives most bulls confidence but….(isn’t there always a but?) we have now come bang up against the trend line that has been in force since Christmas and the key level to watch is an end of day close below the 4,100 level. Below that and you would expect another test of the Oct / Nov lows but it has to be stressed how resilient the FTSE has performed as of late and so nothing it would seem is a done deal yet. It would appear that it is likely to take something major to take the FTSE down again (perhaps another partial Banking meltdown) and so performance this week with reporting underway is crucial.

In the US, the next leg down is perhaps already underway and the DOW is only effectively around 300 points away from breaking historic intraday lows but again with new information surrounding the Obama Rescue package out this week, don’t necessarily bet on new lows being established this week as volatility appears to be the order of the day and this could see fairly violent swings either way.

All this adds up to terrific conditions as far as the Market Trader are concerned with plenty of action to be had both up and down and that as Traders are concerned is all we can ask for.