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Shooting for 100% Return in One Month

Will be very hard for money managers to make 100% in 1 year starting today.

They usually invest in "solid" stocks such as JNJ, WMT, KO, MCD, etc. Stocks that did not suffer significant panic selling and may even prove to be "over-priced" if the current recession continued longer than expected or was able to recover at snail's pace. Those stocks are not meant to rally 2x, 3x or more in a very short period of time.

Best candidates are still hammered-down stocks. Buying them during panic sell-offs and selling when the panic subsides can usually gain 2x to 20x initial capital depending on trade performances.

I've been doing that since July 2008 and have blogged them into SA.

It works much better than shorting them with limited capital since it is impossible to make more than 100% on capital shorting stocks. And extremely hard to play the short side these days with the almost unpredictable massive day-to-day tape fluctuations and government interventions.

You can't leave your shorts with no stop loss protection. One mistake and your capital can get wiped out in a matter of weeks if not days.

It is still OK to leave long positions without any protection at all at their extremely depressed prices. Some of them will go sour and not participate with any rally. But that is just a part of the game. Getting stopped out repeatedly with stop loss protections in place can more than mitigate the purpose of gaining 1x to 19x profits and may even result in a net loss.

This is not going to last long. Once this bear market is over and stock prices are up, price appreciation rate will deteriorate as volatility goes down and stock prices starts spending more time consolidating rather than rallying.

Also, buying hammered and damaged companies can become a very dangerous game once they start declaring banckrupcies if and when this downturn lasts much longer than expected.

It takes a lot more than fundmental analysis to do this type of game without getting badly burned. It takes a lot of knowledge and experience in technical analysis.

Are 'Phoenix' Stocks Getting Ready to Rise?

Strategy with phoenix stocks is to buy them at divergence signal using MACD. Then selling half of the stock holdings after they made a reasonable bear market rally.

With the current volatility; prices of phoenix stocks can easily run up 2x to 5x in a few days or few weeks.

Reward to risk ratio is simply very high at this stage. Buying a $2 stock can easily run to $4 to $10 in a very short period of time due to selling fatique and/or short coverings. Downside risk is that those companies can go bankcrupt in 6 months to 1 year as they continue to burn their cash reserves through the downturn while the credit crunch is still in effect. Selling half the stock holding at $4 or $5 and holding the other half for long-term investment effectively gives you a "free" investment.

For example: UYG or double long financials is now trading at $2 and change from it's previous high of $72.96. Based on Elliott Waves analysis; there is a high probability it has already completed a 1-2-3-4-5 run to the downside with low probability $1.60 as the limit run just in case the downside goes into extended mode. The upside is that it can easily jump to $3.83 just on reaction bounce and $6.95 if bouyed by good news such as if and when the Treasury releases it's Banks Recovery Program. For now traders may already be starting to price in the BRP as the $BKX and UYG failed to produce a lower low on Monday this week while $SPX, $INDU and $COMPQ made new lows last Monday.

Selling at $3.83 half of anything bought at the low $2 levels and holding half for long term investment effectively makes your investment closer to zero while still providing you with half the shares that has a tremendous upside potential. This is more true with beaten down stocks of C and BAC than any other banks.