Like a breath of spring, wasn’t it?  Just when we were expecting yet another short-squeeze toward Dow 14000 and beyond, the Indoos plummet a refreshing 203 points, bowing to economic realities and rationality at last. Or was it just March madness? Who cares. When some uncharacteristically glum Wall Street wrap-ups hit the tape late Tuesday afternoon to acknowledge the stock market’s steepest decline of the  year, it were as though we’d died and gone to heaven. It was even better than that, actually, since the selloff did not exactly take us by surprise. A trading “tout” that we first aired in mid-January called for a 600-point Dow rally to 13085, but here’s the timely update that went out to subscribers shortly after midnight Tuesday:  “The Dow [has gotten] as high as 13056 — close enough to the target to turn us very cautious.  This means, for one, that we are not taking the likelihood of yet one more short-squeeze rally as a given.  In fact, a downdraft that exceeds 12883 would create the strongest bearish impulse leg on the daily chart that we’ve seen in a while.”

In the actual event, the Dow blew past 12883 on its way to an intraday low at 12734. So how bearish are we?  Not as bearish as you might think, actually — just very cautious, as noted above. We leave bullish and bearish “feelings” to gurus who possess, um, crystal balls. We don’t purport to see the future – only to trade day-to-day realities that can change so fast that if you stop to pat yourself on the back after making a good trade or prediction, you risk getting flattened by Mr Market’s equivalent of an 18-wheeler. But as long as you don’t take your eye off the truck, there is nothing to fear from stocks when they are moving forcefully, as they did yesterday.

Silver Wheaton’s Number

One stock that fell with particularly force was Silver Wheaton (SLW), a mining company that is popular with Rick’s Picks subscribers. SLW has plummeted 15% in the last five days, but fortunately we had its number – almost exactly – and recommended buying June 40 call options if the underlying shares came down to 34.53, a Hidden Pivot target. [Click here to get our targets and trading touts free for a week, as well as access to a 24/7 chat room that draws traders from around the world.] Silver Wheaton fell hard yesterday, lengthening its nasty losing streak, but when the dust settled it had fallen no lower than 34.40 – 13 cents below our target.  Subscribers capitalized on this by jumping on the June 40 calls for around 1.27. However, they were advised via an intraday update to take a small profit on half of the calls at 1.37.  Now, if the stock should fall anew, we’ll use a 1.17 stop-loss for the calls so that in theory, we can do no worse than break even on the trade. And if SLW continues to rebound – it ended the day at 34.97 – the plan is to short calls of a higher strike price for at least as much as we paid for the June 40s.  Legging into bullish call spreads for a net credit is the way to go, as far as we’re concerned. If you don’t have a crystal ball, that is.

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