Since last Monday the market has made a nice little rebound but it will take about 6 months of this before we are out of the woods.

The market has formed a hammer candle stick which is a positive sign. This is usually seen as a reversal pattern. How long the uptrend will last is unknown at this point since the economy as a whole is still very negative.

Even with that said there are many beaten down stocks that have huge potential. I particularly like the solar industry and for a long term hold the oil industry.

Here’s a chart for the action this past week:

If you read my last post from last week, the DOW is most likely headed down to test the 7700 levels. With that said there are still some stocks that could breakout. Here are some to keep an eye on.

SPAR – This one has made a 3 day positive move and if it breaks the high of $3.52 it could go higher.

SIRI – This one is coming off 52wk lows and the volume is increasing. This could be a very good short term play if it opens up green.

NOVA – Big end of day pop and could see some continuation.

The Dow broke down below a 20 day symetrical triangle, although it closed very near the bottom of this trend line we could bounce since charting is not an exact science. If we are to bounce it should happen on Thursday. If the market closes down again, the next logical step is to test the lows made on October 10th. This exact number is 7,773.71. It may not happen in one day but I’m sure will will happen soon.

Until then I sugess you sit on the side lines before openining any new positions.

Lots of bargains in the market but they could get alittle cheaper in the next few days.

If you had been loading up on the energy sector the last few days like I had suggested you’d be up nicely right now. Some of my alerts are up as much as 10 points range wise in the last few days!!

I started building a position on CLF last week and will continue to add to it over the next few days. MOS is also trading in a wide range and looks like it could see upside as the market slowly comes back.

The stock I’m currently holding are good day trades but the real money will be holding them for 10-20 points. This is where the real money will be made.

Here are some penny stocks I’m watching too:

TMA – Made a monster gain today and could follow through.
VCSY – This one is moving up with no real news from the company.

Here are few stocks I’m watching right now:

HERO – Is off its Summer highs of $39.47 and currently trading under $9. Dragged down by the whole market this one could see a nice rebound. HERO has reported that their Q3 earnings will be hurt be recent hurricanes and the stock held up.

DRYS – They are a bulk shipper that keeps the economy going. Even with a slow down in the ecomony DRYS is off significantly from it’s high of $131. The company plans to spin off a water business that could be worth more than the current stock price. DryShips owns 49 ships, and I think this one is one to get into at these levels.

ELRA – A Doubling Stock pick this one could go alittle higher if the volume is there.

How do I know the bottom has hit or is near? When people tell me they have stopped looking at their account statements. When people hate the markets the most is when smart money starts building positions.

No one can guess the exact bottom, so my suggestion is to build a position slowly.

I believe the bulk of the money to be made in this market will not be short term, but 6-12 months out in companies that have been beaten down by this market.

If you’ve been thinking about putting money to work start looking to your favorite companies that you’ve always wanted to buy. As long as they are not down because of financial problems or banking related I believe they are most likely on sale.

I’m buying energy related companies trading at or near 52 week lows. My positions include MEE, ANR, CF, EXM, UNG.

The markets have taken a beating this week and the following stocks have come down to an attractive level. The market turned around end of day and many hammer candlesticks have formed.

RIMM, V, FSLR, DRYS, EXM, BTU, AGN, CF

CF has come down the same length it has the past 3 times and today’s reversal could lead to a short term gains.

BTU has also formed a nice hammer candlestick.

RIMM has come down to test support levels it made back in July, and looks very attractive here.