Trading lower today to start..

8:30 am EST It looks as though we will start out the quarter on a sour note. If you read my blog on a regular basis, you already knew that. The key question is, what is the big money going to do from here? Will we go back and retest the lows? Will this just be a continuation of a healthy pullback from the break-neck run higher we have had over the last couple weeks? Only time will tell. Of course, you can check back regularly and get my thoughts.

So how do we make money here? Let's look back at a couple of stocks from yesterday. I set up the hedged trade in Apollo (APOL). They reported a solid quarter last night but they have a couple of factors preventing the stock from going higher today. First is that the stock had a very solid run going into earnings. While the analysts had a specific number in mind for earnings, it looked like the stock had a completely different number and there was little chance of them hitting it. It also looks like the market is going to be down solidly today at least to start. Since 75% of stocks move with market direction on a given day, it should be solidly down. I set up a hedged trade specifically for this. I will still probably be profitable with the earnings announcement no matter the direction of the stock.

I was looking at Lennar (LEN). I didn't pull the trigger on a purchase yesterday. I am not sure that I will. There was solid volume yesterday, but I am not sure that it was the type of volume I was looking for. If I am not fully convinced, I am not putting the trade on. I am not convinced right now. If we get the selling volume I need, the stop will be at $5.25. Whenever you make a trade, decide how much your portfolio you want to risk. Combine that with what your stop is going to be and adjust your position size accordingly. In this case, there is still a little more downside than I would like to put on a sizeable trade.

I am looking at Research in Motion (RIMM) going into earnings after the close Thursday. I will be in the same type of hedged trade I used on (APOL). I think they will report pretty strong earnings but the price action over the next couple of days will determine the direction of the stock when they announce.