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We have seen a continuous pull-back for a few days.  But I do not think it will go down too much since the market seems to have digested all the bad news.  Therefore, we need to be prepared to pick our next possible winners on the long side.

There are 2 strategies to pick stocks.

1: Pick stocks that have not moved up much yet.
2: Pick the strongest stocks such as BIDU and SOHU

The first strategy might give you the best risk/reward ratio.  Once your picks move, they tend to move quite a bit since they have not moved yet and people are caught off guard.  The problem with this strategy is that your picks might not move at all.  They were weak in the past and they tend to remain weak in the future.

The second strategy can also be called momentum trading.   The strongest stocks move up almost every day because they have solid stories behind them.  One of the strongest stocks in 2007 was Drys. If you pull out its daily chart, you could see how it moved from 9 to 130 in less than a year.  So this type of stocks moves fast and furious.  However, they are risky.  Once they turn over, they tend to fall much harder than those boring fish mentioned in strategy one.   See also Drys for an example

Drys Weekly (Click on the image to have a better view)

Yon can mix these 2 strategies.  This can reduce your risk and increase your likelihood to catch some fat fish at the same time.