The MTG Stalk Sheet
October 16, 2008

The MTG Stalk Sheet presents you with the best individual stocks that Morpheus Trading Group is stalking for potential trade entry each day, all in a concise and easy to understand format. Please be sure to read the MTG Stalk Sheet User Guide in order to understand the terminology below and to receive the maximum benefit from your subscription. Enjoy!

"FULL-SERVE" STALK LIST

We have a systematic method for determining a market bottom. We identify market bottoms by analyzing broad market price and volume action, market breadth, and stock leadership. For the market to put in a legitimate bottom all of our criteria must be satisfied. Until we see confirmation of a bottom we can assume that the market will continue to set new lows or chop around in meaningless fashion.

So how do we locate a true market bottom?

Broad market price and volume action - The first rule is pretty simple, as we need to see a prior low hold up in a broad market index. So far, the S&P 500 and Nasdaq have not violated their Oct. 10 lows. We are now looking for a follow through day (at least 4 days off the low) where a broad market index is up at least 2% on heavier volume to confirm that a bottom is in place.

Market breadth - When a market bottoms out we want to see the new 52-week highs list begin to perk up (we have not seen any new highs at all). We would also like to see as confirmation one or more days where up volume exceeds down volume on the NYSE or Nasdaq by a 9 to 1 margin. Though advancing volume beat declining volume by more than 9 to 1 in both the S&P and Nasdaq on Monday, we didn't like that the overall volume was relatively light.

Stock leadership - Though we mention this last, it is the single most important factor. Without stocks (and industry groups) making new highs or at least forming bullish consolidations (showing relative strength), we can not put too much faith in any bounce off the lows no matter how powerful the advance may be. So the market could hold a prior low and follow through (2% higher on heavier volume) to confirm a bottom, however; our true signal to get heavily long the market only comes when we see stocks breaking out to new 52-week highs on big volume.

While the broad market is holding the prior low (for now) we have yet to see a legit follow through day or spot any market leadership. We are now in capital preservation mode (cash in king), while we wait for new opportunities to emerge.

"SELF-SERVE" STALK LIST - UPDATED EVERY MONDAY (Click here to view the "Self-Serve" Stalk List section of the user guide.)

LONG WATCHLIST AND TRIGGER PRICES

Pullback entries

SPWRA - above 46.00 (2-5 day bounce off lows) (triggered 10/13)
AAPL - above 102.00 (2-5 day bounce off lows) (triggered 10/13)
ENER - abvoe 39.00 (2-5 day bounce off lows) (triggered 10/13)
DRYS - 23.55 (2-5 day bounce off lows to 20-day EMA) (triggered 10/14)
WLT - 39.30 (2-5 day bounce off lows to 20-day EMA) (triggered 10/14)
BTU - 34.51 (2-5 day bounce off lows to 20-day EMA) (triggered 10/14)
CLF - 37.01 (2-5 day bounce off lows to 20-day EMA) (triggered 10/14)
AAPL - buy zone 103.00-104.00 (pullback to 20-EMA on hourly) (triggered 10/15)

Breakout entries

SHORT WATCHLIST AND TRIGGER PRICES

Waiting for a bounce.

- Previous setups

- Triggered

Daily Stalk Summary

Below is an overview of all "full-serve" open positions, as well as a performance report on all "full-serve" positions that were closed only since the previous day's newsletter. Net P/L figures are based on the $100,000 Stalk Sheet model account size. Changes to open positions since the previous report are listed in red text below. Please review the MTG Stalk Sheet Subscriber Guide for important, automatic rules on opening gaps and stop prices:

Open positions (coming into today):

Closed positions (since last report):

net P/L = ($370)

net P/L = ($227)

Current equity exposure ($200,000 max. buying power):

flat

Notes:

Per intraday alert, we re-entered CF after stopping out at 57.40. We are currently flat.

Market Conditions / Gameplan:

Market Leaders

Current Leadership

- Will update this list as soon as new leadership emerges.

Open Position Detail:

flat

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Edited by Deron Wagner,
MTG Founder and Head Trader

DISCLAIMER: There is a risk for substantial losses trading securities and commodities. This material is for information purposes only and should not be construed as an offer or solicitation of an offer to buy or sell any securities. The Company and/or its affiliates, officers, directors and employees may or may not buy, sell or have a position in the securities discussed in The MTG Stalk Sheet and may profit in the event the shares of the companies discussed in The MTG Stalk Sheet rise or fall in value. Morpheus Trading, LLC (hereinafter "The Company") is not a licensed broker, broker-dealer, market maker, investment banker, investment advisor, analyst or underwriter. This discussion contains forward-looking statements that involve risks and uncertainties. A stock's actual results could differ materially from descriptions given. The companies discussed in this report have not approved any statements made by The Company. Please consult a broker or financial planner before purchasing or selling any securities discussed in The MTG Stalk Sheet. The Company has not been compensated by any of the companies listed herein, or by their affiliates, agents, officers or employees for the preparation and distribution of any materials in The MTG Stalk Sheet. Past performance never guarantees future results.

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