By James Altucher
Posted at 10:23 a.m. EST on Feb. 23, 2009

After playing the last two weeks relatively safe in terms of risk and capital exposure, I am willing to believe that the market will snap back to the tune of 3% to 5% this week in relatively short order.

Here is why I am bullish on the week:

1. A shortened trading week last week, coupled with options expiration and several important economic data points, increased volatility toward the downside.

2. Corporate bond trading in the U.S. is at a two-year high, signaling improved liquidity in the credit markets

3. Sentiment levels, as judged by the bull/bear index and Citigroup's proprietary panic/euphoria index, are showing panic levels in the broader equity markets.

4. The price of gold rose to almost $1,000 per ounce, a level last seen the week Bear Stearns was rescued by JPMorgan (JPM) and the Federal Reserve.

With this in mind, I've developed this week’s Rocket Stocks portfolio, which includes such snapback ideas as Foster Wheeler (FWLT) and KBR (KBR).

But first, let’s look back and see how last week's ideas fared.

Walter Industries (WLT) finished the week flat after reporting fourth-quarter earnings per share of $4.37 for the quarter ended Dec. 31, 2008, and net income for full-year 2008 of $346.6 million, or $6.35 per diluted share. This compares with $40 million, or 76 cents per share, in the fourth quarter of 2007 and $112 million, or $2.13 per diluted share, for full-year 2007. Walter Industries also divested its homebuilding unit and improved its short-term liquidity.

Chesapeake Energy (CHK) finished the week down 5% after reporting a fourth-quarter loss of $866 million, or $1.51 per share for the quarter ended Dec. 31, compared with profit in the year-ago quarter of $158 million, or 33 cents per share. Backing out several one-time items, Chesapeake said that it earned 73 cents per share. Chesapeake, which has been rumored for several months as a possible takeover candidate for the likes of BP (BP), will only see earnings traction once natural gas prices start moving higher.

Transocean (RIG) finished the week up 5% after reporting that fourth-quarter earnings fell to $800 million, or $2.50 per share, from $1.1 billion, or $4.17 per share, during the same period last year.

Now here are a few ideas in this week’s Rocket Stocks portfolio:

Long Ternium (TX): When it reports on Feb. 24, Ternium could see an earnings surprise similar to what happened to Reliance Steel (RS) on Thursday of last week, which sent shares of Reliance higher by 25%. Despite saying that fourth-quarter profit dropped by 17% due to falling demand and lower steel prices, Reliance Steel’s net income for the fourth quarter was $66.3 million, or 90 cents per share, down from $79.9 million, or $1.06 per share.

Currently, analysts are forecasting earnings per share in a range of 78 cents at the high end to -$1.56 at the low end. This wide range suggests that analysts are uncertain how Ternium may fare during the global slowdown. It is worth pointing out that Ternium has beat analyst estimates to the upside in six of the last seven quarters by an average 19%.

In Monday morning trading, Ternium was down 2.7% to $7.23.

Long Flowserve (FLS): In late January, Flowserve, which reports on Feb. 25, raised its 2008 profit guidance, implying that it would likely beat on the earnings front. For full-year 2008, Flowserve is now predicting that earnings will be on the high end of its previously announced forecast of $7.20 to $7.50 per share. Wall Street analysts were expecting earnings of $7.42 per share. Trading at just 6.3 times 2008 earnings, Flowserve could trade up into the mid-$50s.

In Monday morning trading, Flowserve was down 2% to $47.01.

For more ideas, check out this week’s Rocket Stocks portfolio.

At the time of publication, Altucher had no positions in stocks mentioned.