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Mikey's Short Term Trading Rules

1) Make up a list of stocks, commodities or ETF's to trade. This list should be names that have good earnings and high relative strength.
2) Monitor this list and throw out the weaker names
3) Buy only stocks or ETF's that are intermediate and daily up (green) and the market is Daily and intermediate term up (green)
4) Buy pullbacks on these stocks to the 20 and 50 day averages
Usually you get 4 to 6 20 day pullback buys and 2 or 3 50 day pullback buys in an intermediate term trend
5) More agressive traders can buy the 7 day average in the first 3 to 8 weeks of the uptrend.
6) Buy pullbacks not runups. A buy should not be easy or exciting but difficult and somewhat scary. DO NOT CHASE
7) Place stop at 5% below the buy price. Do not remove
8) Sell 3 to 5 days after the stock price takes out its most recent 2 week high with at least 15% gains
9) Uptrends that are 12 weeks or more may be ripe for a correction. The first 2 pullbacks to the 50 day are usually safe.
Intermediate term uptrends and downtrends generally last from 8 to 16 weeks with 12 weeks being the norm.
10) Shorting is a viable strategy in downtrends for experienced traders only. In general, reverse the above rules
11) Tweet Mikey @themarketshadow with questions or ideas

Wednesday, October 8, 2008

Central banks around the world Wednesday cut interest rates in a coordinated move amid mounting losses on global stock markets, as the credit crunch continued to seize up lending
The Federal Reserve lowered its federal funds rate a half a point to 1.50 percent. It also lowered its discount rate by half a point. The Fed, whose decision was unanimous, last cut rates a quarter point in April.

The markets are a scary place now after the cut was announced in premarket the DJIA futures were down as much as 300 points giving you the impression that nothiing can be done to stop the decline. The Fed seems to be running out of bullets. Gold was up $35 early. We then rally to up 150 at 10:00 AM and now at 10:30 are negative. The traders still remember yesterday when we rallied up early in the AM and then sold off to close down 500. That I believe was a set up rally yesterday that will produce a straight up move possibly today. But my intent is be disciplined and add on when the opportunity presents itself. These prices are being created by panic selling and will be good prices at some point down the road.
The no short sale rule will belifted for the financials. I dont think that ther will be much shorting going on at these levels but when the financials start to rally they the shorts will come in and they will pay for that creating a multiplier affect on the upside when they are forced to cover. I remain more bullish than ever. I like these prices here. As I have said I am placing a bet that the system will not fail these bet always work...at least until now.
Added to SSO at 36.80 3rd buy
Added to UYM 26.76 second buy

8:32 DJIA 9351 -92.23 VIX hit 58 again this AM The market has more moves than Michael Jordon. The traders at this point cannot trust a move in any direction but I if we rally they will sell into it. That's good for the longs we need selling into the rally to lift this thing off. This is a process of getting the traders on the wrong side of the trade. Every bottom has numerous false rallies before it runs. They need give traders the impression that the rally will fail before it goes. That in my opinion is what is happening now.

Oil starting to pick up steam on the downside now $86. This is going to 40 brfore it is all over. The airline stocks are selling off and they are starting to come into a buy zone I like Delta (DAL) 5.61 the best Will start buying here 1/4
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