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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

Tuesday, October 28, 2008

Trial Balloons

6:52 DJIA 8461 +285

The insiders have the stock now but they need to get prices higher and have the traders sell to them. That is why all the rallies have failed so far. This AM we have another rally and I think it is getting to the point where this is going to happen. Remember, they are still looking for a blow out of the lows on big volume. That has not happened and a rally now would catch them flatfooted. It may not be this rally but one of them is going to go.
The bottom is a process. That process includes many failed rallies follow by reasons why something that is suppose to help will not. In the beginning the traders have the hope that those things that are being done to help the situation will work and they chase the early rallies. Because each rally fails and then reasons are given why the situation is hopeless. the traders eventually sell the rallies and the market makers can move prices higher and have stock sold to them as the prices go up.
How long does this take well it varies. It boils down to your will against theirs. If you know something is going to work then go for it and wait for it to happen. The more importance you place on time the poorer your results will be.
In this situation that we are in now, all I can say is that within 1 year things will look a whole lot better and these prices will be much higher. My ability to call the day to day and short term is not good. If you can trade the short term email me please.
One thing that can help on the short term is an understanding of the options cycle. The next cycle ends on Novemeber 21. There have been a ton of puts bought in this cycle and probably in the December and January cycles. Expect that the market will tend to rally into the third friday of each of these months. Why? Well if it doesn't then the put buyers would make money and we would not want that would we?

7:25 DJIA 8384 +207 Here comes the bad news...
US Consumer Confidence Plunges to a Record Low
US consumer confidence plunged to a record low in October as a worsening financial crisis left Americans anxious about their jobs and pessimistic about future prospects, a report said Tuesday.
The Conference Board said its index measuring consumer sentiment tumbled to 38.0 in October from an upwardly revised 61.4 in September. That was the lowest reading since the index began in 1967. The previous low was 43.2 in December 1974.
The result was well below economists' expectations for a reading of 52.0 and comes after a modest improvement in consumers' mood the prior month. Even the most pessimistic forecast of the 74 economists surveyed by Reuters was 45.0

Notice how it was below expectations. That is laughable..who writes this stuff.

There is no way we can rally now right?...well maybe stay tuned its getting deep but don't worry I have my wadeing boots on.

12:03 DJIA 8461 +446 They are still worried about last hour selloff. They say a FED cut to 1% would not help. What I would like to see is a for the market to stay up into the close open strong tomarrow run up into the Fed meeting and then selloff after the rate cut is announced.

I think the shorts feel no reason to cover and I believe we are running out of sellers. If the shorts want to cover(buy) and there are no sellers then we have a meltup. That is possible.

12:53 DJIA 8895 + 715 That's more like it ...The beat goes on..Mikey
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