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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 22, 2008

What the system is saying to the public...Putting the long term in perspective

During all of 2007 and into July of 2008 the public was told to do what? They were told to be long term investors and to trust the system. The long term always worked and to ignore the selloffs because you cannot time the market. How did that work? Well you know how it worked the public got killed.
What is the public hearing now? It is being told to be safe with their money don't take any risks buy CD's buy government bonds, put a portion of your money in gold. The message is don't trust the system it is broken.
I saw a divorce attorney on CNBC yesterday who says he filing suit against a broker because he gave them money and told them to be safe. He says he lost 200K and now has his money in bonds because he wants to be safe. He has lost confidence in the system.
My response is that your money is not safe in bonds if the system fails. The message is be safe and those who were long term investors are now out. I think that they will regret the decision to get out now as much as they do the decision to be a long term investor last year.
Warren Buffett is investing in the financials because he knows that the system is going to save this area first. It has to or we are dead. The thing I have learned in all my years is invest in areas of the economy that are essential to the system when they are in trouble and then trust the system to figure it out.
That is why I have complete confidence in investing in the XLF(15.32) at this level. I trust the system to figure it out and it will. Those who invest FOR THE LONG TERM at these prices will be rewarded in time. That's how you invest.
If you sell here you are a victim of the system if you buy you are using the system to your advantage. Its your choice!
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