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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, January 28, 2009

A Nice day for a change

Stocks shot out of the gate Wednesday as lawmakers prepared to move ahead on an $825 billion economic stimulus plan and banks got a boost from this so-called "bad bank" plan.


Citigroup [C 4.32 0.77 (+21.69%) ] and Bank of America [BAC 7.66 1.16 (+17.85%) ] soared more than 10 percent each amid hope that help is on the way for the battered sector after a Bloomberg report that the Federal Deposit Insurance Corp is aiming to take control of a "bad bank," to be set up by the government to mop up banks' toxic assets.

Rounding out the Dow's top three was JPMorgan [JPM 27.22 2.16 (+8.62%) ], which gained more than 7 percent.

Wells Fargo shares [WFC 20.11 3.92 (+24.21%) ] surged nearly 20 percent as the bank reported a surprise loss but maintained its dividend and said it doesn't need any more bailout funds to help it absorb Wachovia bank.


Investors were also enthused that government stimulus is on the way.

The House of Representatives has worked out its differences with the White House over the plan and is expected to pass President Obama's plan to kick-start the economy with a batch of infrastructure and capital spending projects.

Republicans objected to a slew of spending proposals, but the administration appears to have enough votes to get the plan through the House and let Senate leaders begin working on their version.

Early earnings showed a mixed bag, with companies reporting lower profits but investors looking for positive nuggets amid the gloom.

Wells Fargo [C 4.32 0.77 (+21.69%) ] shares surged more than 17 percent premarket even after the bank reported a loss of 79 cents per share.

The Financial Select SPDR [XLF 10.10 0.96 (+10.5%) ] exchange-traded fund gained more than 9 percent premarket as traders looked for the sector to get a big boost.

Investors also looked to a key policy meeting of the Federal Open Market Committee for more action to stem the credit crisis.

The Fed has effectively run out of ammunition in terms of interest rate cuts, so focus will shift to the accompanying statement. Some analysts believe the Fed could unveil new steps to combat the ongoing crisis, including the printing of money.

The FOMC is due to issue the statement at 2:15 pm New York time (7:15 pm London time).

Obama could also be finalizing a “bad bank” plan to unburden bank’s balance sheets from their most toxic and illiquid assets, according to industry sources.
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