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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, February 24, 2009

Debt to equity swaps;stress tests, and a NYSE trader holding his head on the front page

The banks will be allowed to pay off TARP money with common stock. This will take the billions of TARP money of the liability side and put it into common equity. The net result is a balance sheet that is cleaner for the banks and allows them to make loans. The other side is that the banks equity will be deluded. Citi it is say could be deluded to between 25 and 40%.

The government will begin stress tests to determine how much more capital is needed by the banks. The "Stress Test" of course will be between the banks and the government. Now all we need is for Geithner through an intermediary to start buying banks stocks and cause a stampede into them.

My home town newspaper shows a picture of a trader holding his head and below that in big old numbers 7,117.78. This is good stuff the kind of thing that you see at lows. The beat goes on ....Mikey
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