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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

Friday, February 6, 2009

Banks rally ...another failure?????

Large Banks Soar On Hopes For Stimulus
By Marshall Eckblad

Off DOW JONES NEWSWIRES

NEW YORK (Dow Jones)--Shares of the largest U.S. banks soared in morning trading, led by Bank of America Corp. (BAC), on hopes that the U.S. Congress will soon pass a large economic stimulus package.

Bank of America led the rally, with its shares up 23.5% to $5.99 after a U.S. senator and some prominent bank analysts Thursday strongly dismissed fears that the hobbled Charlotte bank could soon be nationalized.

Ken Lewis, the bank's chief executive, also dismissed those concerns in an interview Friday with cable news channel CNBC.

"I have talked to government officials ... and no one has ever said nationalization was the way to go, or was likely to happen," Lewis said.

He called the rumors "absurd" and said: "I've never had anybody hint at it."

Shares in Wells Fargo & Co. (WFC) also surged in morning trading and were recently up 15% to $18.67. Citigroup Inc. (C) stock was recently up 9% to $3.85, while shares in JPMorgan Chase & Co. (JPM) were up 8% to $26.50.

The KBW Bank Index (BKX) soared 10 to $29.95 and the KBW Regional Banking Index (KRX) rose 6% to $44.83.

Investors and analysts alike have struggled in recent days to discern exactly what the Obama administration's pending plans for the economy will mean for the banking system. Accordingly, bank stocks - and especially Bank of America's - have traded in volatile fashion in recent days.

But one analyst said the rally could be as temporary as last year's rally in bank stocks that followed the U.S. Treasury's first announcement of a rescue plan for banks.

"Fundamentals will likely be forgotten for a while, just like what occurred when the initial version of the TARP was announced," said Lana Chan, an analyst at BMO Capital Markets, in a note to investors on Friday. "There are still many questions and issues to be resolved."
Fitch Ratings lent credence to Chan's concerns Friday when it downgraded the preferred stock of Bank of America Corp. (BAC) and Citigroup Inc. (C) to junk territory while affirming other key ratings, citing the support given the banking giants by the federal government.


Mikey says:
Note in this article that the analyst said that the rally could be temporary as last years rally in the bank stocks. Lana Chan even says "there are still many questions to be resolved. I love this kind of thing being inserted when there is a rally going on. It plants doubt in the traders mind and makes him recall the past failed rallies. Will this be the one that goes? I don't know but one of these will go because the traders have been set up to sell the rallies. By the way when the questions are resolved and Lana is buying I sell.
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