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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, July 14, 2009

Look who's back.... It's the banker babe, Meridith Whitney

DJIA 8335 +3.35 SPX 902.73 +1.68 VIX 25.69 -.69 Gold 925.90 +3.40 Silver 12.90 +.12Oil 60.07 +.38 RBOB (Whsle Gasoline) 1.6557 +.0163 Dollar Index 80.22 -.075 EURO 1.3959 -.0036 (Long Term Gov Bonds) 94.60 -1.09 IEF (7-10 Yr Gov Bonds)91.33 -.49 XLF (Tech Index)17.81 -.01 XLE (Oil Index)45.78 +.43 EEM (Emerging Markets)31.42 +.38FXI (China Index)37.33 +.63


It took a recommendation from the most bearish analyst around to shake the market out of its lethargy Monday. Meridith Whitney has been the hottest hand for the past few years and unbelievably correct in her bearish stance on the financial sector. With her upgrade of Goldman Sachs, the sector and the market woke up.Consensus earnings estimates for Goldman [GS 149.16 -0.28 (-0.19%) ]have the company earning around $3.50 for the quarter just ended. The Divine Miss M sees a good bit more. Bank of America/Merrill Lynch [BAC 12.95 -0.04 (-0.31%) ]jumped on the bandwagon with a Buy recommendation, and they estimate book value will grow to $113 in 2009 and $122 in 2010. Tangible book value, today's preferred metric, would see a similar move. With a forecasted 16% return on equity, BAC/MER (that's all a bit too much to say) feels the stock should trade at 1.6 times book and thus their target of $175.

But now that we have the raised expectations, I think the company has to up the ante by beating the higher expectations to continue to do well. While Whitney feels that the recent "mother of all refinancing" binges will allow a bunch of banks to do better this quarter, she emphasized this is a trading call. Well, the trading call worked, as the financials turned in a wonderful day, with the XLF up over 6%. But (and there is always a but) she sees unemployment rising to 13% (boy, I hope she is wrong on that), and the banks will re-enter their twilight zone as they cannot withstand such a high rate of joblessness without severe strain. The market chose to ignore that part of her forecast.

So she is saying that the banks will trade up in the near term. That's interesting because the XLF has already rallied 82% off of the low. Remember I have her in my blog in the first part of the year saying that they were going to tank.

Notice that in this article they say "Meridith Whitney has been the hottest hand for the past few years and unbelievably correct in her bearish stance on the financial sector." They also said that late last year and earlier this year BEFORE THE RALLY WHEN SHE WAS SAYING SELL. If you read my blog then you can see it.


It was a good excuse to smoke the shorts yesterday after they show you the "head and shoulders" top that projected to 835 on the SPX. Now earning season is on us and the spin begins. You know much better than expected earnings.....Yada Yada Yada. INTC is today. That after yesterday's jobless recovery call by Ben. All good news, right


The beat goes on...Mikey
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