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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, July 15, 2009

The recession is over rally

DJIA 8540 +180 SPX 925 +19.33 VIX 25.02 Gold 938.50 +15.70 Silver 13.19 +.34 Oil 60.43 +.91 RBOB (Whsl Gasoline) 1.69 +.04 Dollar Index 79.56 -.80 EURO 1.4111 +.0176 (Long Term Gov Bonds) 92.71 -1.40 IEF (7-10 Yr Gov Bonds)90.59 -.63 XLF (Tech Index)18.42 +.54 XLE (Oil Index)47.20 +1.24 EEM (Emerging Markets)32.98 +1.49 FXI (China Index)38.81 +1.39

On Monday Meridith Whitney turned bullish on the banks and Ben said the economy was recovering, yesterday Merrill said the recession was over and today INTC has much better than expected earnings.

This is options expiration week and it comes after 4 weeks of bad economic news. It is a perfect set up for the shorts to get run as positions are squared into Fridays expiration.

I saw that pessimist Art Cashen, who has been bearish from the lows and has been looking for a sell off, is now saying that if we hold this week we can have a super rally. Lets now let the numbers get in the way of all of those experts, shall we. They all pile on at the same time and here we go. But that is how the game is played. You have to respect that at all times. In this game there is going to be pain no matter what side you are on.

I am standing aside for this week and will add to my shorts after they all are convinced that the worst is over and the shorts run for cover. I am looking to short EWZ, add to my FXP, DZZ, and buy back my SCO and DUG on this oil rally. But for now nothing today or this week.

The beat goes on ....Mikey
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