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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, September 1, 2009

Shot across the Bow

DJIA 9343 -153 SPX 1004 -16.46 VIX 27.90 +1.89 Gold 949.80 -3.80 Silver 14.82 -.078Oil 68.70 -1.26 RBOB (Whsl Gasoline)1.81 unch Dollar Index 78.71 +.49 EURO 1.4236 -.0094 (Long Term Gov Bonds) TLT 96.03 -.56 IEF (7-10 Yr Gov Bonds)91.48 -.12 XLK (Tech Index)19.71 -.31 XLE (Oil Index) 50.43 -.74 XLF (Financials index)14.23 -.47 XHB (Homebuilders Index) 15.06 -.45 EEM (Emerging Markets)34.92 -.49 FXI (China Index)38.57 -.74

They said expect a 3 to 5% correction and they said to buy the dips. Here is the first shot across the bow. We are now 3.6% correction on this hit. Let's see the extent of this hit and the rally that follows. We want to see how the boys handle this hit and what they say after the next rally comes in. If they say that the hit is a good thing because it needed it and that on the rally ...here we go...Then I short.

Remember what Cramer said on 8/27

"One of the factors that have been buoying the market is fund managers’ desperate scramble for stocks. They found themselves heavy on cash but light on equity as the market turned up, and now they’re buying stocks en masse to keep pace with their benchmark indexes. As a result, any price weakness lures them in, which puts a floor in and prevents a sell-off."
“So I have said take advantage of their panic, get in there ahead of them and buy,” Cramer said. “It’s been the surest strategy going.”

Mikey
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