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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, October 2, 2009

Bad Employment numbers spoil the party

DJIA 9487 -21.91 SPX 1025 -4.66

Bad jobs numbers today but no real sell off, that was yesterday. They gave you the sell off a day in advance. That way the traders who got short yesterday expecting bad numbers because of the weak action then saw the bad numbers and did not get paid for it.

My guess is that the shorts got frustrated and covered today when there was no follow through. Being short I am glad that 1+1 is not 2. When price and news move together expect a reversal. We are at the 50 average on a lot of stocks now. Normally a place they bounce. Also we are 2 weeks until expiration and maybe some puts bit on this sell off.

I did not cover any positions on this hit yet.

Next week I will blog about some interesting comments I saw from Bill Gross and the head of the world bank.

The beat goes on .....Mikey
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