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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

Monday, October 5, 2009

Bad News ...Market rally????

DJIA 9598 +111 SPX 1040 +15

That is the way the game is played. If we were to have sold off on the bad employment number the crowd may have turned bearish and sold. That is not what the boys want here. Remember when 1+1 = 2 then the crowd moves. This action does not add up so the crowd does not change their behavior.

The action is good here for the shorts. The next bit of bad news and there is alot of it coming will make the shorts cover for fear of another rally.

The game is to keep the longs in and not fear the sell offs and get the shorts to cover on the way down on bad news. I think that process has begun.

The beat goes on....Mikey
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