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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

Thursday, October 22, 2009

Breakout. Breakout, Breakout

First Gold broke out above 1000 on 9/11, Then the market broke out above 10000 on 10/14 then oil broke out above 80 on 10/15 and the Euro broke out above 150 on 10/21.The Gold break out is now at 1059 a month later after much hype about the dollar falling. It is down 5.10 at 1059.40 today and the GDX Gold miners index which broke out on 9/8 or 3 days before Gold broke 1000, is now 47.12 or lower than it was on 9/8. If you would have bought a Gold stock on 9/8 you are not making money.

Gold and the miners are showing weakness relative to the others. I said before that I believe that Gold is the leader in this rotation and it is now fading into the woodwork as they focus attention on the market and the dollar. If Gold slips under 1000 with the focus still on the market that will be a great indicator. If it does this into dollar weakness the players will buy the pullback. As it is now the miners are weaker than Gold and a move below 45 would reverse the breakout.

Stay tuned...Mikey
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