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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, March 16, 2010

Terrible Year in Housing produce big gains in stocks

Earlier today, the National Association of Home Builders reported a 2 point decline in their Housing Market Index, back to its level from May of last year. Details revealed that traffic fell to its lowest levels in a year. Tomorrow, we get another read on the real estate market with Housing Starts scheduled to come out at 8:30 am and consensus numbers are expecting a drop there as well.

Despite these indicators, the housing and real estate stocks have fared better than the overall S&P 500 [.SPX 1156.60 6.09 (+0.53%) ] of late. The Dow Jones Real Estate Holding & Development Index is up 6.6% year-to-date and the DJ Real Estate Services Index is up 5.6% YTD as well. The DJ Retail REITs Index is up ~8% YTD. By comparison the S&P 500 is up 3.2% YTD.

From last year's bottom, some of the biggest housing and housing related related gainers in the S&P 500 over the past 52 weeks include household appliance manufacturers Whirlpool [WHR 87.16 0.87 (+1.01%) ] and Black & Decker [BDK 3.07 --- UNCH (0) ], both up over 200% in the past year. Here are some of the biggest housing and housing related gainers YTD by home builder Lennar [LEN 16.35 0.26 (+1.62%) ]:



The market has antisipated something that has not happened. The same thing happened in 2007. The same thing happened between July 2006 and Feb 2007. The wxperts called the bottom in the housing market in the summer of 2006. The chart below is of LEN
Whirlpoool WHR and Black and Decker BDK the stocks mentioned in the article above






In the case of BDK and WHR the stock prices are back to their 2006 levels. They are priced at pre crash levels.
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