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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, July 19, 2010

GOLD (or Mikey) nearing the Hangmans noose

DJIA 10111.41 +13.13 VIX 26.55 +.30 10 year 2.93% 30 year 3.96% Gold 1178.50 -8.70 Oil 76.58 +.57 USD 82.43 -.28
Mikey OB/OS index (80=OB 20=OS) 58

Watch two numbers on Gold 1180 and 1160.

Gold is trading at 1179.58. Looking at a weekly chart, Gold broke a downtrend line in the week of 3/5/10 at 1127. It then had a 3 week pullback to 1085 where I said if if broke 1080 that would be it. It held that level and broke out above the 1150 top in the week of 4/9/10. The high that week was 1164.80 There was alot of breakout buying and alot of hype going on in Gold in that week. My conclusion is that once we close below 1160 then alot of those buyers are going to be underwater and the top will be complete.

There is a 21 month uptrend line that drawn from the lows of 10/08/08 of 681 through the low of 2/10/10 at 1052.40 and the low of 3/26/10 at 1085.20 that crosses today at 1180. The 20 week average is also at 1180 so that is a very critical number that we are sitting on today. I see no mention of this by the Gamekeeper today. They do mention that it is down on technical selling but they are not raising too many concerns.

I conclude, that the focus is on the market and not Gold. These are the conditions they need to move Gold lower without the whole world selling it back to them. A close below 1180 I think seals the deal but a reversal below 1160 that traps the buyers of the last breakout would be final confirmation in my mind.

The gamekeeper tells us that Gold goes up when the market goes down. Well today Gold is down and the market is up. That is something different. To me a close below 1180 does it but the real breakdown comes on a reversal of the 4/29 breakout at 1163. That is were the rats jump ship.

If you cannot get a quote on Gold in the commodities market the GLD is a close surrogate. The two numbers you need to watch here is 115.75 (1180 Gold) and 114.07 (1160 Gold)


Silver (17.57) has already broken its 21 month trendline that came through at 17.83 today. It 20 week average is at 18.05. The ZSL (2X silver short) is trading at 35.91 +1.02. The DZZ (2X short Gold ) is trading at 11.80 +.20 on the day.

Mikey
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