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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, July 9, 2010

Earnings next week

DJIA 10183 +43 VIX 24.90

Lying season starts next week. I saw an article on CNBC that said that earnings next week would determine the health of the market and the economy. If they are your earnings and they are good then the economy is good. I would expect that they would focus on the good ones and tell us you see everything is OK.

Here is a clue from CNBC:

The question of whether the economy is headed for a double-dip—and will take the stock market with it—could be answered when second-quarter earnings season kicks off next week.

With investors wrestling over whether the market has seen merely a normal pullback or is teetering on brink of something far worse, investors again are likely to focus far more on what companies see in their future than what happened in their past.

"It's not really going to be about the numbers themselves. No one's expecting a lot of top-line growth, no one's expecting blowout earnings except in rare cases," says Michael Cohn, chief investment strategist at Global Arena Investment Management in New York. "It's all about the outlook."

Remember the numbers don't count it is the outlook. How good is that!! The outlook, well like I said it is lying season.



The downtrend line drawn off of the late April peak, the 50 day average and the 200 day average all come together at about 10360. To run the shorts they would need to surpass that number on good news. What good news? It will probably a "key" companies earnings that tell us with out a shadow of a doubt the the economy is OK. Maybe it will be the banks earning. Uncle Sam still has some bank stocks to move (5 billion Cit share and odds and ends. Hey, maybe if the banks (CITI) have good earnings they could sell that stock.

The options expire on July 16th and any where in this area will kill the July puts. The tops have been coming with the VIX below 20. It is now at 24.90 so we have a way to go from here.

Gold broke the 50 day and is now rallied back up to it. It looks like we go above it again and challenge the shorts again. I am still short Gold and Silver and will add on on rallies.

Mikey
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