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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

Saturday, July 17, 2010

TW3 Earning outlook and Bad economic numbers.

The first week of earnings and outlook kicked off with Alcoa's better than expected earnings and outlook. That pattern stayed the same for the entire week. Almost every earnings report beat and the week ended on Friday with options expiration and a series of bad numbers on the economy.

The gamekeeper asked the question what is more important the earnings or the economy. I guess they are saying the economy doesn't matter if the earnings are great. It does not take a great leap of faith to conclude that at some point bad earning will come from a bad economy unless you believe that the recovery is just stalled and will pick up later.

I heard the mention of deflation in several article's this week. The price of Gold is weakening and the long term US bond market is very strong. In other words, the story is starting to head toward bad economy and a flight to safety. The kind of safety that happened I believe in late 2008.

The poor public sold their stocks and bonds in late 2008 and early 2009 and after 1 year of earning almost nothing in the bank they ventured out in mainly the corporate and Muni bond markets to prop up their income on their cash. If I am right they will be fleeing back into the banks again later this year and next year as the the word deflation and depression will be tossed about by the gamekeeper. When they do I will be a buyer but not before then.



Mikey
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