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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

Wednesday, November 30, 2011

Dow Spikes 350 After Central Bank Action

Global central banks announced a coordinated plan to support the global financial system, China said it would loosen monetary policy by cutting banks' reserve requirements.

The world's major central banks including the ECB, Federal Reserve, Bank of England and the central banks of Canada, Japan and Switzerland agreed to coordinated action to ease the increasing strains on the global financial system. The move is designed to "enhance their capacity to provide liquidity support to the global financial system."  Yesterday the ECB was making statements that Europe was on the brink of collapse and was threatening the global financial system.  Meanwhile, China surprised with its first cut in banks' reserve requirements in hopes of boosting an economy running at its weakest pace since 2009.

The action comes as Europe was on the brink of collapse and was reminiscent of  QE 1 in 2009. The predictable response was a dollar that was nailed .89 to 78.26.  The move also traps the shorts and will send them for cover. This is the second day this week where the markets were gaped at the open with no warning. 

The markets will flash a buy signal if these gains are held today the move takes out the top end of a trading range at 11700 and establishes a new trading range with 11700 on the low end and 12208 on the high side.
A move avove the 50 week average of 11928 returns the intermediate trend to up.

Mikey
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