Current Sector Trading Focus

Kevin Haggerty is a full-time professional trader who was head of trading for Fidelity Capital Markets for seven years. Would you like Kevin to alert you of opportunities in stocks, the SPYs, QQQQs (and more) for the next day's trading? Click here for a free one-week trial to Kevin Haggerty's Professional Trading Service or call 888-484-8220 ext. 1.

The semis and other technology stocks led the market yesterday, with the SMH +1.9%, QQQQ +1.9%, and XLK +1.5%. The SPX was +0.1% to 1418.34, and the $INDU just +6 points (+.05%) to 12481. Seasonal technology/semiconductor strength is a must if the SPX is to push higher. Most of the semis report in January, so any seasonal move usually occurs in the first few weeks, then pulls back. Many of the semis traded well above average daily volume yesterday, so after the SMH finished -8% for 2006, the generals are probably increasing their weightings, which can keep them moving through at least mid-January.

NYSE volume was heavy again at a 1.7 billion shares, but the internals were neutral with the volume ratio 48 and breadth -42. That is not unusual, as the generals rebalance portfolios and change their weightings in the new year. Also advancing on increased volume yesterday were certain drug, biotech and healthcare stocks. The $TRAN is +2.5% this week, and is a benefactor in the sharp decline in crude oil, which has the OIH -8.4% in 4 straight down days, and the XLE -6.5%. The CL0702 broke below its 3-month trading range low at 55.90 yesterday. It hit 55.55 before closing at 55.59. The future was -4.7% on the day. However, there were profitable Trap Door and RST long trades from Volatility Band setups that caught the up-side reversals in the first 30 minutes after the sharp discount openings. Also, the opening decline for the SPY set up a 1-2-3 double bottom long entry above 140.89, which eventually hit a 142.05 high before closing at 141.67. The low was 140.61 on the 10:05 AM bar, with the -1.0 VB at 140.66. It was both a Trap Door and 1-2-3 double bottom, as the Wednesday low was 140.57. These strategies and more are outlined in the trading modules.

Based on the early 2007 money flows, daytraders should be focusing on semiconductors and various technology stocks, in addition to various biotech, healthcare and drugs. If you are familiar with my reversal strategies, you should also be trading the energy sector in the current price zone. It's not about love, just volatility reverting to the mean from extended levels.

Have a good trading day,
Kevin Haggerty

Check out Kevin's strategies and more in the 1st Hour Reversals Module, Sequence Trading Module, Trading With The Generals 2004 and the 1-2-3 Trading Module.