Did You Capitalize On This 1st Hour Strategy?
What Wednesday’s Action Tells
You
The discounted opening following the media
frenzy
in CSCO (-10.6% on the day) resulted in excellent trades for daytraders that
are
familiar with the “Core Framework.” (Page 10,
seminar material). The day’s significant move was
the major
index contra move off the 10:00 a.m. ET time period. The SPX
(
$SPX.X |
Quote |
Chart |
News |
PowerRating)
finished at 1075.79, -0.3%, after making a 1065.92 intraday low in the first
half-hour of trading. The Dow
(
$INDU |
Quote |
Chart |
News |
PowerRating) closed down 7 points at 9938,
while
the Nasdaq
(
$COMPQ |
Quote |
Chart |
News |
PowerRating) ended at 1782, -1.5%, and
(
QQQ |
Quote |
Chart |
News |
PowerRating) 32.90, -0.9%.
NYSE volume was 1.41 billion shares, with the volume ratio 36 and
breadth -425.
There was no question about the primary
sector
market action as the herd chased the defensive issues and sold technology.
Drugs
and related medical stocks were the main recipients of some of that
technology
cash, as the
(
PPH |
Quote |
Chart |
News |
PowerRating) and XLV were +1.7%, with the
(
BBH |
Quote |
Chart |
News |
PowerRating) +2.2%. The XLP
(consumer staples SPDR) was +0.8%, while the
(
TLT |
Quote |
Chart |
News |
PowerRating) — bond proxy — was
+0.4%. This carried over to advancing financials like
(
FNM |
Quote |
Chart |
News |
PowerRating) and
(
FRE |
Quote |
Chart |
News |
PowerRating),
in addition to the XLF (financial SPDR), +0.2%.
The technology scorecard was led by the
semiconductors, with the
(
SMH |
Quote |
Chart |
News |
PowerRating) -4.1%, then you had the XLK -2.5% and SWH
-2.2%.
(
NSM |
Quote |
Chart |
News |
PowerRating) led the red semis at -14.1%,
(
TER |
Quote |
Chart |
News |
PowerRating) -7.6%,
(
MRVL |
Quote |
Chart |
News |
PowerRating)
-7.5%, and
(
TXN |
Quote |
Chart |
News |
PowerRating) -6.9%.
For Active
Traders
I have included yesterday’s SPX five-minute
chart
which has all of the “Core Framework” factors in market
action/psychology and
also the sequence involved. The SPX traded straight down to a 1065.92
intraday
low on the 10:00 a.m. bar. This was the mid-point (1065.78) of the -1.5
and -2.0
volatility bands shows on the chart. It was also the 1.272 extension of the
last
leg up from 1068.94 – 1079.04. When you are in a Trap Door situation, you
always
calculate the extensions of the last leg up or down and look for confluence
with
the volatility bands. This zone was also that minor weekly support line at
1063.75 shown in Monday’s commentary chart.
The reversal was off the 10:00 a.m. bar low
(you
have been there before), and it carried up to the key retracement zone and
240
EMA where price reversed in the direction of the open. If you didn’t enter
at
the initial sequence level, you had a second chance with a 1,2,3 higher
bottom
entry above 1067.98. After the contra move/gap pullback to 1075.13, the
reversal
in the direction of the open (90% – 60% move) only went to 1069.73 before
trading back up to 1074.19, where it traded between 1074 – 1070 until a
little
advance to 1077.32 started on the 2:55 p.m. bar, closing at
1075.79.
If you took the first trade, then covered and
went short after the 1075.13 high, you still made small money on the short,
or
at worst broke even, as the SPX traded from the 1073.40 entry to that
1069.73
low before reversing to 1074.19. Net net, we should just say thank you CSCO,
Market Makers and Specialists for the discounted opening period which gave
us
all the window we needed.
Today’s
Action
If the early red futures hold with the
S&Ps now
down -5.3, Dow -46 and Nasdaq -9, we will be ready to play the First-Hour
strategies once again. The last leg up you measure was from 1069.86 –
1077.32,
and of course, you should have the volatility band levels ready to
go.
That 1063.75 SPX weekly minor support line
has
been in play for four days now, with the low close being 1063.97 and
intraday
lows of 1062.23, 1063.97, 1065.22 and 1065.92 yesterday. Repeating my Monday
commentary, the better short-term long position trades will come from the
1010 –
1020 level (see Monday’s chart).
When the fear factor increases,
accelerated by
the media, sequence traders hit home runs.
Have a good trading day,
Kevin Haggerty
