Oversold energy gives daytraders good volatility to trade
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?
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Traders caught a trend
day as the SPX advanced +1.0% to 1275.53. The Dow, 11,028, QQQQ,
40.90 and Nasdaq, 2262, were also all +1.0% on the day. The early Trap Door
setups in the the SPY, QQQQ and DIA made for a good trading day. NYSE volume
expanded to 1.79 billion shares, with the volume ratio 72 and breadth +1156.
Yesterday’s move comes off the short-term oversold condition as of 2/7/06 and
the time period this week. Crude oil (CLH6) declined -2.7% while the TLT was
-0.5%. Energy stocks had big discount openings to extended volatility bands and
that meant immediate Trap Door opportunities for many traders. The early contra
move up was sharp, but many of the stocks made lower lows after that initial
reversal. However, some of the second moves up from the lower lows were
excellent, like
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PowerRating) from 75.70 to 79.55.
The media was hyping the retail sales number
following a weak Christmas season. Sales are always good in January when you can
buy the unsold inventories for a 40-50% discount. The media failed to mention
the recent negative productivity number, higher labor costs, higher interest
rates and commodity prices. Sorry, I forgot the declining real estate market and
negative savings rate. Net net, trade it as you see it, not how you read it,
especially from the media empty suits.
The most oversold sector is obviously energy, so daytraders will continue to get
excellent volatility to trade. If “they” are going to push the SPX through the
1276 – 1277 resistance and then the downward trendline from the 1294.90, 1/11/06
high, the semiconductors will have to participate, so they are a trading focus.
The basic industry stocks got another push by the Generals yesterday, and they
will also have to provide leadership if the SPX is to take out 1294.90. However,
first it has to take out the short-term downtrend channel. The SPX became an
above-the-line index yesterday after closing above the 1269.93 20 DEMA.
Short-term long positions can be carried until this condition changes.
Have a good trading day,
‘Kevin Haggerty
