Where price action creates opportunity these next 2 months…
Kevin Haggerty is
the former head of trading for Fidelity Capital Markets. His column is
intended for more advanced traders. Kevin has trained thousands of traders
over the past decade. If you would like to be trained by him,
ext. 1
The
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the previous anticipated retracement zone of short-term position action, which
is 120.40 – 120.75, closing yesterday at 123.91 with the magnet high up at
124.74. The SPX
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SPX |
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(
QQQQ |
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(
COMPQ |
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to 1236.36, 39.40 and 2172. The Dow was +0.4% to 10,673. NYSE volume was 1.49
billion shares with the volume ratio 62 and breadth weak relative to price at
just +178, highlighting a concentrated advance in fewer stocks. The
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TLT |
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declined for the second day at -0.9% with the XAU -0.1%. Crude oil futures were
+0.4% to 64.65.
It was slim pickings for daytraders in the major
indices based on how they traded, but the
(
SMH |
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long opportunity on the retracement to the 816 EMA which was also the .618 retracement zone to the 36.31 low of last Friday. The SMH traded up to 37.09
after entry above 36.64 and closed at 36.97 (see chart). Although focus list
stocks like
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MO |
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(
NOC |
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there wasn’t much vig for daytraders. On the other hand,
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COH |
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a +2.6% move from entry above 32.42, right at the 89-day EMA level. All three
stocks were daily chart setups from the previous day.
The synthetic straddles which were initiated
between SPX 1235 – 1245 are doing quite well after the 19-day decline to 1201.06
and now this current Katrina rally to a 1237.06 high yesterday. The bet was, and
is, that there will be volatility/travel range into September and October, and
we do not care in which direction as we adjust delta neutral. The trades were
put on as the SPX approached the .618 retracement (1254) to 1553 from the 769
October 2002 low. There are also other significant bands which are retracements
to previous bear market lows from the 1553 March 2000 bull market high. They
are:
|
1256 —– .236 RT to the 295 1980 low |
|
1238 —– .50 RT to the 923 1998 low |
|
1237 —– .236 RT to the 216 1987 low |
|
1210 —– .236 RT to 101, the 1982 low |
Significant bands will often come into play both
ways and are always zones where price action can create opportunity, and that is
one of the primary reasons, along with the low implied volatility, that the
synthetic straddles were initiated, in addition to the September/October time
period, which is very often very volatile.
Have a good trading day,
Kevin Haggerty