Trading Contracted and Expanded Volatility
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
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The SPX failed to take out the 5-day range high
(1453), as it hit 1452.45 on the 9:35 AM bar, then failed again at 1450.45.
After that, it was a trend-down day into the 1433.44 intraday low before closing
at 1438.06 (-0.7%). There was a significant volume increase at the 1-2-3
lower top trend entry below 1447.74, and even more so when the 5-day range low
at 1442.81 got taken out. NYSE volume was the week high at 1.62 billion
shares, with the volume ratio 27 and breadth -1301. All sectors were red,
led by the brokers with the $XBD -1.7% and the SMH -1.3%, in spite of the
semiconductor upgrade by JP Morgan. The only green on the week was the $HUI
+2.4%, TLT +0.5% and OIH +0.2%. The SPX daily range Friday was 19 points,
and the week’s range, 19.6 points. Contracted volatility, once again,
preceded a good move for traders (2/9 commentary).
Traders should work off the last 2 significant
SPX lows at 1416.96 and 1403.97 for retracement levels if there is continued
weakness. For daytraders, that would be about 1428-1430 and 1423-1425.
Also, look for symmetry with the daily Volatility Band levels. Many of the
ATL (Above The Line) stocks have pulled back to their 20 and 50 demas, or have
remained in contracted volatility patterns, acting better than the markets, so
that is where traders should focus for the bounce back up after Friday’s knife
down. The crude oil futures (CL0703) hit 61 Friday before closing at
59.89. The OIH, which closed at 138.38, remains in its 5-day range between
140.12-136.47, so daytraders should continue to trade any intraday expanded VB’s,
using mostly Trap Doors, Volatility Bands, RST and 1-2-3’s.
This is the 360th week from the 3/24/00 bull
market week high, and then 2/23 is calendar day 1597 (Fib) from the 10/10/02
bear market low, so there is time symmetry. However, the most significant
time period for this bull market is March, followed by April, which is the 55th
month (Fib) from the10/10/02 769 bear market low. There is little doubt
that traders will benefit from a significant increase in daily volatility during
these key time periods.
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.