Trading the Zones

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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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Friday was essentially flat for the major indexes, with the SPX closing at
1402.85 (+.07%), with the $INDU -.01% to 12276. The QQQQ was only +.02%
despite the semis up with the SMH up +1.7%. The energy stocks, which have
been a primary focus in the trading service, led the week with the OIH +4.1% and
is back to the top of its trading range, with the XLE +2.7%. The OIH has
advanced for 4 straight days. The semis gapped on Friday due in part to
the TXN upgrade, and the SMH finished the week +2.9%. However, the gaps
both ways on any news is routine for the semis, but the reality is, they can’t
get out of their own way, as the SMH remains in the middle of a 10-month trading
range. Each time there is a positive upgrade, the hedge funds try to run
them, but it has failed each time, as sellers let them buy whatever they want,
and that chases the hedge funds away. In fact, trading money was made on
the sell side in the semis on Friday, as the SMH gapped up to the +2.0
Volatility Band zone, setting up the RST short, which was a “no-brainer.”
It traded down -1.4% from entry below 34.75 to 34.26, before closing at 34.61.
The Sequence Trading Module is best for learning about the RST because it
combines all of the primary tools which provide symmetry, and covers in detail
multiple ways to use it in multiple time frames for both daytraders and swing
traders.

NYSE volume declined for the 3rd straight day Friday to 1.43 billion shares,
with the volume ratio neutral at 55 and breadth +636. The SPX is 4 days
off the 1374 bottom, and the 5 RSI is still only 48.71, which is an anemic
bounce so far. This is a triple expiration week, with the market coming
off a mini-meltdown, so the odds favor a strong trend-up day before Friday.
The SPX has failed to close above its .382 retracement (1407.45) to 1461.57 from
1374, finishing Friday at 1402.85. The $INDU (12276) has also failed to
close above its .382 retracement level, which is 12328. The generals won’t
let this market cycle die on this initial mini meltdown, so they will take the
SPX up to at least the 1422-1428 zone, and then we will find out how many
“players” will lighten up on the sell side. This is a significant time
week, and if the market advances, it can set up a reversal to retest or take out
the 1374 level.

The long delta neutral synthetic straddle suggested in this commentary when
the average implied volatility was below 9 has obviously been successful.