Intraday Bases In The ETFs
Nothing like a late rally for those of you who trade intraday versions of
the medium-termer’s cup-with-handle bases and other correction-recovery bases. We
saw some nice examples Monday in the exchange-traded funds.
The Broadband HOLDR
(
BDH |
Quote |
Chart |
News |
PowerRating) tested the lows twice before rallying up the
right side, putting in a little right-side pause under 45 a share, then breaking out on an
intraday basis. The basket ended the day up 4.2% from the close, the day’s
biggest gain among the exchange-traded
funds.
But gourmet dinner for
the daytrader often remains inedible for the intermediate-term momentum player, at
least assuming you’re looking to play the long side. The
Broadband HOLDR
(
BDH |
Quote |
Chart |
News |
PowerRating) and its components stocks remain badly broken in price
and relative strength and are presumably weighed down by tons of overhead supply.
All intraday charts in this commentary
display
five-minute price and volume changes of the most recent session as well as
the final 2 1/2 hours of the prior session. The
price display is governed by an arithmetic scale.
The top field of all long-term charts in this
commentary display daily price on a logarithmic price scale
with a 50-day moving price average in
red. In the second field,
a blue relative strength line represents the displayed security’s price
performance relative to the S&P 500. The third field displays vertical daily
volume bars in black with a 50-day moving average in blue for volume.
Ordinarily, I write from an
intermediate-term perspective, given that I normally trade the medium-term trend
myself. However, today’s intraday action deserved treatment. If you’re new to
trading, check out my lesson on trading
timeframes.
Among its Broadband HOLDR’s components, Broadcom
(
BRCM |
Quote |
Chart |
News |
PowerRating)
closed up 7.4%, showing fast trade buoying the
late-session price rally.
Qualcomm gained
(
QCOM |
Quote |
Chart |
News |
PowerRating) rose 6.6%. The stock’s
best morning showing would have formed a good pivot for the daytrader.
The Nasdaq 100 Tracking Stock
(
QQQ |
Quote |
Chart |
News |
PowerRating) picked up 2.1%, the Semiconductor
HOLDR
(
SMH |
Quote |
Chart |
News |
PowerRating) 1.4%, the Utilities SPDR
(
XLU |
Quote |
Chart |
News |
PowerRating) 1.4%.
On the downside, the Internet Infrastructure HOLDR
(
IIH |
Quote |
Chart |
News |
PowerRating)
lost 6.4%.
The Biotech HOLDR
(
BBH |
Quote |
Chart |
News |
PowerRating) lost 4.7%,
following through on the prior session’s break below support. For more on the
breakdown in biotechs, see my Trading
The News commentary. The Dow Jones Internet iShares
(
IYV |
Quote |
Chart |
News |
PowerRating) gave up 3.9%,
the Dow Jones Consumer Cyclical iShares
(
IYC |
Quote |
Chart |
News |
PowerRating) 2.4%
Exchange-traded funds combine traits
of stocks and mutual funds. Like mutual funds, an ETF represents diversified
ownership in a number of different stocks, greatly reducing company-specific
risk. Like stocks, ETFs trade on exchanges, nearly all of them, in fact, trade on
the American Stock Exchange at present. They quote throughout the day, enabling
traders to take advantage of intraday price moves.
If you’re new to exchange-traded funds,
be sure to visit TradingMarkets’ Knowledge Center,
dedicated to explaining the basics of trading and active investing in ETFs and
mutual funds. Just click on the Funds tab
near the top of this page, then click on the Knowledge
Center tab.
You also will find lessons on trading
exchange-traded funds in the Stocks Education area of TradingMarkets.com. In
particular, check out my three-part series on trading ETFs, starting with
Average Crossovers. I also recommend newcomers read my tutorial,
HOLDRs: Unique Opportunity And Risk.