After
Thursday’s strong move in the techs,
it was only reasonable to expect a pullback in the morning. In fact, it makes
it easier, giving traders an opportunity to think about their entry points

It
looks like we had two quick reversals in both the techs and S&Ps today. 
I would like to share a bit of my own strategy behind the trade.

I’ll
admit, I took a bad position myself, and went long into the morning reversal
after it was overextended. But, as I mentioned in my presentation in Las Vegas,
you must cut your losses quickly. Of course, since I was trading Nasdaq
futures, cutting my losses quickly was not that easy. I did the best I could
and waited for the second reversal. It occurred near 3624 on the NQ mini
contracts. I filled at 3431.50 and just sold at 3494.50.

My
logic behind my entry was the reversal that I saw on the two-minute and
five-minute charts. As for the exit, it was based partially on gut (which I do
not suggest you use for your trading). I expected resistance at 3500 (on the
NQ futures contract), so I decided to sell a bit under that. The day high so
far,1501.

On
another note, before you jump into trading Nasdaq futures, I suggest that you
take a look at a few of the three-minute intraday charts. They can move over
100 points in three minutes.

Today’s
Watchlist:
(
ADCT |
Quote |
Chart |
News |
PowerRating),
(
CMRC |
Quote |
Chart |
News |
PowerRating)

Despite the
strength in many of the big names, there still continues to be weakness in
some parts of the market. ADC Telecom
(
ADCT |
Quote |
Chart |
News |
PowerRating) continues to trade near its
recent lows. It plummeted on Wednesday and attempted a tiny recovery on
Thursday, but to no avail. While it is trading higher on Friday, it has not
eclipsed Thursday’s high, and most importantly, Wednesday’s high. This draws
my attention. Look for a break of Wednesday’s intraday low, which is where
we will set our alerts. Although there may be some support at 20, if it
remains weak, it could quickly cave.

 

 

A
more positive chart is that of Commerce One
(
CMRC |
Quote |
Chart |
News |
PowerRating). After making a
significant pullback in from its all-time high, it set a low in April. Since
making this low, the stock has been in a nice uptrend, setting a series of
higher lows, offering a buying opportunity on each bounce. It is so hard to
find stocks trending smoothly in this market, that we should note anyone that
does such.

Currently,
it finds itself in a consolidation pattern, between roughly 62 and 70. Set
your alerts near both of these levels. On the long side, should it break out,
look for more resistance just over 80. Of course, the 10 points of breathing
room between current resistance and 80 are quite plentiful. Should it break
down, watch for another bounce off of the trendline which has held it up for
the last four months.

 

Until
later,

David
Baker