Wash And Rinse, II

September 22, 2000
Kevin Marder

Summer’s Almost Gone

by The
Doors

Summer’s
almost gone

Summer’s almost gone

Almost gone

Yeah, it’s almost gone

Where will we be

When the summer’s gone?

Summer’s almost gone

Summer’s almost gone

We had some good times

But they’re gone

The winter’s comin’ on

Summer’s almost gone

Friday saw the most classic
wash-and-rinse action for the Naz in recent memory.

The panic gap open (the wash).

Followed by the swift reversal, which
delighted daytraders (more on this below).

Followed by the swift accumulation in
almost every leader imaginable (the rinse).

Followed by a top-end close.

And all on volume heavier than in any
session since April 17.

I would caution as to drawing any
in-stone conclusion as to where the market will head henceforth.

Nevertheless, this is the best
possible thing the Nasdaq market could have done at this point to cleanse itself
of whatever weak longs were out there.

As well, a very nice rally emanated
from the last wash-and-rinse day, that of Aug. 3, the Naz up 21% in about three
weeks, to be precise.

Most all of the stocks that mattered
acted quite well Friday, and by a ratio of 4 to 1.

I don’t daytrade every single day,
preferring to concentrate on the intermediate time frame.

However, when I see the makings of an
emotional, knee-jerk downdraft such as we saw prior to this a.m.’s open, I
immediately position myself to capitalize on any reversal that might occur.

I begin by scanning my list of the six
or seven glamours that have shown the best relative strength over the past week
within the context of a strong intermediate uptrend.

Specifically, what I’m looking for are
those vogue names that show a gross overweighting on the bid side.

I do this preopen on Level II.

As I’ve mentioned recently, Network
Appliance
(
NTAP |
Quote |
Chart |
News |
PowerRating) is a top actor, and a valuable barometer of the current
speculative sentiment.

And so I settled on NTAP as my buy
candidate as one large bid after another showed up immediately preceding the
open.

Without waiting for the second
five-minute bar to kick in — and with the TV and other forms of outside contact
turned off — I entered and over the next 20 minutes booked a multiple point
win, all the while watching institution after institution line up on the buy
side of the tape.

What offers there were were simply
caught in a vacuum and didn’t stand a chance against the stampede of elephants
desperately wanting to get into this leader.

Brocade
(
BRCD |
Quote |
Chart |
News |
PowerRating) would have been an
equally good choice, however I liked NTAP’s relative strength and recent volume
characteristics on the daily better.

It’s important to note that, by doing
your homework and focusing only on those stocks with the big picture on your
side, i.e. the intermediate trend, you’re upping the probabilities in your favor
should you choose to take a daytrade.

And with Level II on your side before
and immediately after the open, the balance gets stacked more in your favor.

So next time you’re bracing for a
panic open, turn the TV off and check out Level II on some of the leading names.

What you find could surprise you.

Of course one of the true masters of
the opening reversal, flip top, trap door, etc. is trader extraordinaire
Kevin Haggerty.

For more on this stuff, I urge you to
check out Kevin’s presentation at The Venetian on Oct. 14.

Otherwise, as I’d intimated Thursday,
fear can be a good thing.

For the market, that is.

Wash And Rinse, II

Summer’s Almost Gone

BUY THE FEAR, SELL THE GREED

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