A Classic Day
Yesterday was the classic trend day of 1999:
Never more than a six-bar pullback (on a five-minute chart) before moving to new intraday highs
in the S&P 500 cash index.
The buyers–both institutional and retail–came out to play, forcing the shorts to scramble.
Program trading, the day trader’s catalyst, accelerated stocks in our favorite direction–up.
There were very few big-cap momentum stocks that didn’t participate on the upside.
Today, be careful of gap openings if the futures are up early; specialists will be more
inclined to open stocks at their prices rather than yours. Remember, enter continuation
trades only if your stock trades–not gaps–through your entry point.
Target Stocks Of The DayÂ Â Stocks that have pulled back from highs and should
get moving again above Monday’s highs or current consolidation highs include: Clorox [CLX>CLX],
Computer Sciences [CSC>CSC],
Alza [AZA>AZA], American Eagle Outfitters [AEOS>AEOS],
Scientific Atlanta [SFA>SFA], Oracle [ORCL>ORCL], Firstar [FSR>FSR], Dayton Hudson [DH>DH],
KLA-Tencor [KLAC>KLAC], Colgate Palmolive [CL>CL], and Network Appliance [NTAP>NTAP].
These stocks represent
high-probability patterns in institutional momentum stocks. But we’re not trying to pick stocks
for you; we’re just trying to alert you to good pattern setups. Check the patterns of these
stocks and decide upon an entry point. If these issues pull back early,
you might get a clearly defined consolidation with multiple bars (on a five-minute chart) that
will provide entry below yesterday’s high or a recent consolidation high.
Entry points are most often 1/8-point above yesterday’s high or 1/8-point above a recent
consolidation high. I recommend saving charts on all stocks that give entry and building
a book for reference. History repeats, and so do chart patterns, but it only matters when market
dynamics are in your favor.
In response to an e-mail: As we move forward, I will help you build a library of some
common, high-probability patterns through a series of brief articles you will be able to link
to through this page.