A Matter Of Time
I trust
everyone took full advantage of yesterday’s terrific price action,
especially on the opening. It was only a matter of time before there was some
sort of buying pressure. On the opening was where I found the "easier" setups
and for one simple reason, a sense that the market just did not want to go any
lower.
As I had mentioned in Thursday’s
column, the whole financial world was predicting a meltdown, capitulation
etc. We all know that when everyone sees the same thing, it inevitable turns out
the other way. So, shortly after the opening bell the S&Ps did in fact begin
their downward descent to the 906 level. It was at this point that you needed to
rely on your tape-reading skills and take the temperature of the market. Simply
looking at a 1- or 5-minute chart of the S&Ps did not indicate that a bottom was
being put in as defined by a classic bottoming formation. For newer traders this
can be a bit challenging, but yesterday morning was a classic case of either:
1. Real buyers
2. Substantial short covering
So, if you were "dialed" into this
possibility of a reversal, you needed to be an assertive buyer. Granted, the
move did not immediately take hold and give you the instant gratification that
all daytraders crave, but once it started, it fed on itself and the subsequent
moves in the futures and underlying stocks was larger than usual. What started
off as decent buying pressure, quickly turned into a stampede.
The chart below shows exactly what I
was looking at and doing on the opening. A one-minute chart of the S&P futures
and Citigroup (C). The first entry point at
A was not the traditional pattern I always
talk about. This was a case of breaking my number one rule, "Trade With The
Trend," and letting a little gut feeling and tape-reading ability take
over. In a case like this, I do not throw on a large position until the move
reveals itself. So in this case, I added to the position as it developed, and
actually scaled out since I could sense that the move could be large.
Point B
is a great example of the traditional pattern I try to identify all day. In this
instance, I still had the sense that the upward thrust could resume, and since I
was trading with the trend this time, a full (larger-than-usual position) was
established. Scaling out of the trade was also in order in this case.
The subtle adjustment in share size is
critical on days like this. If you recall, the previous two trading days were
nothing to write home about, and even if they were, you had to be able to
identify that something was in fact different yesterday and take full
advantage. Granted that recognition may take to develop, but I highlight it here
to demonstrate just how important it is.
So what can we expect today? Tough
call, but given that it is Friday and the fear of bombshells, both figuratively
and literally, are forefront in traders/investors’ minds, it should be an active
session. Naturally the afternoon may be slow due to it being summertime. We will
just have to wait and see.
Key
Technical Numbers: (futures)
S&P’s |
Nasdaq |
| 951 | 1040 |
| 943 | 1027 |
| 935 | 1014 |
| 928.7 | 1001 |
| 920-21 | 989 |
| 908 | 973 |
| 890-93 | 952 |
As always, feel free to send me your
comments and questions. See you in TradersWire and enjoy your weekend.
P.S. Southern California residents: I
will be speaking at the Day Traders USA meeting tomorrow, Saturday July 13, at
9:00 a.m. For more info go to:
https://www.daytradersusa.com/nextmeeting.htm