A Trader’s Market

  • March 4, 2002
  • Dave Floyd

The
excellent price action continues and the market
made a clean break above key resistance levels. All in all trading
(HVT) was excellent last week. Given
Friday’s close, I expect the nice price action to continue as the market
determines whether or not it can hold onto the recent gains. Trades on the short
side, with the exception of Friday, have been the most profitable and despite
Friday’s impressive close, the price action still feels a bit labored.

I don’t have a whole lot to offer in
terms of insight at this point, which is typical when you get into a market that
is trading well. The less thought and effort you put into your preparation the
better you will trade. This current market is truly a trader’s
market. Tape-reading and an ability to define and execute off of technical
levels is all you need. For the last two weeks, my office is practically empty
as the traders file out by 1:15 p.m. PST. There is simply no prep work to be
done if you are only “scalping” (HVT).

We continue to find the chip stocks,
retailers and good old
(
IBM |
Quote |
Chart |
News |
PowerRating) to be the best place for consistent price
action. Again, keeping it simple and not looking all over creation for some
story stock to trade has been richly rewarded. This is what makes HVT so
appealing.

The one item that we all need to keep
our eye on as traders is how the S&Ps, in this case the cash, handles its
current rally off the 40% retracement. You will notice the last time it traded
around a 40%-50% retracement off the high it failed, culminating in the Sept. 11
low (see chart below). We are now revisiting the same scenario which is why
trading has been so good lately. There is tremendous pushing and pulling
currently, although after Friday, the bulls came away with the upper hand. The
real battle should ensue this week. I suspect trading will be excellent. 


Keep an eye on technical levels and
pay very close attention to the tape for subtle signs that charts simply cannot
provide. Also, be sure to check into TradersWire intraday since I have
been pointing out several setups off of slightly longer time frames in recent
sessions which have panned out well.

Key Technical
Numbers: (futures)


S&Ps
Nasdaq
1162-64   1507
1148 (major confluence) 1493 (key resistance)
1140   1486
1135 (key)   1460-64
1121-23 1437
1117      1425-28 (key support)
1113     1417-19
1104-06  1409
1094  1392-95
1081  1381
  1364 (key support)

 

 

 

 

 

 

 

As always, feel free to send me
your comments and questions. See you in

TradersWire.


Dave