Alert Zone Rally

October 10, 2000
Kevin Haggerty

A
holiday session, but great reaction and travel range for
the daytrader yesterday. It was also another good opportunity for those trying
to scale into a long position at a key retracement level on the NDX 100. The
S&P 500 traded down to the 68% volatility band of 1394 and then rallied to
an intraday high of 1409.70, before closing at 1402 or -0.5%. The intraday low
was 1392.50.Â

The reversal from this
volatility band was a clearly defined entry pattern. The bounce off 1392.50 came
on a wide-range bar that reversed the previous three closes and previous two
highs. It closed in the top of its range and this wide-range bar was preceded by
two extremely narrow-range bars as the index approached the volatility band. It
was an excellent entry from a three-bar reversal pattern at a key intraday
level.

This was short lived as the
NDX 100 traded down to the key .618 RT level zone and mounted an explosive rally
at about 11:30 a.m. The index hit an intraday low of 3185, within 0.6% of the
exact .618 RT number of 3165.Â Like the S&P 500, it gave a clearly
defined entry pattern. It reversed four closes and three highs on a wide-range
bar with a top-of-the-range close, all coming at a key alert level.Â

If you missed the
opportunity, shame on you because you probably had the TV on, listening to the
chatter about margin calls or whatever, and that will always influence you the
wrong way. If your trading plan was set up correctly, you were keyed in at this
alert zone looking for a reversal pattern and a good contra move. The
NDX rallied from 3185 to 3360 or 5.5%, before closing at 3319 in the top 25% of
the range. See the five-minute chart below, included for your records of entry
patterns at key alert levels. If you are not doing that, then start now and
watch how fast your learning curve accelerates.

As yesterday was a lower
low, you also got a lower high of 3360, which has to be surpassed and closed
above to give us any change in direction and a confirmed RST buy entry. The
Generals are the only ones who can decide that. There were also many defined
reversal patterns in the chosen ones at the same time of course, as the NDX 100
bounced off the .618 RT level. The travel range reversal was huge, as JNPR
reversed 16% to the upside, BRCD 9.7%, NEWP +13.7%, and GLW +12.4%. This
scenario also applies to many of the other chosen ones.

Instead of getting the
reaction day on reduced liquidity as I had mentioned yesterday, we got a
slingshot move and in some cases such as JNPR, it was on significant volume.
Today, if there’s no follow through by the Generals and we head south, the
shorts will have to come from intraday chart patterns. This is because of the
wide-range-bar closes in the top of the range yesterday for most of the chosen
ones and it is too far down to the previous low for your first short
entry.Â

If we get continuation
today on the upside by the Generals, we all know where yesterday’s highs are or
maybe a pullback pattern vs. yesterday’s range that sets up on the intraday
charts. Have a plan.

face=”arial, helvetica”>(December Futures)
Fair Value	size=2>Buy	size=2>Sell
16.00	17.20	14.70

Pattern
Setups

Be careful today. Look for
second entries. Also, if we head south, these same stocks will set up as shorts
from your intraday charts.

Have a good trading day — and keep
your helmets on..

src=”https://tradingmarkets.com/media/images/comms/haggerty/kh101000-01.gif” width=”453″ height=”282″>

Do you have a follow-up question about something in this column or other questions about trading stocks, futures, options or funds? Let our expert contributors provide answers in the TradingMarkets Question & Answer section! E-mail your question to questions@tradingmarkets.com.
For the latest answers to subscriber questions, check out the Q&A section, linked at the bottom-right section of the TradingMarkets.com home page.

Alert Zone Rally

BUY THE FEAR, SELL THE GREED

Quick Links

Company Info

Contact

Company Resources