Always Go Where The Emotion Is Highest

  • July 30, 2002
  • Dave Floyd

Well, the
trading wheel just keeps on spinning. While yesterday was far more
conducive to position trading, given the trending nature of the day, there were
several great HVT setups during the morning
and afternoon session.  For me this is truly a pleasure to come to work each
day, trade like a madman for the first hour and a half, walk away for a couple
of hours, only to return for the last two hours and find more volatility. 

I have been around this game long enough to know that mid-morning
HVT is usually a crap shoot. So back up the
Brinks truck in the morning and afternoon only. Many people have a tough time
doing this. It’s as if they feel they will miss something. Nothing could be
further from the truth, all that you will miss is choppy trading, burning
commissions and being completely exhausted when the good trading shows up in the
afternoon.

To borrow a line from Dave Landry,
“Where do we go from here?” For me it is the status quo. Trade very assertively
in the morning, then back off, unless the market is just humming. Naturally the
“hot” place top be recently has been the bank stocks, as well as tech. If you
look back to last week, you will notice that even during the pummeling that the
indices were taking, tech, specifically, the SOX held in well. Whether this is
indicative of anything is anyone’s guess, but it has certainly made for some
good long entries intraday. 

Always go where the emotion is
highest, that is where the best trades are found. I continue to focus on stocks
like Citigroup
(
C |
Quote |
Chart |
News |
PowerRating) and
JP Morgan
(
JPM |
Quote |
Chart |
News |
PowerRating),
as well as Texas Instruments
(
TXN |
Quote |
Chart |
News |
PowerRating), 
KLA Tencor
(
KLAC |
Quote |
Chart |
News |
PowerRating)) and
Maxim Integrated Products
(
MXIM |
Quote |
Chart |
News |
PowerRating). Compare
their one-minute charts with that of the one-minute S&P or Nasdaq futures. They
are carbon copies, that is what makes for an ideal trading stock.  Additionally,
the range on each intraday rally and sell-off makes for very effective “scalps.”

Luckily, with the range we are getting
intraday, position trades have been playing out real well. The ones I have been
posting here in the column and on the nightly service have been panning out real
well. I have provided you with a few tonight as well:

Longs:

Maxim
Integrated Products
(
MXIM |
Quote |
Chart |
News |
PowerRating): buy stop above
35.50

Shorts:

Country
Wide Credit
(
CCR |
Quote |
Chart |
News |
PowerRating): sell stop below 47.95

A look at the daily charts last night
showed some great setups. Naturally these are longer term in nature, but may
make for some nice gains over the next few weeks if the market continues its’
bullish ways.

General
Electric
(
GE |
Quote |
Chart |
News |
PowerRating): buy stop above 31.30

Kellogg
(
K |
Quote |
Chart |
News |
PowerRating): buy stop above 36.58


Wachovia Bank
(
WB |
Quote |
Chart |
News |
PowerRating): buy stop above 35.84

Wells
Fargo
(
WFC |
Quote |
Chart |
News |
PowerRating): buy stop above 50.13


Washington Mutual
(
WM |
Quote |
Chart |
News |
PowerRating): buy stop above 38.10

Notice a trend developing with those
last three stocks?

The setups from yesterday’s column are
playing out very well, the long entry on Eli Lilly
(
LLY |
Quote |
Chart |
News |
PowerRating) and The Dow Diamonds
(
DIA |
Quote |
Chart |
News |
PowerRating) are
in the money.  Make sure you have a protective trailing stop in place.

Gold? Yes, gold. The beaten-down metal
is now hovering just above $300 an ounce, the so-called “all critical” price. 
Is there a future there? I believe yes. The rout over the last couple of months
has been bad and somewhat confusing. Prior to that, you may recall, gold stocks
were trading contra the market. It made for some excellent trading. However,
the recent slide in the market also took gold and gold stocks with it. Many
stocks have retraced better that 60% off their year highs. 

So, do they represent a buying
opportunity? Technically, not yet, but if your belief that this recent rally in
the general market as well as the sell-off in gold being overdone, we are
getting close to some buying opportunities. I frankly think that the reasons
for gold are still relevant. Nothing in the past few weeks has really changed
from a fundamental perspective. And while that may or not play out, one needs
to be cognizant of it, because once those scenarios start swirling again, and
they will, gold will appear attractive. Stocks I am watching are,
Newmont
(
NEM |
Quote |
Chart |
News |
PowerRating),
Gold Fields
(
GFI |
Quote |
Chart |
News |
PowerRating) and Agnico Eagle Mines
(
AEM |
Quote |
Chart |
News |
PowerRating).

Key
Technical Numbers: (futures)


S&P’s   		 Nasdaq
935  1011-14
930  998
919-21  986
911 (key and confluence)   974
897 948-52
882     935
873    923
854 891-92
840  

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


David