Anatomy of a Trade
From 1990 to 1997, Kevin Haggerty served as Senior Vice President for Equity Trading at Fidelity Capital Markets, Boston, a division of Fidelity Investments. He was responsible for all U.S. institutional Listed,OTC and Option trading in addition to all major Exchange Floor Executions. Mr. Haggerty is a co-founder of Tradingmarkets.com and is the founder of www.KevinHaggerty.com.
The $SPX has been churning in the anticipated key price zone (1396-1417) for ten days and only closed above the zone once at 1418.26 on Tuesday. The intraday high was 1422.72 last Friday, before closing at 1413.90. There is a key time period this week which started Monday which was trading day 34 (Fibonacci count) of the rally from the $SPX 1257 3/18/08 low. Day 35 on Tuesday is the square root of 1257 (35.45) and is used for both price and time symmetry. Yesterday was day 36 which is a Natural Square number (Square of 9) and is also significant when it is used with other symmetry. Traders in my service had anticipated this price and time zone, and when they also got a 123 Lower Top Reversal short setup yesterday they were ready to take a high probability trade, with a very low common denominator entry. I included the $SPX chart today that shows the pattern and the immediate trade symmetry for entry.
The table was set for the trader because of the anticipated price and time zone, plus the $SPX was obviously short term extended. The 123 LT reversal pattern started with the breaking of the logical trend line to the 1413.81 low, and subsequent reversal to 1419.54 The .618RT to 1422.72 was 1419.32, so there was price symmetry. There was also intraday time symmetry in that it was 12 bars down to the 1413.81 low from 1422.72, and then 7 bars up to the 1419.52 high which is a .618RT in time. The other key level in play for the reversal was 1417 which is the .50RT to 1576 from 1257. The $SPX accelerated when it traded through the 1407 200DEMA, and also the initial downside H&S Neckline from the 1576 high, so that brought in some selling. The NYSE volume was light again at 1.28 billion shares, and that has been the case for the entire rally, and corrections. Yesterday the volume was 682 million shares at 2:07PM, and then traded 598 million shares into the 4:00PM 1392.57 close, so there was late selling pressure as some hedge funds took money off the table. I will discuss this trade and strategy in more detail on todays 12:30PM conference call, which is free to all participants and you will also get an idea of what the trading service is all about.
Trading is a game of probabilities and it is important that understand the tools that will enable you to play at the highest level. We do this everyday in the trading service.
The next written commentary is Tues 5/13/08, but I will be discussing the overall market in the 12:30PM conference call today.
Check out Kevin’s strategies and more in the 1st Hour Reversals Module, Sequence Trading Module, Trading With The Generals 2004 and the 1-2-3 Trading Module.
Have a good trading day!
Kevin Haggerty