Be Ready In The Semis — Here’s Why

June 12, 2003
Kevin Haggerty

What Friday’s Market Action
Tells You

Except for the semis, the major sectors were up
across the board, led by the oil service stocks. These stocks have been
consolidating after a May rally, and the two primary stocks from our scrolling
list had great moves:
(
RIG |
Quote |
Chart |
News |
PowerRating) broke out of a pattern and was +6.3% for the
day, and
(
DO |
Quote |
Chart |
News |
PowerRating) was +4.8%. The
(
OIH |
Quote |
Chart |
News |
PowerRating)s gained +4.4%. As mentioned in my
commentary, they stay on your daily list, and you just wait for the Generals to
show up when it’s going to be an energy day, as they were all trading in tight
patterns at the 200-day EMAs. All three stocks had good trade-through entry.

The
(
BBH |
Quote |
Chart |
News |
PowerRating)s got going at +3.5%, the XBD +2.6%,
the BKX +1.8%, and the CYC +1.7%. It’s still all about the Generals pushing
prices into the June quarter’s end, if they can, and based on just the one-day
reaction, that’s the case until the market proves otherwise.Â

For Active Traders

Active traders had a good day yesterday, and that
last-hour mark-up into the close enabled us to capitalize on the gap-down
opening, setting up a four-bar Trap Door to the 20-period EMA on the five-minute
chart for the SPY, with a 98.88 entry on the 9:45 a.m. ET bar. Retail sold the
opening, and the Generals came in on the buy side. The SPY ran to a 99.64
intraday high, closing in the top of the range at 99.54.Â

The best opportunity was in the
(
SMH |
Quote |
Chart |
News |
PowerRating). Yes,
that sector was -1.3% at day’s end, but I told you the other day there was
unusual volume in major semis in the last 45 minutes, and that was repeated
again at the same time on Wednesday, as the SMHs were taken up +2.1% in the last
45 minutes. Obviously, there was an agenda. That set up a great trade, as the
SMHs had a gap down opening to 29.65 from 30.19, or -1.8%. It traded down to
28.85 on the fifth five-minute bar, then gave you a Trap Door entry on the 9:55
a.m. bar above 29. The SMHs ran +3.2% from entry to the 29.94 intraday high,
closing at 29.78. After entry, it re-crossed the 20-day EMA, which was 29.10, so
you had another good reason to take the trade, in addition to a 29 support
level, where the SMH broke out to 32.47.Â

Unlike the SPX and Dow, the SMH has had a
three-day reaction after the 32.47 high reversal day, which is the minimum you
want to see. It declined -11.3% high-to-low on the pullback. This was simply an
excellent setup, with anticipated levels where you look for a potential trade,
and you got it. I guess we say thanks to the mystery mark-up into Tuesday’s
close.

Today’s Plan Of Attack

Have a good trading day.

Five-minute chart of
Wednesday’s SPX with 8-, 20-,
60- and 260-period
EMAs

Five-minute chart of
Wednesday’s NYSE TICKS

Be Ready In The Semis — Here’s Why

BUY THE FEAR, SELL THE GREED

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