Beware The Air Pockets
The
event-driven volatility dominated Friday’s action with
the knife down, but ended at the top, with both the NDX
(
$NDX.X |
Quote |
Chart |
News |
PowerRating) and SPX
(
$SPX.X |
Quote |
Chart |
News |
PowerRating) giving you 1 2 3 bottoms and excellent up-trends into the close.
I received an e-mail from a subscriber who told me he had muted the sound and
just took the 1 2 3 bottom trade he saw on the screen. This is exactly what the
daytrader has to do. Don’t contaminate yourself with the media chatter and just
trade what is.
There will be a
continuation of this volatility with the war news, earnings reports for the
third quarter, and Greenspan front and center again on Wednesday. The volume
declined to 1.3 billion, with a volume ratio of 36 and breadth negative at -696.
A concerted effort to keep the averages up enabled the Dow to finish only -0.7%,
and the S&P 500 -0.5%. The Nasdaq reversed back to the plus side at
+0.1%, and the NDX 100 ended +0.3%, as the dogs of summer continue their run.
I certainly liked the reversal, but would
have liked it much more if it wasn’t after a 16-day rally up into the moving
averages.
The SPX closed at
1091.55, right at under its 50-day EMA of 1102, while the NDX closed at 1393.84
vs. its 50-day EMA of 1394.20. This sets up related short pivots for stocks that
have made similar retracements and might be bumping up against resistance, like
Intel
(
INTC |
Quote |
Chart |
News |
PowerRating), which closed at 25.02 vs. the 50-day EMA of 24.84 and major
resistance at the 26 to 26.5 level. Cisco
(
CSCO |
Quote |
Chart |
News |
PowerRating) closed at 16.95, off of
Friday’s intraday high of 17.40 and the 100-day EMA of 17.55. The point is that
things happen around inflection points and retracement zones, and we are at
these levels now in the major averages and, of course, many stocks. Also, use
these pivot points in conjunction with your intraday charts for early trade
setups with tight stops. Probability favors the short side until proven
otherwise. Position traders will get some retest of the 945 low and have
opportunity if this rally is for real.
Stocks
Today
Some of the moves have
been spectacular, like
(
QLGC |
Quote |
Chart |
News |
PowerRating), which has doubled in eight days on big-time
volume. But many of these semis will have some short-term air pockets, so you
must be ready to play them from intraday short setups. The two to focus on are
QLGC and
(
NVDA |
Quote |
Chart |
News |
PowerRating). The
(
SMH |
Quote |
Chart |
News |
PowerRating)s are right at the 50-day EMA of 37.82,
having closed at 37.74. Other semis that are giving you good two-way intraday
setups are
(
BRCM |
Quote |
Chart |
News |
PowerRating), which had big-time volume and move on Friday,
(
KLAC |
Quote |
Chart |
News |
PowerRating),
(
MU |
Quote |
Chart |
News |
PowerRating), which is now on the move again,
(
MCHP |
Quote |
Chart |
News |
PowerRating) and
(
TXN |
Quote |
Chart |
News |
PowerRating).
The
(
BBH |
Quote |
Chart |
News |
PowerRating)s closed at
120.80, so use the 100-day EMA of 120.57 as a short pivot.
Other stocks: Some
that set up on the daily chart as longs,
(
GDT |
Quote |
Chart |
News |
PowerRating), and also, if it’s a fear
day, look on the long side to
(
AMGN |
Quote |
Chart |
News |
PowerRating) and
(
BGEN |
Quote |
Chart |
News |
PowerRating). Also,
(
BDX |
Quote |
Chart |
News |
PowerRating),
(
MMC |
Quote |
Chart |
News |
PowerRating),
(
JNJ |
Quote |
Chart |
News |
PowerRating) and
(
BAX |
Quote |
Chart |
News |
PowerRating).
If they raise them all
from the dead,
(
EMC |
Quote |
Chart |
News |
PowerRating), which is one of the dogs of summer, can’t be far
behind, so keep that on your screen every day and look for the volume.
On the short side, I
would look for the stocks that have had the big moves, and I’d look for the air
pockets in the semis that are mentioned above, also the dogs of summer, which
would have to be
(
JNPR |
Quote |
Chart |
News |
PowerRating),
(
CIEN |
Quote |
Chart |
News |
PowerRating) and
(
AMCC |
Quote |
Chart |
News |
PowerRating) because they’ve had
such big-volume moves, and there’s a lot of activity in them. Also, they’re
giving you good two-way narrow-range setups on a daily basis.
Have a good trading day.
Five-minute chart of
Friday’s SPX with 8-, 20-,
60- and 260-period
EMAs
Five-minute chart of
Friday’s NYSE TICKS
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