Convergence

  • February 13, 2001
  • Kevin Haggerty

It was
an excellent day for the daytrader as
we got two uptrends to play with. The S&P 500
(
SPX |
Quote |
Chart |
News |
PowerRating) came out of a
seven-bar Flip Top and traded up to 1328, then retraced 50% of the move and went
on to make an intraday high of 1331. Its closing range was a tight triangle at
the highs. Unless the Generals put some more money to work than they did
yesterday, look for the SPX to churn between 1335 and 1341. 


Stocks don’t need much
volume to sink but it takes capital to move them up, and yesterday’s volume of
just over 1 billion shares and blocks of only 19,375 wasn’t big. There’s no
question that the
(
EMLX |
Quote |
Chart |
News |
PowerRating) crash; a -22% for
(
QLGC |
Quote |
Chart |
News |
PowerRating) and a -15% for
(
BRCD |
Quote |
Chart |
News |
PowerRating)
made some of them a bit tentative. 


The Nasdaq 100
(
NDX |
Quote |
Chart |
News |
PowerRating)
gave you an excellent Trap Door with the breakout on the eighth bar and rallied
to a 2320 high. After opening at 2247, the index traded down to 2229 and closed
on that bar at 2241. The .786 level from your daily chart is 2234. You hit the
alert zone on the nose and got a defined pattern right on it. It doesn’t get
better than that! If you didn’t
take the entry, but saw it, then your problem is not technical — it is
emotional. When you take reversal-pattern entries, it is always like that. 


The NDX sold off from the
2320 intraday high to the opening price of 2247. The
afternoon trend took it back up to 2300, closing at 2286.85. It closed in a
tight triangle closing range. It comes out of the pattern above 2287 and then a
minor high of 2300 and last stop is above the 2320 intraday high. The NDX runs
into some resistance from 2375 to 2415.


You had a great day if you
traded
(
KLAC |
Quote |
Chart |
News |
PowerRating) (+8.4%) and
(
NVLS |
Quote |
Chart |
News |
PowerRating) (+9.7%). NVLS had pulled back to the
top of its base at 36 and was just below its 50-day EMA of 37.5. Your first
entry was a recross of the 50-day EMA and your second was above the previous
day’s high. The pullback to the
base and the 50-day EMA was also a 50% retracement of its run from  24
15/16 to 49.5.

You don’t get much
more convergence than that, but you must do the work in advance and take it if
you get it. KLAC was the exact same convergence as NVLS and your entries were
identical — a recross of the 50-day EMA, then the previous high. Those
of you attending my Naples
seminar will never again miss these high-probability setups. 


The Biotechs advanced and
you got continuation in all three stocks yesterday. The SMHs,
(
RMBS |
Quote |
Chart |
News |
PowerRating) and
(
MU |
Quote |
Chart |
News |
PowerRating)
had the same Trap Door setups as the NDX and gave you early multipoint advances.
(
LEH |
Quote |
Chart |
News |
PowerRating) was the best of the brokers, giving you a multipoint move on a
continuation entry.

(March
Futures)

Fair Value

Buy

Sell

5.95

 7.25 

 4.65 

Pattern
Setups


(
IRF |
Quote |
Chart |
News |
PowerRating),
(
IDTI |
Quote |
Chart |
News |
PowerRating),
(
AMAT |
Quote |
Chart |
News |
PowerRating);
also
(
NVLS |
Quote |
Chart |
News |
PowerRating) and
(
KLAC |
Quote |
Chart |
News |
PowerRating) if they come for them on a continuation or any
kind of pullback setups on the intraday charts.
(
MU |
Quote |
Chart |
News |
PowerRating) and
(
RMBS |
Quote |
Chart |
News |
PowerRating): Look
for intraday setups. 

Also
(
MMM |
Quote |
Chart |
News |
PowerRating),
(
TYCO |
Quote |
Chart |
News |
PowerRating)  and any of
(
IP |
Quote |
Chart |
News |
PowerRating),
(
GP |
Quote |
Chart |
News |
PowerRating),
(
WY |
Quote |
Chart |
News |
PowerRating) — they all
set up yesterday (if they come to play the basics today, they’ve got patterns
right at their 200-day moving averages after pulling back).

Other
stocks:
(
IBM |
Quote |
Chart |
News |
PowerRating),
(
PDLI |
Quote |
Chart |
News |
PowerRating),
(
IDPH |
Quote |
Chart |
News |
PowerRating) — and for you breakout players look
at
(
CVS |
Quote |
Chart |
News |
PowerRating) and
(
PMC |
Quote |
Chart |
News |
PowerRating). 

Have a good trading day.