Day Traders Ride The Energy Stocks
What Friday’s Action Tells
You
For the third consecutive week, the SPX
(
$SPX.X |
Quote |
Chart |
News |
PowerRating) weekly low was on Monday and the high on Friday since the
“Generals’ Pullback” (seminar material) to the key price and time
zone and 1090
low. The SPX closed at 1184.17, +0.9% and +1.5% on the week, as the minor
resistance anticipated from 1169.50 – 1175 was taken out after churning at
that
level for four days. The Dow
(
$INDU |
Quote |
Chart |
News |
PowerRating) was +0.7% to 10,539 and +1.8% on
the
week, while the Nasdaq
(
$COMPQ |
Quote |
Chart |
News |
PowerRating) was +1.2% to 2085 and the
(
QQQ |
Quote |
Chart |
News |
PowerRating)
at
38.66, +1.0%. For the week, the Nasdaq was +2.1% and QQQ +1.8%.
The acceleration for the SPX and our second
entry
after the 1090 zone occurred trading through the high monthly close of
1144.94.
The anticipated price objective if the SPX took out the 1161 .50 retracement
to
1553 from 769 is 1254.
The three-bar consolidation after the SPX
made
the 1170.87 high worked off much of that short-term overbought condition.
But
after Friday’s market action, it returns to short-term overbought with the 4
MA
of the volume ratio at 66 and 4 MA of breadth +1075.
NYSE volume on Friday was 1.54 billion, the
volume ratio 78 and breadth +1628 which follows the +1538 on Thursday.
Rising
prices bring pigs to the trough.
On Friday, all of the primary sectors were
green,
in addition to bonds with the
(
TLT |
Quote |
Chart |
News |
PowerRating) +1.1%, gold (XAU) +2.4% and energy,
with
the
(
OIH |
Quote |
Chart |
News |
PowerRating) +2.4%, the leader on the day.
The semis advanced for the second day with
the
(
SMH |
Quote |
Chart |
News |
PowerRating) +1.1% and the XBD also +1.1%. On the week, the cyclicals led at
+2.6%,
OIH +2.3% and XBD +2.1%.
The fifth leg in this bull cycle for the SPX
started by taking out the 1163 high while the Dow was playing catch up and
has
to take out the 10,754 number to join the parade. The QQQs closed at 38.66,
just
below its 01/06/04 39 high, which was a +97.4% move off the October 2002 low
of
1976.
For Active
Traders
The
(
SPY |
Quote |
Chart |
News |
PowerRating),
(
DIA |
Quote |
Chart |
News |
PowerRating) and QQQ all retraced
four to five bars after the opening to the 60 EMA (five-minute chart) and
that
proved to be the intraday low of the day. The SPX closed on Thursday at
1173.48
and at 1:55 p.m. ET on Friday was trading at just 1176.23 before the program
light went up, and the SPX traded up into the 1184.17 close. Some traders
played
the earlier retracement to the 60 EMA, but most played the first Slim Jim
breakout above 1175.58 and then the second Slim Jim above 1177.52, which was
the
2:00 p.m. – 4:00 p.m. rally.
In the NQZ4, there was an RST sell pattern
with
entry below 1546 if you trade the pre-9:30 a.m. market, which traded down to
1537.50, setting up an RST buy around that 10:00 a.m. reversal time which
ran up
to 1550.50, setting up another RST sell, which then only declined to 1543,
then
reversed up into a 1550 close. The last RST sell was stopped out with a
small
loss, or scratched, depending on your entry level. Those of you who are
involved
in our energy focus stocks had some excellent trades again following the
narrow-range inside day on Thursday. Daytraders have made money three of the
last four days on the long side with defined entries in the OIH and related
stocks.
Today’s
Action
I am doing this Sunday to get a running start
on
the week, which is also another key time zone. The SPX has advanced +8.6% in
14
days entering this time zone with the market short-term overbought, so the
probability of a short-term reversal is the higher probability. If you have
already missed the last three SPX entries from the 1090 zone, trading
through
the 1144.94 monthly high close, and then above the 1161 .50 retracement to
1553
from 769, you have no edge taking an entry into the current rally highs.
Have a good trading day,
Kevin Haggerty