Daytraders’ Gifts

March 1, 2001
Kevin Haggerty

If you
took that long breakfast and
watched the early game unfold, you had some good opportunities. The S&P 500
(
SPX |
Quote |
Chart |
News |
PowerRating) broke down from its first-hour trading range between 1263 and 1255,
trading down to a 1236 low for an excellent short trade. It then gave us an RST
buy entry above 1238. The SPX ran to the .50 retracement zone at 1249 which was
below the opening and previous close, and failed as it broke to new intraday
lows on the 2:50 p.m. bar.Â

1238 was a live number as
the 1.5 volatility band was 1235 and the .50 retracement between the October
1998 low of 984 and March 24 high of 1553 is 1238. The index hit a 1216 low last
Friday, but reversed to close that day at 1246. FYI, the .618 on the daily chart
is 1207 and the .786 is 1114. The SPX intraday low was 1229.65 vs. the 2.0
volatility band of 1227. From this convergence, the SPX rallied to 1243 in the
last 45 minutes, closing at 1240.Â Â

The Nasdaq 100
(
NDX |
Quote |
Chart |
News |
PowerRating)
also traded down to 1895 after the early leg up to an intraday high of 2010.
This was vs. the 1.0 volatility band of 1900. There was a double bottom, and
then broke above the 8-period moving average of the high at 1911. It ran to a
1959 high which was the .50 intraday retracement level, then failed, trading to
new lows on the 3:00 p.m. bar. Another opportunity for shorts.

The intraday low was 1880
vs. the 1.28 volatility band at 1882, and the 2.0 Fib extension of 1880. The
rally from this convergence carried the NDX to 1930, then faded to close at
1908. In spite of all the
Greenspan hype, there were some defined entry patterns both long and short in
addition to convergence, which strengthens the decision.Â

The Semis got hit, led down
by the Integrated Circuits and
(
ELNT |
Quote |
Chart |
News |
PowerRating) which revised second-quarter numbers
down. ELNT went from 20.25 on Jan. 19 to 58.5 in four weeks or +188%, and closed
yesterday at 19 13/16, 28 days later. Tough
game, to say the least.Â

Within the down sector,
(
MU |
Quote |
Chart |
News |
PowerRating)
and
(
NVLS |
Quote |
Chart |
News |
PowerRating) gave you excellent trades. MU was an Opening Reversal above
35.5, running at 237, and the second pattern trade was a seven-bar Slim Jim
breakout above 34, running to 35.95 before fading and closing at 34.22. The Slim
Jim breakout was right at the 1.618 extension of the up leg which was 33.76 for
excellent convergence and sequence of extension and pattern.Â

NVLS gave us a 1,2,3
breakout above 37, running to 39.25. It closed at 38 5/8. The intraday low was
36, right at the top of its recent base breakout. The 1.618 extension of the
early leg up was 36.30. Summed up,
you had a basic pattern, convergence with a Fib extension and top-of-the-base
support at the same time as the NDX was coming off its double bottom.

Save the five-minute charts
for the SPX, NDX, MU and NVLS. It’s a lesson. It
didn’t matter about the Greenspan hype. The daytrader with basic tools had a
good day. You can do it. The
factual market commentary is that we are at another key alert zone for both the
SPX and NDX. We have had excellent
trading rallies for the NDX from the .50 retracement and .618 retracement zones.

We are now sitting at the
.786 retracement zone which is 1866 and deeply oversold. On
your weekly chart, there is a positive divergence in RSI against the price
decline. A rally just back to the
declining 10-week EMA is a 20% advance.

The SPX, on the other hand,
has had excellent rallies from the .38 and .50 retracement zones. The index
rallied from the high end of the zone of 1254 to 1383 and is now back to 1240,
right on it. The SPX also has a positive RSI divergence on the weekly chart. These sharp 20%-40% rallies we have had from the alert zones are the daytrader’s or
short-term trader’s gift, to go along with any of your retracement shorts in the
downtrend.

(March
Futures)

Fair Value

Buy

Sell

2.45

3.75Â

Â 1.00Â

Pattern
Setups

Have a good trading
day.

Daytraders’ Gifts

BUY THE FEAR, SELL THE GREED

Quick Links

Company Info

Contact

Company Resources