Earnings Season Is Excellent For Daytraders

January 13, 2005
Kevin Haggerty

What Wednesday’s Action Tells
You

NYSE volume increased a bit to 1.56 billion
shares, the volume ratio 60 and breadth +538. The primary sectors were led
by
the
(
OIH |
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News |
PowerRating), +2.6%, and
(
SMH |
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PowerRating), +2.2%, with
(
KLAC |
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PowerRating) +4.8% and
(
NVLS |
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Chart |
News |
PowerRating) +3.8%, both on a significant increase in volume. The SMH volume
increased to 38.3 million from the 24.8 million average as price bounced off
the
.618 retracement level to the 27.77 09/07/04 low, which was the beginning of
a
+26% rally to 34.95 on 12/03/04. The key focus zone after the decline from
the
200-day EMA was 31 – 29, and today’s SMH chart outlines the symmetry. The
low
end of the zone is 29.30 (.786) and yesterday’s bounce was also off the
lower
channel line of the AB=CD pattern.

The SPX had considerable program action in
the
first hour yesterday. The first SPX RST buy setup only ran +2.56 points to
1183.84, which was just over 2x risk, before reversing down to the 1175.64
intraday low and the -1.0 volatility band at 1175.86. This second RST long
entry
advanced to 1184.52 (+6.5 points) vs. the 1184.81 .786 retracement to
1187.31
and the 240 EMA zone. The SPX made a .618 retracement to the 1175.64 low,
then
advanced +7.8 points from entry to 1187.98. S&P futures/
(
SPY |
Quote |
Chart |
News |
PowerRating)
traders had
another good day, regardless of whether you played in some or all of the
game.
The SPY low was 117.52 with the -1.0 volatility band at 117.45. Those of you
that should be looking at the 20-day, 30-minute chart saw that the -2.0
level
was at 117.25 – 117.30, so entry in that RST was a no-brainer, provided you
were
prepared for the zone and recognized the RST setup.

The QQQQ was easier because there was only
one
RST long entry, which was above 38.08 and eventually traded up to 38.60,
closing
at 38.58. There was also a .618 retracement from the initial 38.40 high to
the
38 low, so if you missed the RST entry, you caught the 1,2,3 Higher Bottom
entry.

The SMH hit a 30.61 low on Tuesday, which is
in a
key price zone, as is outlined in today’s chart, but because of the gap
opening
yesterday, the short side
Trap Door set up first with entry below 31.48
after a
31.56 high on the third bar. The SMH opened at 31.33, right at the +1.0
volatility band and then 31.59 was the 1.5 volatility band vs. the 31.56
high.
The result was better than good as price traded down to 30.85, back into the
key
price zone, and after a five-bar ledge, it broke out above 30.95, trading up
to
31.41 before going sideways into a 31.43 close. If you missed both of the
SMH
trades, review the material, but the zone was anticipated in advance, and
the
semis are a major focus. That means no excuse, traders. There were also many
other excellent intraday setups from the focus list stocks.

Earnings season is excellent for the
daytraders,
but certainly tough for the short-term position trader. The intraday
volatility
created by artificial futures activity after every earnings or economic
report
has been setting up many expanding volatility patterns. In fact, this
stretch
since last Friday is one of the year’s best for those of you trading the
major
index futures/proxies, assuming you play RSTs in conjunction with the
primary
tools outlined in the
“Trading with the Generals IV” seminar
material.

Have a good trading day,

Kevin Haggerty

Earnings Season Is Excellent For Daytraders

BUY THE FEAR, SELL THE GREED

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