Excellent Straddle Plays

• July 10, 2000
• Kevin Haggerty

We got
an early up in the S&P 500 after the first-Friday game show, and
a steady rise until about 12:00 p.m. where we leveled off in a sideways
range until a little pop up around 3:00 p.m. The S&P 500 and the Dow were
both up 1.5% while the Nasdaq 100
(
NDX |
Quote |
Chart |
News |
PowerRating) finished +1.3%. The RLX led by the
two major favorites of the Generals, Wal-Mart
(
WMT |
Quote |
Chart |
News |
PowerRating) and Home Depot
(
HD |
Quote |
Chart |
News |
PowerRating),
ended +6.3%. 

Techs did well, with the MSH +2.7% and the SOX gained 3.7%, and has
now regained almost all of the 9.3% drop initiated by the Salomon Smith Barney
analyst the other day. There are other analysts who believe it was a premature
call and that semis should be bought on a weakness. Talk about the herd
mentality!

The BTK once again
out-performed the S&P 500, as did the BKX, gaining 2.6%. The S&P 500
index is coming out of the upside line of the symmetrical triangle that I
mentioned on Friday.
After a period of contracting volatility, you want to see an expansion of volume
on the upside breakout. On Friday, the total volume was only 929 million, but
the volume ratio was excellent at 71, with 621 million up and 252 million down.
Breadth was very positive at +767 advancers over decliners. 

You don’t necessarily
need an initial expansion of volume on the break to the downside, but to the
upside you do if it’s going to be a sustained move. The Dow, whose volatility is
the lowest this year, looks ready to resolve itself with a defined move out of
the diamond pattern. 

Both the S&P 500 and the Dow are excellent straddle
plays with active management of the position, as I mentioned in my commentary on
Friday. 

Once again, the Nasdaq
100
(
NDX |
Quote |
Chart |
News |
PowerRating) broke above its 3800 resistance line and closed at 3841.27.
The QQQs
(
QQQ |
Quote |
Chart |
News |
PowerRating) opened at 95, traded
down to 94 7/16, then gave you an opening reversal above 95 as the NDX broke out
above 3800. The Qs hit an intraday high of 97. 

I hope you all made that trade as
it doesn’t come any more obvious than that! There was a very high-probability
trade as the opening reversal above 95 was also above the 20-, 60- and
260-period EMAs on your five-minute charts.

Program Trading Numbers (September Futures)
Fair Value	Buy	Sell
16.70	17.90	15.50

Pattern Setups  

Sun Micro
(
SUNW |
Quote |
Chart |
News |
PowerRating), Xilinx
(
XLNX |
Quote |
Chart |
News |
PowerRating), Cisco
(
CSCO |
Quote |
Chart |
News |
PowerRating), Sanmina
(
SANM |
Quote |
Chart |
News |
PowerRating), MedImmune
(
MEDI |
Quote |
Chart |
News |
PowerRating), Millennium
Pharmaceuticals
(
MLNM |
Quote |
Chart |
News |
PowerRating), Pe Corp
(
PEB |
Quote |
Chart |
News |
PowerRating), Citigroup
(
C |
Quote |
Chart |
News |
PowerRating), and American
Express
(
AXP |
Quote |
Chart |
News |
PowerRating).

Also, American International Group
(
AIG |
Quote |
Chart |
News |
PowerRating), EMC
(
EMC |
Quote |
Chart |
News |
PowerRating),
Providian
(
PVN |
Quote |
Chart |
News |
PowerRating), Analog Devices
(
ADI |
Quote |
Chart |
News |
PowerRating), Micron Technology
(
MU |
Quote |
Chart |
News |
PowerRating) and
also Mercury Interactive
(
MERQ |
Quote |
Chart |
News |
PowerRating).

Have a good trading day.

 

 

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