Excellent Trading Opportunities Today–Here’s Why

January 6, 2005
Kevin Haggerty

What Wednesday’s Action Tells
You

NYSE volume remained heavy at 1.73 billion shares
as the Generals rearranged portfolios by ringing the register and putting some
money to work in some other areas that had pulled back. The volume ratio
improved to 25 from 11, as did breadth -1490 from -1728. The short-term oversold condition is in place with the 4 MA of the volume ratio 27, 4 MA
of
the breadth -1114 and the 5 RSI 17. These are numbers short-term traders
want to
see in any retracement in uptrends.

The primary stock thread yesterday was money
moving into some larger defense stocks, like
(
LMT |
Quote |
Chart |
News |
PowerRating) +2.5%,
(
BA |
Quote |
Chart |
News |
PowerRating) +1.7%,
(
NOC |
Quote |
Chart |
News |
PowerRating) +1.5% and
(
RTN |
Quote |
Chart |
News |
PowerRating) + 0.8%, all on above-average volume. All of
these
stocks had retraced to rising 40-week EMAs (Generals’ Pullback in seminar
material). That is what the first week of the new year is all about, to see
where the money flows change as the Generals adjust portfolios. Certainly,
quite
a few of their winning major holdings were marked up in the
10/25-to-year-end
rally, so it only makes sense that they sell some and get back to a normal,
or
different, portfolio weighting, so this increases the activity, along with
the
programs.

Intraday Setup
Alert

SBUX may bounce at the low of day.

You are starting to hear a new theme from the
herd/media that 2005 will be led by the big-caps and back to the Nifty 50
mentality, which I find amusing. Been there, done that. You don’t like the
final
ending of it. The casino always needs a new marketing gimmick to suck the
masses
back into the pit.

The late decline in the major indices did not
hurt daytraders as they made some money earlier in, for example, the SPX.
The
first entry (by my strategy definitions) was the RST (60-minute chart) above
1189.82, which only traded to 1192.58 before reversing. The next entry was
off
the double bottom which set up after the 1185.22 signal bar low on the 12:40
p.m. ET vs. Tuesday’s 1185.39 intraday low on the 2:45 p.m. bar. This trade
+6.2
points to 1192.75, which proved to be the intraday high on the 1:35 p.m.
bar.
Individual focus list stocks (Inner Circle Group) like
(
AEOS |
Quote |
Chart |
News |
PowerRating),
(
UNH |
Quote |
Chart |
News |
PowerRating)
and
(
RTN |
Quote |
Chart |
News |
PowerRating) gave you some different strategy setups, like Flip Tops and
First
Consolidation Breakout to New Intraday Highs, so on balance, there were good
opportunities if your trading plan was good.

The
(
SPY |
Quote |
Chart |
News |
PowerRating) closed at 118, which was our
initial downside focus level, with the 50-day EMA at 118.09. 118 is the -3.0
standard deviation band for the period in focus. (If you have my material,
you
know what it is.)

The QQQQ went out at 38.54, right at key
levels
from 38.60 – 38.20, so that game is on today. The same zone for the
(
DIA |
Quote |
Chart |
News |
PowerRating),
105.75 close, is 106 – 104.95, which is the -2.0 to -3.0 band zones. The
50-day
EMA is 105.22.

The SOX hit 402.59 yesterday vs. our initial
interest level at 403 and bounced to 408.83 before closing at 404.25. 390 is
the
other interest level, mentioned yesterday, with the -3.0 band at about 395,
so
this is an active price zone for traders.

Net net, we have active price zones in the major
indices and a short-term oversold condition with the 4 MAs of the volume
ratio
and breadth and the 5 RSI under 20, so there will be excellent trading
opportunities today.

Have a good trading day,

Kevin Haggerty

Kevin Haggerty is the former head of trading at Fidelity Capital Markets.
If you’d like to learn how to trade from Kevin, go to www.kevinhaggerty.com.

Excellent Trading Opportunities Today–Here’s Why

BUY THE FEAR, SELL THE GREED

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