How To Find The Best Setups In 15 Minutes A Day
What Monday’s Action Tells You
The major indices gapped open, but the upside
move was over by 10:30 a.m. ET, and then, for example, the
(
SPY |
Quote |
Chart |
News |
PowerRating) traded down
to an intraday low of 104.51, which was below the 104.72 open and 104.57
previous close. The new intraday high was 105.27 on the 10:25 and 10:30 a.m.
bars, but then reversed the previous rally high of 105.21 from last Thursday.
The SPY closed at 104.93, +0.3%. It was a plus day in price, but an extremely
light day in volume for the holiday, as NYSE volume was only 921 million at 4:00
p.m. before the runoff. NYSE volume ended at 1 billion shares, the volume ratio
was 75 and breadth a positive 1330. Needless to say, the Generals were not heavy
on the sell side.
The SPX
(
$SPX.X |
Quote |
Chart |
News |
PowerRating) closed at 1045.35, +0.7%,
the Dow
(
$INDU |
Quote |
Chart |
News |
PowerRating) 9764, +0.9%, and the Nasdaq
(
$COMPQ |
Quote |
Chart |
News |
PowerRating) 1934, +1.0%.
The
(
QQQ |
Quote |
Chart |
News |
PowerRating) at 35.22 was +0.6%, and the
(
SMH |
Quote |
Chart |
News |
PowerRating)s at 38.50 were +0.4%. Volume
in the index proxies was extremely light, as the QQQs traded just 61 million vs.
its 89 million average, the SPY 24 million vs. a 40 million average, and the
SMHs traded 8.2 million vs. its 11.5 million current average daily volume.
In the sectors, the XAU (gold) was +2.5%, the XBD
+2.2%, BKX +1.5%, and RTH +1.4%, all outperforming the SPX by a wide margin,
which is positive, with the exception of gold.
For Active Traders
Looking at the index screens from yesterday’s
trading, you see that the major price and volume moves were mostly news-related,
such as
(
EBAY |
Quote |
Chart |
News |
PowerRating),
(
HON |
Quote |
Chart |
News |
PowerRating) and
(
IGT |
Quote |
Chart |
News |
PowerRating). A fast way to check that and for
trading setups on both the S&P 500 and NDX 100 screens is to sort the screen by
the CR1 column which shows you where the stock closed in its range, and you look
at the percentage volume that the stock traded above its 30-day average daily
volume. Of course, you’re looking for stocks that have both an increase in price
and volume and closed in the top of the range.
Next, your eyes move right on the page and check
where the closing price is relative to its 20-, 50- and 200-day EMAs. Then you
also look to see if the 20-day EMA is greater than the 50-day EMA which is
greater than the 200-day EMA (assumes you’re looking for long setups). You would
then check the daily charts for those stocks that closed above the midpoint and
preferably in the top 25% of the range on an increase in volume in order to
identify possible trade setups. By doing this, you can identify all of the best
setups in 600 stocks in less than 15 minutes a day. You would then move to the 3
Day Wake Up Call and Change In Direction screens. For new readers, the screens
are available at the bottom of my commentary page.
If you trade the SPX futures or SPY, the two best
trades yesterday were the short reversal of Thursday’s SPY 105.21 high on a
three-bar reversal entry below 105.14. This initial trade then developed into a
1,2,3 lower top with trend entry below 104.97. Entry was on the 12:50 p.m. bar,
and the SPY traded down to a 104.51 intraday low, which as I said previously,
was net minus, which means below the open and previous close. After that, the
SPY edged back up in choppy trading to close at 104.93.
It is the media’s time to demonstrate how
inadequate they are during this earnings management season, but for traders, it
means volatility and overreactions which provide trading opportunities. As I
have said many times before, you should emphasize the index proxies, HOLDRs and
futures during this time period and be very careful of individual stocks for
anything more than a daytrade.
Many of the stocks reporting early have risen 10%
or more over the past 10 days, and any upside overreaction on announcement can
be a good daytrading short trade if you can beat the hedge funds to the exit
that were running the stock up ahead of the earnings date, provided there was
some Generals order flow to also front.
Have a good trading day,
Kevin Haggerty