If You Saw These Trades, I Hope You Took Them

July 28, 2003
Kevin Haggerty

What Friday’s Action Tells You

The confluence from 977 to 972 was a good lower
boundary all of last week and was the springboard level for the rally on Friday
from an intraday low of 977.42. There were 5 trips below 980 last week, but the
net net was that the SPX opened the week at 993 and closed at 998.68, +1.7% on
the day and just 0.5% for the week. There was good travel range between the
upper and lower boundaries of the trading range the major indices are now in, so
there were some decent trading opportunities.

In spite of the rally on Friday from 977.42 to 998.68 to a top-of-the-range
close, the NYSE volume was only 1.29 billion shares, the volume ratio was 76,
and breadth +956. The other major indices all had good percentage moves on
Friday, with the Dow, led by the cyclicals, +1.9%, and also, the cyclicals are
getting extended after the last three days up. Then you had the Nasdaq, which
was +1.7%, and the QQQs +1.9%. In the major sectors, it was the BKX, +2.0%, SMH,
+1.9% and the cyclicals, +1.9% as represented by the CYC.

In the semis, Intel
(
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PowerRating) traded to a new
weekly low of 23.73, taking out last Monday’s 23.95 low, where the earnings
hype, +8.1% move all started. The 20-day EMA was 23.56 and the buyers took Intel
up to a 24.93 intraday high, closing at 24.91. There was a good 1,2,3 higher
bottom entry above 23.99 if you had waited for a definitive pattern and above
23.95 was also a reversal of the previous low last Monday.

The XLB, which is the basic industry SPDR, traded
171% more than its average volume, as opposed to the XLF, which is the financial
SPDR, +2.4%, on just 44% of its average volume, and the XLK, the technology SPDR,
+2.2% on 45% of its average volume. All of the major sectors finished green, but
only the BKX, SMH, and CYC outperformed the SPX.

For Active Traders

Friday’s trades in the SPX using the SPY and/or
E-minis were right out of the seminar videos. I have included a chart today
outlining the three pattern trades as learned in the seminar. The first trade
was an SPY RST long entry above 98.25 after a 98.04 SPY low, which was
equivalent to a 977.42 SPX low. The lines above and below the swing points are
the defined RST pattern that is only taught at the seminar. The 50-day EMA was
below at 97.80. The second trade was a 14-bar Slim Jim which broke out above
99.05 and all of its 8, 20, 60, and 240 EMAs, and never looked back The third
trade was a flag retracement to the 20-period EMA on the 5-minute chart but it
was also a retracement to the 20-day EMA of 99.33, which it had crossed on a
breakout of the Slim Jim.

What was the reason for the SPY rally from the
98.04 intraday low to the 100.26 intraday high and 100.23 close? The answer is:
Who cares?Â Because the trade setups were defined patterns that you have —
or should learn — and the first trade was from the lower end of the trading
range we have been working against all week. The Slim Jim and flag were just
continuation trades in the day’s trend. The three setups were probably the best
defined combination of patterns the entire week.

From your e-mails, I see many of you caught the
initial RST long setup. Good job. For today, if the “game” can push price on the
SPX for another try at the 1015 level, then the SPY gets extended on the 5-day,
5-minute chart from 100.75 to 101.40, which are the +2.0 and +3.0 bands for the
5 days. Friday’s rally started at the -2.0 band.

For the SMH, it’s the 33.40 to 34.00 zone, but
they only closed at 32.34 and must get past the 32.95 high, so look for any
intraday short setups from 32.50 to 33.00 if the market gets soft today. The Dow
gets extended short-term from 9325 to 9375 and closed at 9285.

Have a good trading day.

Kevin Haggerty

If You Saw These Trades, I Hope You Took Them

BUY THE FEAR, SELL THE GREED

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