Intraday-Pattern Recognition

January 23, 2001
Kevin Haggerty

The S&P
500
(
SPX |
Quote |
Chart |
News |
PowerRating) finished essentially unchanged
but there was opportunity in between. It started out with the familiar Opening
Reversal, which also cleared all of the EMAs at the 1343 level as mentioned
yesterday morning.

This run ended at the
intraday high of 1353.62 on a narrow-range reversal bar followed by a
wide-range-bar reversal of the previous five-bar lows and also below
the 8-period moving average of the lows at 1350. For
those of you who don’t have the necessary software, just use the 8-period moving
average of the last, which is close.

The SPX is now in an
Ascending Triangle, bumping multiple times at the 1350 top area with
the high close in that zone being 1347.97. The SPX closed at 1342.90, just above
its 50-day EMA of 1341.79, which becomes your first pivot point today.

Coming out the top of the
pattern could give you a quick run to the 200-day EMA of 1392. The decline
from the intraday high 1353.625 was a Fib extension from the leg up from the 9:40 a.m. low of 1336.75.
The first leg up was 16.87 points. Multiply 1.27 by 16.87 and
subtracting it from that first intraday high gives you the extension level of
1332.20.

The low of the declining
leg was 1333.84 on the 2:00 p.m. bar. There was a 1,2,3 close long entry above
1335.85 for those who attended my New York seminar, and also entry above the 8-period
moving average of the highs, and 8-period EMA of the last. This rally carried up to 1344.44 before closing at 1343.

Save this text and your
five-minute chart and the daily chart showing the Ascending Triangle and you
have a lesson, not some subjective market dialogue.

The Nasdaq 100
(
NDX |
Quote |
Chart |
News |
PowerRating)
was similar yesterday, except you got a Trap Door long entry above 2616.92 which
was the 9:45 a.m. bar after the market makers took out the opening retail orders
at a discount. This first leg contra rally carried up to the intraday high of
2683.12.

Unlike the SPX, the NDX
didn’t make a new intraday low, which was the 2598.95 low of the 9:45 a.m. bar.
It hit 2615 on the decline, then rallied to 2653, closing at 2643 for a
positive divergence vs. the SPX. This close is above all of its 8-, 20-, 60- and
260-EMAs on your five-minute charts. It gets going to the upside above 2653 and
gets fragile below the 260-EMA of 2630.

The point of this lesson is
to make you focus on intraday-pattern recognition and the importance of
framing the daily market dynamics. It is the same regardless of
what underlying you trade.

face=”arial, helvetica”>(March Futures)
Fair Value	size=2>Buy	size=2>Sell
9.80	11.10	8.50

Stocks Today

After earnings yesterday,
(
TXN |
Quote |
Chart |
News |
PowerRating)
had traded down over 4 points after the close, so be prepared for discount
openings and Trap Doors in the semis.

If the market makers and specialists
are able to pull the early plug, there will be opportunity both ways during the
day.

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have a follow-up question for Kevin Haggerty, email him at questions@tradingmarkets.com.
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Intraday-Pattern Recognition

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