It Takes Courage To Be A Pig
Good
morning. If
only all the recent afternoon trading sessions could be as volatile as a "Fed"
afternoon session. Yesterday’s activity
made me yearn for active September trading. But
enough of the reminiscing. Let’s take a look at some examples of how "hyperactive"
daytrading was meant to be, lots of high-probability trades with good follow
through.
As I had indicated in
yesterday’s column, I had no intention of being the hero when the Fed
announcement came out. Instead I waited for the market to calm down and indicate
a trend on the one-minute futures and stock chart.
As the chart of the S&Ps indicates, the market went into a downtrend
immediately after the announcement. The
goal at this point was to not buck the trend, but let the trend be your friend.
Notice that after the initial
selloff in the S&P futures, they rallied back to the 20-period average three
times, chopped around (consolidated) then resume the downtrend.
Those three areas represent ideal entry points on the short side.
The opposite was true once the slope of the moving average changed,
around 2:45 EST. The futures rallied up,
pulled back, consolidated, then repeated the same pattern three times.
That represents six great trade setups within a 50-minute time frame.
Additionally, each move in the futures was greater than 4 points,
allowing you to get in and out without getting “nickeled and dimed†by tight
ranges.
The one-minute chart of IBM is
almost identical, allowing you to trade it while cueing off the futures.
I am hopeful that we will see
similar price action today. Looking ahead
at some key numbers on the S&Ps and Nasdaq, I see the following:
1228 continues to be a solid barrier. A move through this number should
loosen the market up a bit and allow for some good setups on the long side.
Look for 1233 to be the next intraday resistance level.
The market still needs a close above 1250 in order to set the stage for a
good bull leg. Look for support at 1221,
that stubborn retracement level, as well as 1212.
The Nasdaq managed a close
above 1757, and is now holding 1800 in pre-market.
A close above 1847 would be a good sign. Support
is seen at 1793 and 1767.
If
the market is offering you good setups like yesterday, step up to the plate and
take full advantage. With the thick of summer upon us, a quote from Stanley
Druckenmiller is appropriate: “The
way to build superior long-term returns is through preservation of capital and
home runs…When you have a tremendous conviction on a trade, you have to go for
the jugular. It takes courage to be a
pig.â€
Until
tomorrow…good trading.
Dave