It’s A Half, Three-Quarters Around Greenspan

March 19, 2001
Kevin Haggerty

Last
week may have historically been one of the worst weeks, but for
daytraders it provided four out of five days with excellent opportunity. The S&P 500
(
SPX |
Quote |
Chart |
News |
PowerRating) gave you two excellent defined trading opportunities. The first was
the contra rally from the program selling that started with the opening sell
imbalances and followed through until the 1150 low on the 10:50 a.m. bar. The
contra rally started on the next bar as it reversed three highs and four closes
on a wide-range Change in Direction bar which had been preceded by a positive
divergence in NYSE ticks.

There were many good Trap
Door and Volatility Band setups at that juncture. The contra rally was good as
it ran up to 1166.39 and this was the second excellent opportunity to both take
profits and/or get short. The intraday .786 RT between the 1171 high and 1150
low was 1166.50, right on the 1166.39 contra rally high.

At that level you got a
narrow-range reversal bar and then a 1,2,3 short entry below 1163.85. From there
it traded down to an 1149 low closing at 1150.53. So you don’t need any help
from anyone looking for the continuation short entry.

Geometric retracements that
are below the open and previous close are excellent shorting opportunities and
also levels to take contra rally profits. The programs accelerated the selling
and you got to fade the emotion and then you got an excellent shorting
opportunity as the trend resumed the direction of the open, which was down.

In all this chaos, there
have been many stocks that have been very tradable with defined pattern entries.
The strongest contra rallies will most often come from stocks that exhibited
stronger relative strength on the downside relative to their related index. In
this actual example, JNPR had a positive divergence from the NDX 100 which had
bottomed on the 10:50 a.m. bar.

JNPR gave you a
narrow-range inside-bar reversal pattern on the 10:25 a.m. bar on a significant
increase in volume. It had a 52 low vs. a multiday geometric RT at 51.75, and 52
is also the level that JNPR broke out of a 20-bar Slim Jim that I showed you the
other day. So let’s do the body count:

Positive NYSE
divergence

Minor support

Positive relative
strength

Geometric retracement

Defined reversal
pattern

This all adds up to a
high-probability trade which ran for several points. As you see on the chart,
you got another entry at 53.5 coming out of a six-bar congestion. The key point
for you in today’s example is that some trades give you more reason to take a
trade than others and you must condition yourself to think that way when you
select your trades. The body count for this trade was +5 which is excellent and
if you can focus on high-body-count trades, you will definitely be more
successful.Â

If you don’t manage your
risk, and fail to hit the ejection button, then the market will take you out in
a body bag and that is not good.

Five-minute chart of
Juniper Networks
(
JNPR |
Quote |
Chart |
News |
PowerRating)

with 8-period EMA, 20-period
EMA, 60-period EMA, and 260-period
EMAs

1.
10:25 a.m. Inside Narrow Range Bar Pattern with a 52 low. JNPR had
an increase in volume and narrow-range bar which often precedes a trend
reversal.

This 52 low was a convergence with the 51.75 .786
RT between the 3/12 48.75 low and the 3/14 62.75 high. It was also
a positive divergence from the NDX which made the low at 10:50 a.m.

The first entry in JNPR was above the high of the inside bar
at 52.75. The second entry was out of the congestion above 53.50.

Five-minute chart of
Nasdaq 100
(
NDX |
Quote |
Chart |
News |
PowerRating)

with 8-period EMA, 20-period
EMA, 60-period EMA, and 260-period
EMAs

1.
10:25 a.m. bar.

2. 10:50 a.m. bar.

3. Setup bar reverses two closes and one high and is a Change in
Direction bar establishing a swing point low.

(June
Futures)

Fair Value

Buy

Sell

11.90

.13.30

10.40

Pattern
Setups

There are obviously very
few continuation long setups after Friday on the daily charts so the focus
continues to be on the intraday charts and closing range setups. In the chosen
ones, on the long side, JNPR gets going above 53 9/16;
(
CHKP |
Quote |
Chart |
News |
PowerRating) above 58;
(
CIEN |
Quote |
Chart |
News |
PowerRating) above
53. Obviously all three of these are continuation shorts below Friday’s lows.

Have
a good trading day.

It’s A Half, Three-Quarters Around Greenspan

BUY THE FEAR, SELL THE GREED

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