Key On NDX 100

August 9, 2000
Kevin Haggerty

Seven
successive days up for the Dow and S&P 500 while
the Nasdaq 100
(
NDX |
Quote |
Chart |
News |
PowerRating) closed at 3686, -0.6% on the day. The banks and brokers
were off slightly, as were the biotechs and semis, while the RLX stuck its head
up, led by Wal-Mart and Home Depot, to finish +3.8% on the day. The big-cap
techs were mixed while Microsoft was up 4 1/4 points. Total New York Stock
Exchange volume increased to 992 million, while the volume ratio remained
positive at 58.

Breadth was once again
positive with +283 advancers over decliners. The shining lights were some of the
momentum stocks such as
(
ARBA |
Quote |
Chart |
News |
PowerRating) +7 1/2,
(
PCMS |
Quote |
Chart |
News |
PowerRating) +12 1/8, and
(
JNPR |
Quote |
Chart |
News |
PowerRating)
+6 11/16. Hope you caught some of the move. If
we head south today, an early short pivot point for the S&P 500 today from
the five-minute charts is below the 60-period EMA of 1481. As for the NDX 100,
the QQQs finished with its third successive higher high and higher low, but with
a very narrow-range day and the lowest volume — 10.4 million — since the July
3 half-day.

Rising prices on declining
volume is a red alert. The QQQs
(
QQQ |
Quote |
Chart |
News |
PowerRating) closed at 93 1/4 vs. 50-day EMA of
93.17. If we head south, trading below the 50-day EMA can be your first short
entry. Also, be ready to enter
short again below 91 1/2, yesterday’s low, which is also the low of a 15-bar
consolidation on a 65-minute chart that closed with a 20-period EMA of 91 15/16.
If they play the long game today, take continuation entry above yesterday’s
high.Â

It is very helpful when you
check your daily charts for next-day setups to also look for inflection points
on your five-minute charts, or other
intraday periods such as the 65-minute chart. Also,
a stock like Ariba
(
ARBA |
Quote |
Chart |
News |
PowerRating) that has run from a July 31 low of 102 3/8 to a
145 1/2 high yesterday, which is a 42% gain in seven days, is probably going to
catch an air pocket as it retraces some of that gain. You don’t know when, but
you should be ready if you like to play extended stocks on the short side when
they set up.Â

Looking at the five-minute
chart of ARBA with a 20-, 60- and 200-period EMA on it, you can see that it
closed at 142 1/2, + 7 1/2 points on the day, and gave
you a good trade-through entry above the prior day’s high of 135 1/4. If
it heads south today, the two logical short entry points are below the 60-period
EMA of 142.17 and then below the 140 5/8 low of the 1:10 p.m. bar from
yesterday’s five-minute chart, with very tight stops. On this kind of a trade,
you will be correct as soon as possible as you will get stopped out just above
the 60-period EMA of 142.17.

If ARBA heads south, it can
very easily trade quickly down to the 132-132 1/2 level, where
it broke out on Monday at 3:30 p.m., and the 260-period EMA is at 132 5/8. ARBA
has given us three long continuation entries in succession, but a stock has no
memory, so you still must be ready if they run it on the long side. If you are
ready at key inflection points, this kind of trade can have a good risk/reward
ratio, but the stop must be just above the 60-period EMA, in this case, or give
it some more room but adjust your size so you still keep it at your money-stop
amount.Â

face=”arial, helvetica”>(September Futures)
Fair Value	size=2>Buy	size=2>Sell
8.80	9.95	7.70

Pattern
Setups

Have a good trading day.

Key On NDX 100

BUY THE FEAR, SELL THE GREED

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