Looking For Patterns

Friday reversed Thursday, but it had more volume (921,000,000 shares) and more program activity. The swing price percentage movement (the amount of total price change, both up and down, on an intraday basis) was extreme at 7.3%. It was a clear down trending day, with five waves down and not one higher high.

The techs stayed weak, with only three stocks in the Morgan Stanley High-Tech Index (MSH) finishing up on the day. If the tech names don’t get the job done, we’ll have short-term weakness until the first-quarter mark-up, which is mandatory to maintain investor confidence and keep this “new paradigm” going.

If weakness continues today, look to short the technology SPDRs [XLK>XLK] if the Nasdaq 100 (NDX) breaks below its Friday outside reversal low of 2053; or, short the regular SPDRS [SPY>SPY] if the S&P 500 (SPX) breaks below the Friday low of 1298.99. Try to enter either trade on the second time through to avoid getting caught in opening noise (or just enter half your normal position and wait for confirmation to enter the second half).

Target Stocks Of The Day  Daily pattern selection was very slim after Friday’s action, which should tell us something. Here are a few to look out for, though. Gap [GPS>GPS], USWeb [USWB>USWB], and Minimed [MNMD>MNMD] are narrow-range patterns that still haven’t resolved themselves in the direction of the trend. Look for entry above Friday’s high.

Knight-Ridder [KRI>KRI] broke out of an eight-week base on upgrades and news of increased revenues, trading 77% more than its average daily volume. Watch for continuation today.

Intraday patterns on five-minute charts that show promise are Lucent [LU>LU] American International Group [AIG>AIG], and Abbott Labs [ABT>ABT], which has pulled back from a five-year high.

Editor’s note: If you want to learn more about Kevin Haggerty’s trading strategies, click
on the link below to go to his new series of tutorial articles.