Position Size And Tight Stops!

The
Nasdaq 100
(
NDX |
Quote |
Chart |
News |
PowerRating)
reversed Friday’s action
which
had gapped up, and then came back as the professionals profitably covered shorts
and got long before taking the index up 2.4% for an excellent unwind of
positions. 


Yesterday, the NDX opened
slightly higher at 3346, ran up and took out Friday’s high of 3355. It then
reversed that high with a 1-2-3 top pattern and also a 1-2-3 close (for those of
you that attended my seminar).
After
reversing Friday’s high, the NDX 100 traded down the rest of the day to an
intraday low of 3285, which was -2.2%, before closing at 3290.62. Friday’s low
of 3275.07 becomes a downside pivot point where acceleration can occur. 


The S&P 500 diverged
from the NDX 100 and rallied to its intraday high of 1438.46 on the 1:10 p.m.
bar vs. the NDX 100, which hit its high on the 10:15 a.m. bar before heading
south. The best of days occur when both these averages are in sync, so that
should have put you on red alert. The S&P 500 got within just 0.4% of the
.618 RT level of 1444, and then sold off from a three-bar narrow-range pattern
down to an intraday low of 1427.72 before closing at 1432.20.
The
key point is that you had divergence of the NDX 100 and S&P 500 while the
S&P 500 hit the .618 RT zone which puts you on alert, as it almost always
offers resistance when approached the first time. 


The Dow danced to its own
drummer, advancing 1.5%. After recently recrossing the 200-day SMA on two
wide-range bars, it has consolidated for the past five days and closed yesterday
above the past 35 days’ highs, so you
(
DIA |
Quote |
Chart |
News |
PowerRating)
s players are on top of
that. 


I prefer the NDX 100 and
S&P 500 because the Dow lacks consistence of movement, as there are too many
cyclicals in the index and they don’t trend as well for persistent daytrading
opportunities. Yesterday’s early rally was enough to get trade-through entry and
multipoint moves in
(
MERQ |
Quote |
Chart |
News |
PowerRating)
,
(
SEBL |
Quote |
Chart |
News |
PowerRating)
,
(
SANM |
Quote |
Chart |
News |
PowerRating)
,
(
VRTS |
Quote |
Chart |
News |
PowerRating)
and
(
NTAP |
Quote |
Chart |
News |
PowerRating)
, but as you can see, most of them finished in the bottom of the
range. 


Many will be watching the
TV screen today for the election and there will probably also be erratic
movement in the averages today, so watch your position size and only take the
clearly defined setups. Don’t force it.














face=”arial, helvetica”>(December Futures)


Fair
Value


size=2>Buy


size=2>Sell


9.75


11.05

8.45


Pattern
Setups


There really are slim pickings, and
your intraday patterns in addition to the contra rally will probably make your
day. Some names to take a look at are
(
ARBA |
Quote |
Chart |
News |
PowerRating)
(above Friday’s high),
(
CHKP |
Quote |
Chart |
News |
PowerRating)
,
(
MERQ |
Quote |
Chart |
News |
PowerRating)
(if there’s any continuation),
(
TXN |
Quote |
Chart |
News |
PowerRating)
(if it breaks
out of the small dynamite triangle),
(
TER |
Quote |
Chart |
News |
PowerRating)
and
(
AIG |
Quote |
Chart |
News |
PowerRating)
.
And
also in the drug area,
(
AZA |
Quote |
Chart |
News |
PowerRating)
,
(
SGP |
Quote |
Chart |
News |
PowerRating)
and
(
LLY |
Quote |
Chart |
News |
PowerRating)
.


Shorts today: Look to some of the
chosen ones that finished in the bottom 25% of their ranges yesterday. If they
take out their lows today, they could give you a quick airpocket downside move.
The same with the QQQs. 


Be quick to take profits and keep
tight stops because it will be erratic movement.


Have a good trading day.

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