Powerful Reversal Strategies In Any Market
What Tuesday’s Action Tells
You
After the early down on the first four bars,
the
(
SPY |
Quote |
Chart |
News |
PowerRating) took out the previous day’s 104.51 low, which set up a Trap Door
trade, then reversed the 104.51 low, never looking back, but scratching its
way
to a 105.43 intraday high, and also to new rally highs, then closing at
105.27,
right on the previous day’s high. I say scratched its way to new highs
because
NYSE volume was only 1.2 billion, volume ratio just 54, and breadth +417
which
is not what you’d call a power move to new highs. The SPX
(
$SPX.X |
Quote |
Chart |
News |
PowerRating)
closed
at 1049.48, +0.4%, while the Dow
(
$INDU |
Quote |
Chart |
News |
PowerRating) 9813 and Nasdaq
(
$COMPQ |
Quote |
Chart |
News |
PowerRating)
1943, were both +0.5%. The
(
QQQ |
Quote |
Chart |
News |
PowerRating)s closed at 35.36, +0.3%, with the
(
SMH |
Quote |
Chart |
News |
PowerRating)s at new highs, closing at 38.95, +1.1%.
The leading percentage gainers of the big cap
semis,
(
NVLS |
Quote |
Chart |
News |
PowerRating) +1.3% and
(
KLAC |
Quote |
Chart |
News |
PowerRating), +1.1%, both traded well below
their
average daily volume, while
(
INTC |
Quote |
Chart |
News |
PowerRating) announcing earnings after the close
traded 20% more than its average volume. The media was crowing about
(
MER |
Quote |
Chart |
News |
PowerRating)
and
(
MOT |
Quote |
Chart |
News |
PowerRating) earnings, and needless to say, both closed in the red (MOT
falls
in the category “who cares?”). MER closed at 58.04 and is of no
intraday long
interest to this corner until a minimum of 56.26 which is the current 20-day
EMA
and then 54.47 which is the 50-day EMA, in addition to a five-day filter I
use
for MER which was coincident Monday with past short-term highs. If it
doesn’t
pull back to the levels and trades above Monday’s 59.20 high, then be my
guest
on the continuation entry and eleventh day of this retracement rally after
hitting its 50-day EMA around 53.05 on Sept. 30. Also, the 59.20 high is
right
at the .618 retracement level to the January ’01 bull market high of 80.
FYI:
MER has gained +110% since the October 2000 low of 28.21, so the brokers are
not
sneaking up on anyone. One should certainly be ready for any good intraday
short
setups prior to MER backing off from this zone, earnings or no
earnings.
For Active
Traders
Continuing the decline from Monday’s 105.27
high,
the SPY took out Monday’s 104.51 intraday low on the first four bars
yesterday
on your five-minute chart which set up a Trap Door long trade, which was
also an
RST entry because the 9:45 a.m. ET signal bar low of 104.39 is a significant
enough decline from 105.27 in that short time frame to qualify, in addition
to a
positive divergence in several momentum indicators. Entry was above 104.57,
which also re-crossed the previous day’s 104.51 low and the 240 EMA, so you
had
more reason to take the trade.
The SPY never saw 104.39 again, but it was
choppy
until the acceleration move up, starting on the 1:45 p.m. bar. Because of
the
choppy trading after the entry, many traders would have managed the trade
differently, with some exiting and entering several times, all depending on
your
style and risk profile, so that discussion is not needed.
I have included in today’s commentary charts
of
both the SPY and E-minis which label the trade. The RST entry was also your
Trap
Door entry. On the E-mini, there was also a Kings & Queens entry above
1040.75
from a 1,2,3 double bottom after the 1039.50 low. FYI: 1,2,3s and RSTs are
powerful reversal strategies in any time frame in any market, regardless of
what
you are trading.
For Today
This morning the pre-market futures are being
marked up as I do this at 8:00 a.m., with the Dow +29, S&Ps +5, and
Nasdaq +14.
There is INTC fever as it was trading up on Instinet above 32.50. Go back
and
pull out the commentary when the same group of analysts, after INTC rallied
to
16.55 and then pulled back to 13.42, were pounding the table about it going
lower because of valuation, etc., etc., etc. Now the price target game
starts
again, which will fool most of the people once again. You can bet some of
the
largest mutual funds will try and maximize it into month’s end. (See my Oct.
13
commentary.) FYI: This Friday is the third Friday of the month which is
option
expiration again, so there will be things for the daytrader to capitalize
on.
Have a good trading day,
Kevin Haggerty
Â
