Risk Reward Short Zone

• February 15, 2002
• Kevin Haggerty

The
indices were up early, then went sideways, as
it was a program trader’s market yesterday with fast three- to four-bar big NYSE
tick moves and then back to go. The volume ratio and breadth were neutral for
most of the day, until the NDX
(
$NDX.X |
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Chart |
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PowerRating) had a knife move down on the 1:50
p.m. bar along with the SPX
(
$SPX.X |
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PowerRating). Of course, the NDX came out of a
symmetrical triangle that it had formed since 11:00 a.m., while the SPX was from
a 1-2-3 lower top. As you should know if you’ve been reading my commentary,
programs are most often initiated at key inflection points when the gang is
legging a program trade. It’s a great game.

NYSE volume was 1.26
billion, the volume ratio 41, and breadth minus 184. The biotechs at -3.0% and
networkers -3.1% were downside leaders, while health care +2.6% and gold +2.2%
led the upside. The 
(
$SOX.X |
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PowerRating) was off slightly at -0.8%, and the
drillers ended +1.2%.

The 60-minute trend
turned down yesterday for the NDX, but the SPX and
(
$DJX.X |
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PowerRating) are still
just above the lines. The DJX closed at 100.02, which is above both its 10-week
and 30-week moving averages and has outperformed both the SPX and NDX, which are
below both moving averages. Needless to say, it’s choppy with many stocks making
roundtrips above and below entry points. Stay with second entries and/or
pullback/retracements in the intraday trend. 

The DJX closed at 100.02,
just under its 233-day EMA of 100.27. Yesterday’s high was 100.52. The NDX
bumped up against its 21-day EMA of 1507.10, until the knife downside move to
close at 1475. The SPX was held back at the 55-day EMA of 1124.51, hitting an
intraday high of 1124.72. These are all good inflection points for the
shortside. The
(
SMH |
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PowerRating)s made an intraday high of 46.70 vs. the 233-day EMA of
47.10 and its 200-day EMA of 45.44. This is a good zone for shorts. The
(
SWH |
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Chart |
News |
PowerRating)s are bumping up against their head-and-shoulder neckline.

The VIX had a Change in
Direction day after five days down, and I see on the site we have the CVR 2 and
CVR 3 giving us a down directional bias. 

Stocks
Today

Depending on what the
program gang does, look for short opportunities in the index proxies, SMHs and
SWHs. 

On the longside, daily
chart setups are
(
ELBO |
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News |
PowerRating),
(
AZO |
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News |
PowerRating),
(
UPS |
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Chart |
News |
PowerRating),
(
COST |
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Chart |
News |
PowerRating),
(
SEBL |
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Chart |
News |
PowerRating),
(
FITB |
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News |
PowerRating) and
(
BAX |
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Chart |
News |
PowerRating).

On the shortside,
(
MEDI |
Quote |
Chart |
News |
PowerRating),
(
SEPR |
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Chart |
News |
PowerRating),
(
CELG |
Quote |
Chart |
News |
PowerRating),
(
INTU |
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Chart |
News |
PowerRating),
(
ISIL |
Quote |
Chart |
News |
PowerRating) and
(
BRCD |
Quote |
Chart |
News |
PowerRating). 

Have a good trading day.
My next commentary will be on Wednesday of next week, as I’ll be traveling.

Five-minute chart of
Thursday’s SPX with 8-, 20-,
60- and 260-period
EMAs

Five-minute chart of
Thursday’s NYSE TICKS