Rotation

  • January 5, 2001
  • Kevin Haggerty

Volume
exceeded 2 billion shares, with
a volume ratio of 48. Advancers led decliners by +237. All three averages
finished down small, relative to Wednesday’s explosion. 


All three major games, the Nasdaq 100
(
NDX |
Quote |
Chart |
News |
PowerRating), S&P 500
(
SPX |
Quote |
Chart |
News |
PowerRating) and Dow, closed slightly down on narrow-range
opposite days, but all the action was played in the top of yesterday’s range. 


For example, the NDX 100’s
high to low on Wednesday was 2531 to 2087. Yesterday, it was 2547 to a 2432 low.
That means it only retraced 22% of the 444-point range from Wednesday. 


The expansion of volume to
over 2 billion included tremendous rotation from the defensive issues to tech,
financial services and consumer cyclicals, including a big 4.3% advance in the
Dow Jones Transportation Index.


The narrow-range days set
up a trading plan going into today’s game. Yesterday’s close for the NDX was
2460 and the low was 2432, which is your short pivot point if it decides to
retrace more of Wednesday’s range. 


Seeing that the Fed cut the
discount rate another 1/4 point after the close, that might not happen. Your
upside alert is, of course, yesterday’s high of 2547.


At 7:35 a.m. this morning,
both the SPX and NDX futures were quiet, so we were unsure of any gap on the
news. I don’t want to wait until the
(
QQQ |
Quote |
Chart |
News |
PowerRating)s trade above yesterday’s high
which is 63 5/8, so I go to my intraday charts to see where I can get early
entry.


I see on my 5-minute chart
that the QQQs closed at 61 5/16 in a narrow-range triangle, with narrow
moving-average bands. The 8-period moving average of the highs is 61.46 and the
8-period moving average of the lows is 61.22.


The breakout of these bands
is also a breakout of the triangle, so that is the first possible early entry,
depending on the market dynamics at the time. The
swingpoint high of the triangle is 62, so that is the second early long entry,
and the third is above yesterday’s 63 5/8 high.


If you get in early, I hope
you sell some of your position to the traders who only buy breakouts, and let
the rest ride while you keep raising your stop levels. The
second short entry is below yesterday’s low of 60.23, and the first was below
the moving average lower band of 61.22. You
should do the same exercise with the S&P 500 and SPDRs. 


I will expand on these
early entry strategies at my Naples
seminar.














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


Fair
Value

size=2>Buy

size=2>Sell


14.60


16.00

13.00


Stocks Today


In the semis,
(
ALTR |
Quote |
Chart |
News |
PowerRating) on a recross
of the 50,
(
TER |
Quote |
Chart |
News |
PowerRating) above Wednesday’s high,
(
INTC |
Quote |
Chart |
News |
PowerRating) above Wednesday’s high,
and
(
AMAT |
Quote |
Chart |
News |
PowerRating) on a recross of the 50. Also, focus on all of the other semis on
your intraday charts, especially
(
TXN |
Quote |
Chart |
News |
PowerRating) which is pushing up against its
200-day moving average.


Some of the momentum stocks that set
up are
(
VSTR |
Quote |
Chart |
News |
PowerRating),
(
VRSN |
Quote |
Chart |
News |
PowerRating),
(
VRTS |
Quote |
Chart |
News |
PowerRating),
(
AMCC |
Quote |
Chart |
News |
PowerRating) (above Wednesday’s
high) and
(
CIEN |
Quote |
Chart |
News |
PowerRating) (by using a 200-day EMA as your pivot point). Also,
you can focus on
(
JNPR |
Quote |
Chart |
News |
PowerRating) trading above its 20-day EMA.


The two plain-vanilla blue-chip techs
that look good to me right now are
(
ORCL |
Quote |
Chart |
News |
PowerRating) and
(
CSCO |
Quote |
Chart |
News |
PowerRating). Old
habits die hard — they want to get back into them. I
see some activity in the storage stocks again, which had been oversold. They
don’t set up on the daily charts, but focus on
(
EMC |
Quote |
Chart |
News |
PowerRating) and
(
NTAP |
Quote |
Chart |
News |
PowerRating). 


Have a good trading day.


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