Roundtripper For The Daytripper

May 10, 2001
Kevin Haggerty

Just
another good day for the daytrader who
faded the overreaction and played the game on the side of the professionals. The
game is perpetuated by futures trading, media hype, and the almost-always-wrong
crowd psychology overreacting to economic numbers and analysts’ comments.
(
CSCO |
Quote |
Chart |
News |
PowerRating)‘s
was yesterday’s early hype. Please.

I have included the
five-minute charts of the Nasdaq 100
(
NDX |
Quote |
Chart |
News |
PowerRating) and S&P 500
(
SPX |
Quote |
Chart |
News |
PowerRating) to point out the contra trade entry
patterns, for your records. Do me a favor — you all put the book together and
send me a copy! The NDX opened down 2.3% at 1885 from the previous close of
1929.24. The index traded down to the intraday low of 1862.06 by 10:10 a.m.
which was -3.5% and right at the 1.28 Volatility Band level of 1859.

Remember, any time you see
big red or green, pre-opening, you should always do your volatility numbers so
you are ready to act if you get a reversal entry pattern at the volatility
levels. As you can see on the chart, the first entry pattern was an inside day
pattern with a top-of-the-range close. The second possible entry pattern was a
basic 1,2,3 pattern. The chart just shows you the entry pattern and the first
rush up to 1909. The actual intraday high was 1921.87. As with the SPX, your
entry was on the 10:20 a.m. bar. From that high, the NDX traded back down to
1868, closing at 1877.

Chart 1. Five-minute chart of
yesterday’s Nasdaq 100
(
NDX |
Quote |
Chart |
News |
PowerRating) with
8-,
20-, 60-
and 260-period EMAs.

The SPX hit its low of
1247.83 on the 10:15 a.m. bar, which was a narrow-range bar with a
top-of-the-range close and above the midpoint of the previous bar. You can see
on the chart that there were three bars with declining range in succession
before your entry, which is positive. The second entry was also on a 1,2,3
pattern.

The first rush took it up
to 1259.53 but it went on to make an intraday high of 1261.65 right around the
previous close, before declining to 1250, closing at 1256.

Chart 2. Five-minute chart of
yesterday’s S&P 500
(
SPX |
Quote |
Chart |
News |
PowerRating) with 8-,
20-, 60-
and 260-period EMAs.

Yesterday’s game was a
roundtripper for the daytripper. From Tuesday’s NDX close of 1929, it went -3.5%
to 1862, +3.2% to 1922, -2.8% to 1868, and then closed at 1876.21. This morning
at 7:45 a.m., it looks like the game starts up instead of down. The S&Ps are
+850 and the NDX futures +32. The indexes remain in overbought consolidation, so
it remains to be seen if the SPX can push up to the high end of its 127-132
resistance in the SPYs which includes the 200-day EMA.

Stocks
Today

(June
Futures)

Fair Value

Buy

Sell

3.80

5.10

2.50

On the short side, which I
didn’t mention because the Travel Range stocks are always both ways, if we turn
red obviously go right to the Travel Range stocks and the
(
QQQ |
Quote |
Chart |
News |
PowerRating)s.

Have a good trading day.

Chart 3. Five-minute chart of
yesterday’s S&P 500
(
SPX |
Quote |
Chart |
News |
PowerRating) with 8-,
20-, 60-
and 260-period EMAs.

Chart 4. Five-minute
chart of yesterday’s New York Stock Exchange ticks.

Roundtripper For The Daytripper

BUY THE FEAR, SELL THE GREED

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