Second Entries

  • November 5, 1999
  • Kevin Haggerty

Second Entries Yesterday’s late-afternoon fade was very similar to Wednesday’s. The highs of the day came in the first 15 minutes of trading. At 9:45 AM ET, the S&Ps were up 17 points, the NDX was up 42 and the Dow was up 93. The S&Ps finished up 8 and the Dow up 30. The NYSE Ticks were negative from 11:00 AM to the close, which was very strange.

Markets that are strong early and weak late are a sign of distribution
There was the same big pre-market hype in the S&P futures as there was on Wednesday. It’s as if the legendary Jesse Livermore (a famous trader of old, for those of you who like to read classic trading books) came back to take the futures up early, which would of course dictate a higher opening and also higher early stocks prices, and distribute his line of stocks to the eager buyers who saw the up activity on the tape. Markets that are strong early and weak late are a sign of distribution. Let’s hope in this case it’s just some portfolio adjusting before the economic numbers

The long bond rallied for the eighth straight day. Remember, three-, five- and eight-day pullbacks are key reference points. The yield is down to 6.09% after all of Greenspan’s (and his regional governors’) jawboning the market since August 26, when the yield was 5.9% and then went to 6.40%. And here we are back to 6.09%. So, what do you really want to do, Mr. G?

Yesterday’s stock market action was understandable, as the market rests after the rally and before the October Employment report this morning. Once again, you should be ready to trade the normal overreaction that usually follows the numbers. That’s no problem if you’re not long or short overnight, right?

Pattern Setups With all the futures activity, second entries have become the norm (I was aware of at least five stocks of the ones I mentioned). Be alert for a second entry if your stock is up on a gap or an early rush, then fades below the entry point, then trades back above the entry point when the trend asserts itself. That’s when you’ll get your best entries.



Program Trading Numbers
BuySellFair Value
7.805.406.50
Setups today: Solectron [SLR>SLR], Texas Instruments [TXN>TXN], Computer Associates [CA>CA], Exodus Communications [EXDS>EXDS], Harmonic [HLIT>HLIT], Omnipoint [OMPT>OMPT], Merck [MRK>MRK], Johnson & Johnson [JNJ>JNJ], Amgen [AMGN>AMGN] and Tandy [TAN>TAN], which has gone into a four-bar narrow-range pattern after a two wide-range bars to new highs. It’s one they love to run and gun.

Editor’s note: A friendly Employment report has the S&P futures up around 20 points at 9:00 AM ET. The unemployment rate fell to a new 30-year low of 4.1% and non-farm payrolls rose 310,000 in October.

If you want to learn more about Kevin Haggerty’s trading strategies, click on the link below to go to his series of tutorial articles.