Slim (Jim) Pickings

  • November 3, 1999
  • Kevin Haggerty

Slim (Jim) Pickings Yesterday was a search-and-destroy day. The market took out Monday’s highs by 11:30 AM ET, after which the S&P 500 went sideways until just before 2:00 PM, when it reversed to the downside and took out Monday’s lows. What do they say? You have to take them up before you take them down?

The best thing that can happen today is to first go down and then go up
General Electric (GE) provided entry above 129 1/2 and was good for a 3 3/8-point move from there. American Express (AXP) also gave good entry trading through 150 and running to 151 1/2 before the move ended. Both stocks closed down on the day, but who cares? They were up when you needed them to be.

The best trade of the day was the afternoon trend trade, which was of course down, and took out Monday’s low in the S&P 500–see Figure 1, a five-minute chart of the spiders (SPY), below.

After taking out Monday’s 137 high and hitting 137 1/4, the spiders traded back below 137. A perfect 12-bar Slim Jim formed between 137 and 136 3/4. The 137 resistance was Monday’s high. When it couldn’t penetrate that, it took the path of least resistance and broke below 136 3/4 and traded to an intra-day low of 134 5/8. That’s equivalent to over 20 S&P 500 points. For those of you who trade the E-minis or the full S&P futures, your Slim Jim was between 1376.50 and 1372.40. The S&P futures broke to a low of 1352 as they took out Monday’s low.



Figure 1. S&P Depository Receipts (SPY), five-minute bar. A Slim Jim consolidation was followed by a sharp downside break as the market reversed on Tuesday. Source: Quote.com.

As I’ve mentioned before, the Slim Jim is a simple pattern that you will find on your five-minute charts. Many traders insist on making things complicated, rather than accepting something simple and clearly defined. The market dynamics had clearly turned negative in conjunction with the breakout of the Slim Jim. Save the chart as a reminder to constantly look through your charts for this excellent pattern setup on all your stocks. If you have to rely on one pattern, the Slim Jim is a good choice. For more information, review my Day Trading course and the TradingMarkets.com Guide to Conquering the Trading Markets.

The Semiconductor Index (SOX), Morgan Stanley High-Tech Index (MSH), and Bank Index (BKX) all finished green. The long bond continued its rally, with they yield down to 6.13 from 6.39 just seven sessions ago. We’ve pulled back two days, maybe we’ll get another pullback. The best thing that can happen today is to first go down and then go up. But right now (around 8:30 AM), the futures are up around 5 points.

Pattern Setups With the WLA-AHP merger talks, I would imagine most of the drugs will get a play. Watch Bristol Meyers [BMY>BMY] if it trades back above its 20-day exponential moving average of 74.82. Also watch Dell [DELL>DELL], Intel [INTC>INTC], Teradyne [TER>TER], JDS Uniphase [JDSU>JDSU] and Comverse Technology [CMVT>CMVT].



Program Trading Numbers
BuySellFair Value
8.205.606.75
If the market is going to be up today, they’ll run General Electric [GE>GE] and American Express [AXP>AXP] to get the averages up. GE closed at 128 7/16. Look for entry above Tuesday’s low of 129 1/4 (keep your stops tight right below that; these are different entries than you’re used to). AXP closed at 147 1/2, which is approximately a 50% retracement of its recent move. Again, an entry point would be above Tuesday’s low (148 1/2).

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.