Still A Volatile Situation

Friday was an exciting day–the third down day in a row (including the initial close below the low of the high day last Tuesday). On again off again inflation numbers were enough to trigger profit-taking in the energy and basic stocks, which still finished the week up 5.9% and 5.3%, respectively.

After the plug was pulled just before 1:00 p.m. ET (and until just after 3:00 p.m. when the rally started) the market surrendered to program influence, fear, and a rush to the exits, especially by the fast money that has been front-running the institutional buying in basic industry stocks. The S&P 500 rallied to close above its midpoint, and with the late tech rally, the QQQs (the NASDAQ 100 SPDRS) made an outside day and closed near the top of their range.

Today, key off the QQQs if they can trade above Thursday’s high of 107 3/4. Look for intraday entry in any of the techs that show early strength. There will be more volatility ahead; keep your stops tight and only take trades when the buyers are showing they want to go in the direction you want to go, and that’s up (unless, of course, you’re on the short side).

Target Stocks Of The Day  Here are some continuation patterns in stocks in which buyers were evident on Friday: Concentric Network [CNCX>CNCX], Exodus Communications [EXDS>EXDS], Uniphase [UNPH>UNPH], Lucent [LU>LU], Motorola [MOT>MOT], Electronic Data Systems [EDS>EDS], Ascend Communications [ASND>ASND], and Security Dynamics [SDTI>SDTI].

There’s a good-looking narrow range setup in Nextlink Communications [NXLK>NXLK]. Bottom-fishing patterns that look like they might come to life include Sears [S>S]], which just re-crossed and closed above its 200-day moving average, Polaroid [PRD>PRD], and Sara Lee [SLE>SLE].

Program trading numbers  Buy: 9.02. Sell: 3.86. Fair Value: 6.37.

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