These Strategies Caught Both Trends
What Wednesday’s Action Tells
You
The market action was famine, then feast
yesterday, but was very trader-friendly. There was certainly enough going on
with end of the month, oil prices and the very negative Iraq bombings. This
was
mixed with a few economic reports, in addition to what I said in yesterday’s
commentary, that the rising prices on Tuesday were not as well supported by
the
volume ratio and breadth as one would have expected with a
1.61-billion-share
day.
The afternoon reversal left the SPX
(
$SPX.X |
Quote |
Chart |
News |
PowerRating) slightly green at 1095.46 and the Dow
(
$INDU |
Quote |
Chart |
News |
PowerRating) +0.3% at
10,117. The Dow declined 91 points to a 9994 intraday low, then reversed
+153
points to the 10,147 intraday high, closing at 10,117. That’s the kind of
travel
range that daytraders live for.
In the sectors, the
(
CYC |
Quote |
Chart |
News |
PowerRating) closed +1.4%
with
that last-hour run-up in the major indices. The biggest percentage reversal
during the day was the
(
SMH |
Quote |
Chart |
News |
PowerRating) as it traded up +3.0% from the 30.76 low to
31.67 and closing at 31.40, -0.8% on the day. The SMH traded 33.2 million
shares
vs. its 20.2 million average.
For Active
Traders
It was a knife down and then the same move
up, so
there was opportunity both ways yesterday for daytraders. I have included
the
(
SPY |
Quote |
Chart |
News |
PowerRating) chart, which shows the first-hour strategy. The SPY initially
opened
down, then the contra move ran to 109.87, which was the 200-day EMA level,
and
then reversed in the direction of the open. If you got short on that break
below
the 109.69 480 EMA, which was also a three-bar reversal, you got in
early.
The next entry was the opening reversal (OR)
below 109.54. There was some choppy action, and you probably exited on a
re-cross of the 12-month EMA at 108.91 (this corner). After the rally to
109.07,
the SPY made a new intraday low at 108.59, and this set up the combination
reversal pattern.
It was a 1,2,3 lower bottom reversal entry
above
108.66, and the RST entry was above 108.70. The moonshot carried up to
110.37,
closing at 110.10. The SPX -1.5 volatility band was 1082.85 vs. the 1082.17
low.
The RST long entry on the ESU4 was above 1082. It doesn’t get any better
than
that as it ran 16.5 points.
The 200-day EMA, we said, was in play both
ways
in yesterday’s commentary, and then the 108.91 12-month EMA came into play
for
the afternoon trend up. The “90% – 60% Rule” was in motion, and
after the
200-day EMA failure. Price resumed the direction of the open and your OR
below
109.54. I know most of you caught one of these trades, and maybe some of
you
got a piece of both trends.
The energy stocks started strong with the
related
news that the
(
OIH |
Quote |
Chart |
News |
PowerRating) gapped up on the open. As you see on the chart, it
was a
gap pullback (GPB) setup that eventually hit the 74.65 intraday high, and
then
the energy stocks faded in the last hour as the OIH closed at 73.95. The GPB
was
also to the 480 EMA where it rebounded on a wide-range bar with increased
volume. Stocks like
(
SLB |
Quote |
Chart |
News |
PowerRating) had a continuation move above the previous
high of
64.43 that ran to 65.35, and
(
WFT |
Quote |
Chart |
News |
PowerRating) above 46.69 to 47.10 before reversing
in
the last hour.
The
(
AHC |
Quote |
Chart |
News |
PowerRating) chart from Tuesday is included
as
promised, which shows the 1,2,3 double bottom and RST setups.
Today’s
Action
This is done Wednesday for Thursday, so I
know
not what the morning brings, but we do know that price is still around the
levels in play yesterday, and in the case of the
(
QQQ |
Quote |
Chart |
News |
PowerRating), the initial
overhead
mentioned yesterday remains the same. The major indices might get some travel range help
because it is month-end this Friday.
The SPX/future/SPY move late yesterday to a
new
intraday high ended in an RST sell below 1097.50 on the ESU4 and below
110.18
for the SPY. The better longside play on Thursday, if it develops, is some
percentage retracement to the SPY 108.59 low, but the first price action
zone is
the 200-day EMA.
Have a good trading day,
Kevin Haggerty
