Trade Duration Vs. Trade Frequency

• November 25, 2002
• Dave Floyd

As the markets embark on the shortened holiday week,
will the seemingly perpetual grind higher continue, or was Friday’s pullback in
the afternoon a sign of some further weakness? As of right now it appears as
only a blip on the radar screen. Most indices, as well as the
SOX, the cheerleader for the recent rally,
while extended, look pretty solid technically.

Friday’s action brought little in the way of short-term volatility spikes, a
condition I feel is becoming the norm rather than the exception, so it was a day
that I continued to play more from the trade duration side versus trade
frequency. One common trait, however, is that just like markets that are
incredibly volatile intraday, the best sectors to play are always the ones with
the speculative money chasing them. The recent sessions have proven no
different. The flying pigs of the semiconductor index offer great liquidity,
orderly price action and decent range. It is there where I found the best trades
on Friday. I suspect until the semis and telecoms fall off the speculative money
list, this will continue to be an advantageous sector to play. 

Most of the semis are coming up to some key levels on their daily charts, and
with that, should offer some great intraday setups.

AMD:  $6.99, 50% retracement off August
high

MU:  $15.85, 60% retracement off August
high

TXN:  $19.28, 40% retracement off August
high

SOX:  365, August high

Naturally, some of the other semis, AMAT, INTC, MXIM
and QLGC are at or above their August
highs. However, since I primarily trade NYSE stocks, these do not show up on my
list of candidates.

So, as we head into today, keep an eye on these stocks on the 5- and
15-minute charts for your entry cues. The best plan of attack is to draw these
levels right on the chart itself. Remember:

1. Buy the pullbacks in the uptrends
2. Sell short the rallies in the downtrends.

Just because I have extended my time frame does not mean that I adopt a new
risk profile. The key to this game is longevity. Always put the odds in your
favor. If their is no edge, sit on your hands. As Don Miller said in his

column on Friday, perhaps you may need to reduce your expectations. Lowered
expectations or not, this will truly be an environment that will punish those
who trade impulsively. No edge; no trade.

Key Technical
Numbers (futures):

 

As always, feel free to send me your comments and
questions. See you in TradersWire.

Dave