Trade The Overreactions This Week
What Tuesday’s Action Tells
You
The market action was certainly erratic, but
it
was trader friendly, starting with the trade-through long entries in many of
the
energy focus list stocks, like
(
CVX |
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PowerRating),
(
RIG |
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PowerRating) and
(
SLB |
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PowerRating). This move
was
over by about 10:30 a.m. ET and most of the energy stocks headed south with
the
major indices, but not before you had made a good chop. The internals on
Monday
were out of sync with a volume ratio of 70 and breadth just +196 with the
SPX
(
$SPX.X |
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PowerRating) +0.6%. This, as I said yesterday, was due to a narrow
concentration of big-cap stocks. The NYSE volume yesterday was 1.51 billion
shares vs. Monday’s 1.44 billion, but the volume ratio was 27 and
breadth -1100,
so the morning reversal picked up some steam. You don’t have a clue how much
was
program-expiration related, the only thing you can be fairly sure of is
erratic
price movement into Friday.
The early leading sectors yesterday were the
brokers and energy. At day’s end, the
(
OIH |
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PowerRating) reversed to -1.4% and the
XBD
remained green at +0.3%. The semis led the red team with the
(
SMH |
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PowerRating) -1.7%
having made the 33.81 intraday high on the first bar, reversing at the 240
EMA.
The biotechs are not a real trading sector as it really is just a
company-by-company crapshoot to be daytraded only and never taken home
overnight
unless you have an option strategy.
We started yesterday’s trading with the
(
SPY |
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PowerRating)
resistance at 121.40 – 121.50 (03/14 commentary), and that was the reversal
zone
yesterday as the SPY hit 121.46, formed a
Flip Top and
1,2,3 Lower Top, then
headed south to the bottom of the trend channel with a 120.10 low and 120.14
close. This set up the RST zone after taking out Monday’s 120.28 low.
You will certainly do better this week
trading
overreactions, not intraday trends which can be very erratic.
Have a good trading day,
Kevin Haggerty
P.S. I will be
referring to some charts here:
www.thechartstore.com in the future.
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