Traders ride energy, semis and gold
Kevin Haggerty is
the former head of trading for Fidelity Capital Markets. His column is
intended for more advanced traders. Kevin has trained thousands of traders
over the past decade. If you would like to be trained by him,
ext. 1.
2006 started the year with energy and
gold as the OIH was +7.3% and the XAU +8.0% the
first two days before giving back 2.0% yesterday (see 1/3 commentary). The energy
stocks were the initial focus because crude (CLH6) was in a 1,2,3 double bottom
pattern at its 200-day EMA, which is now 58.90. It hit 57.50 on 11/30/05, rallied
to 63.45 on 12/13/05, then declined to 58.10 on 12/21/05. The double bottom follows
the decline in crude oil from 70.70 on 09/01/05. Because of the 1,2,3 double
pattern setup, a trader would look to play retracements in the OIH and related
energy stocks, which is exactly what happened. Nothing cerebral about it–just
taking what the market gives you. No predictions involved, just fact (see
charts: CLH6 and OIH).
The SPX closed flat yesterday at 1273.48 with the Dow the same
at +2 points to 10,882. The only green move of note was the SMH atÂ
+2% on a third straight up-day and is +6.2% so far in 2006. The OIH is +5.3% and
XAU +5.9% year-to-date. NYSE volume was 1.78 billion shares, with the volume
ratio neutral at 50 and breadth +337. The SPX remains in the same trading range
that began 11/21/05 (see SPY chart).
There are only three things that an index can do when it reaches a significant
price zone, and that is to reverse, blow right through the zones to the next
level or consolidate in a range, which is not good for the long synthetic
straddles due to time decay with no adjusted volatility moves. However, there is
plenty of time remaining.
The same empty suits who said the inverted yield curve was different in January
2000 are saying the same thing now, as the curve is again slightly inverted and
this has almost always preceded a softness in the economy. But far be it for
these ‘suits’ to discuss that on TV this morning as they as they droned on about
some analysts that got fired from Morgan Stanley in the strip club trip.Â
Give us a break Squawk Box–get back to the business side of life.
There is no question where the early 2006 action is for
daytraders, but until we see something change that is where we should remain
Have a good trading day,
Kevin Haggerty
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