Trading Over-Reactions Continues To Be Profitable For Traders
What Thursday’s Action Tells
You
The Dow
(
$INDU |
Quote |
Chart |
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PowerRating) hit its intraday low of
10,419 (DIA, 104.60) on the 10:30 a.m. ET bar before reversing +143 points
to a
10,562 high and 10,553 close, +0.6% on the day. The SPX
(
$SPX.X |
Quote |
Chart |
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PowerRating) hit
a
magnet number again, 1190.51, after reversing off of the 1173.78 low and
closed
at 1189.24, +0.5%. Needless to say, those of you who trade my First-Hour
strategies had a moonshot day, and to top it off, we got carry-through on
the
energy stocks that started the day with excellent daily chart setups after
Wednesday’s reversal off of the 89-day EMA (12/09 commentary). The
(
OIH |
Quote |
Chart |
News |
PowerRating)
finished +2.0%.
NYSE volume expanded to 1.62 billion shares,
with
the volume ratio 59, and breadth +257, but breadth had been more than -1400
at
one point during the day.
On the red side, the
(
SMH |
Quote |
Chart |
News |
PowerRating)
finished -1.4%,
but was -3.5% after hitting its 31.89 low, which set up the best trade of
the
day. The other primary sectors advanced in line with the SPX and Dow. The
Nasdaq
(
$COMPQ |
Quote |
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PowerRating) lagged the other major indices at +0.1%, while the
(
QQQQ |
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were +0.6% despite the SMH decline.
For Active
Traders
We got the knife down on the opening, so the
First-Hour trading strategies got traders in almost at the lows of the day.
The
SPX gave you a 1,2,3 Higher Bottom entry above 1175.24 after the 1173.76
10:30
a.m. intraday low, which was also right at the -1.28 volatility band of
1173.35.
After the entry, the SPX re-crossed the 20-day EMA at about 1177.25, trading
up
to 1186.24 where there was a three-bar sell reversal below 1185.34, which
for
those of you who know, was also an RST sell entry. Price only traded down to
1181.98, then re-crossed the 240 EMA (five-minute chart) and made a surprise
run
to the 1190.51 intraday high, closing at 1189.24.
The SMH opened down -2.3% to 32.27 and traded
down to the -2.0 volatility band of 31.97, making a 31.89 low. At that
point,
the SMH was -3.5% on the day and -7.7% in two days/one hour. The SMH went
into a
Slim Jim with a 32.08 high, then broke out, trading to 33.03 (the previous
day’s
close), which was +3.0% from entry, provided you had not entered earlier.
The
31.89 low was right at that 31.50 – 31.75 zone (12/09 commentary) and major
support, in addition to the lower channel line from the 27.78 low (see
chart).
The volume surge off this SMH price zone was significant. On the day, the
SMH
traded 53.4 million shares vs. a 21.9 million average.
Today’s
Action
Yesterday’s
(
SPY |
Quote |
Chart |
News |
PowerRating) and
(
DIA |
Quote |
Chart |
News |
PowerRating) reversals
came from the 20-day EMA levels, and the SPY continues on a closing basis
within
a 119.33 – 117.42 range over the past 19 days. Trading the overreactions
continues to be very profitable for traders, and that means the key time and
price zones. The DIAs closing range over this trading range period is just
105.84 – 104.33. Net net, it is just a 1.6% closing range for the SPY and
1.4%
for the DIAs.
The SPX 1190 – 1195 anticipated resistance is
the
current zone of contention, but should be taken out as the SPX moves to the
1254
price zone in the current fifth wave of this bull cycle since the October
2002
lows.
Next week has several different time ratios, if
there are to be lower prices, it should come next week, but the bias is clearly
up into year-end, if and after any more downside
pressure
Have a good trading day,
Kevin Haggerty
