Trap Door Alert

  • February 7, 2001
  • Kevin Haggerty

The Nasdaq 100
(
NDX |
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News |
PowerRating) ran 5.1% from Monday’s 2409 low to yesterday’s 2531 at
noon. The five-minute chart
looked like the Liberty Bell with the morning trend up and the afternoon trend
straight down to a low of 2457 or -2.9%, closing at 2473.


The OSX (which I call the
Bush trade) continued its strength, breaking above resistance. It looks like it
wants to challenge the 144 high.


Goldman Sachs pulled the
plug on
(
AMCC |
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PowerRating) and it mattered, as they have a first team analyst for the
semiconductors. The Semis were all strong green, pre-opening. Then AMCC backed
them off but they quickly came back and ran strong green during the early
uptrend in the NDX, but faded with the afternoon downtrend.


Even a couple of stocks in
AMCC’s sector,
(
ELNT |
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News |
PowerRating) and
(
IRF |
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PowerRating) turned green. At day’s end, 65% of your
Semi list remained green — but hardly. There
were some excellent buy patterns in the Semis during the morning rally. 


The damage was done to AMCC
right away as the stock opened at 56 3/8, down 19%. From
there, it traded to a low of 53 3/4, closing at 55.06 on just under double its
30-day average daily volume of 18.3 million. That,
of course, is the double Nasdaq count. 


The stock was taken right to a level
where there was some large-volume buy interest. We
will have to label these all-too-frequent occurrences the “Trashed Buy
Strategy,” because every one we have seen has come back after the carnage.


We start today with
(
CSCO |
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PowerRating)
and — for the wrong reasons — it brings us more volatility. With these
volatile intraday moves come substantial trading opportunities around the
inflection points so many of these stocks are currently trading at.


For example, the SMHs
opened yesterday at 53.62, recrossed the 50-day EMA of 53.78, and ran quickly to
a 55.69 high before fading and closing at 54.01, right back to the 50-day EMA.
Monday’s low of 52.53 was right on the .618 retracement level framed from 46.20
to 61.86. 

(March
Futures)

Fair Value

Buy

Sell

6.75

 8.05

 5.45 

Stocks
Today

I don’t see any big red on
the screen yet, but hopefully CSCO brings us some Trap Doors and Volatility
Bands on the downside, because that could be the best trade of the day. 

Also, if
there’s any kind of selling at all, scrolling your intraday charts for setups
will probably be the best thing you can do all day. Continuation entries will
probably not be available in a whole lot of stocks.

If
they come for the energies again — but they’ve had three up days — you can
look at
(
CHV |
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PowerRating),
(
APA |
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PowerRating),
(
APC |
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PowerRating) and
(
HAL |
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PowerRating).

Other
stocks are
(
MMM |
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News |
PowerRating),
(
EDS |
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News |
PowerRating),
(
IBM |
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PowerRating),
(
INTC |
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PowerRating),
(
MU |
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News |
PowerRating),
(
AVNX |
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News |
PowerRating),
(
ITWO |
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News |
PowerRating),
(
GSPN |
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News |
PowerRating), and
(
BAX |
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News |
PowerRating).

On
the short side, outside of the
(
QQQ |
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News |
PowerRating)s, look to the Chosen Ones that are
trading below their 200-day moving averages and also close to their lows, like
(
JNPR |
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Chart |
News |
PowerRating).

Have a good trading day.