Trap Doors, Thank You

February 6, 2002
Kevin Haggerty

The
best move in the indices yesterday was
from the carryover sell emotion which set up Trap Doors early on. The
(
SPY |
Quote |
Chart |
News |
PowerRating)s
held the recent low of 108.40, which is a .38 retracement zone to the September
low, with an intraday low yesterday of 108.53. You got an inside-bar reversal
entry, and the SPYs rallied to 110.19 by the 10:40 a.m. bar. From the .618
retracement to the 108.53 low, the SPYs rallied to a new intraday high of
110.50, then declined into the close at 109.17. The
(
QQQ |
Quote |
Chart |
News |
PowerRating)s had the same type
of pattern.

NYSE volume was heavy at
1.761 billion, a volume ratio of 28, and breadth negative by 472. That still
didn’t prevent two good longside trades. The
(
$NDX.X |
Quote |
Chart |
News |
PowerRating) was -1.1%, while
the
(
$SPX.X |
Quote |
Chart |
News |
PowerRating) was off 0.4%, and the Dow was basically a push. Gold
continued its upside run, and some of the biotechs finished in the top 20% of
the NDX 100, probably primarily on short covering and a little bottom
fishing.

We have gotten some good
trades with two bounces off the .38 retracement zone in the SPYs, which is
108.74, in addition to the two excellent short trades breaking below the 112
inflection point. Yesterday, the SPY closed at 109.17. The next levels down
after 108.74 are the .50 at 105.89 and .618 at 103.04. For the QQQs, it’s the
.50 retracement at 35.22 and .618 at 33.33.

Some of you have e-mailed
me and said you get slightly different numbers in the retracements or moving
averages. That is because data vendors use different prices. Some use composite
numbers and some primary exchange. Also, others, like AT Financial, use
after-hours prices, which is basically useless, especially when, for example, a
stock trades down a half a point after-hours on no volume. Bloomberg and PC
Quote have the same pricing, while AT and Advance GET seem to be in sync with
their closing prices. You just have to know what your vendor is using. Also, bad
ticks are a way of life with the advent of ECNs. The vendor that can correct bad
ticks the same day will win the traders’ business.

We come into this morning
still short-term oversold, especially the Nasdaq. Any early red will set up
pretty good reflex opportunities.

Stocks
Today

The reason I gave you a
whole lot more stocks today to look at is because they’re all different
patterns, whether they be pullbacks, 180s, consolidations, but they all have
symmetry in different ways. They all indicate buying pressure, and most of them
are high relative strength stocks up at the top end above the moving averages.
So, save them, take a look at them, and you should start to be able to do this
yourself every day with a whole slug of stocks.

Have a good trading day.

Five-minute chart of
Tuesday’s SPX with 8-, 20-,
60- and 260-period
EMAs

Five-minute chart of
Tuesday’s NYSE TICKS

Additional
resources from Kevin Haggerty:

Click
here for a FREE 1-week trial to Kevin Haggerty’s Volatility Bands

To learn exactly how to trade like Kevin
Haggerty, click
here.

Below are the tools that Kevin uses on the TradingMarkets
Indicator page. To learn more about how to use them, click
here.

S&P
500 Index Screen

Nasdaq
100 Index Screen

3
Day wake up call

Change
in Direction

Trap Doors, Thank You

BUY THE FEAR, SELL THE GREED

Quick Links

Company Info

Contact

Company Resources