When Price Brackets Inflection Points, There’s Opportunity
What Monday’s Action Tells You
Yesterday’s wide-range-bar reaction down took the
SPX
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$SPX.X |
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range before closing at 1022.79, -1.3%. The Dow
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at 9535, -1.1%, with the Nasdaq
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$COMPQ |
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(
QQQ |
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33.90, -2.0%.
The major sectors declined in line with the SPX,
except for the
(
OIH |
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(
RTH |
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KSS |
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then you have the
(
SMH |
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AMAT |
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-4.0%,
(
NVLS |
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(
XLNX |
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(
KLAC |
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volume that came in on the buy side in the last half-hour in a lot of the semis.
NYSE volume was lighter at 1.2 billion, volume ratio 19, and breadth certainly
negative at -1367. In the energy stocks,
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APC |
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(
BJS |
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+1.2%, both carrying through on increased volume and giving you trading setups.
Gold stocks like
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NEM |
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FCX |
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volume.
For Active Traders
The most significant thing about yesterday’s
market action is the major indices once again have retraced to inflection points
as they did before the rally from 1007 – 1040 for the SPX. These zones are much
better for traders of any time period because of the price action in either
direction that always occurs. The SPX closed at 1022.82 vs. its 1018.60 20-day
EMA, having hit a 1018.30 intraday low yesterday, then re-crossing to the upside
for the 1022.87 close. The Dow had an intraday low of 9502 vs. the 9492 20-day
EMA, then closed at 9535. The QQQs closed at 33.92 after an intraday low of
33.77 vs. the 20-day EMA just below at 33.64.
I have included the daily chart of the SMHs since
the 17.32 low which shows the initial 1,2,3 higher bottom and then the highly
correlated trend channel since that .786 retracement to 20.36 on Feb. 10. The
38.85 high was to the top of the trend channel, although this chart doesn’t show
that because of the incorrect 5 point spacing, while the low end is down around
33, with the 89-day EMA at 32.64. The SMH closed yesterday at 36.50, below its
20-day EMA of 36.66 after an intraday low of 36.26. The 50-day EMA is below at
34.66. As you can see, the SMH is forming a 1,2,3 lower top which would be
confirmed breaking the 35.39 low.
After the trend down day into the 2:30 p.m. ET
intraday low bar, the SPX made an attempt to rally from the 2.0 volatility band
zone, which was 1019 yesterday. Entry was above 1019.67, but it only carried to
1023.15 and closed at 1022.82. There were better opportunities in many of the
individual stocks because the opening gap down in the major indices took most of
the index travel range away.
The initial Trap Door in the
(
SPY |
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advanced .30 from entry, and the next long opportunities were from the 2.0
volatility band and 2:30 p.m. signal bar. Entry for the SPY was above 102.15 and
it ran to 102.60, closing at 102.55. Not much, but not shut out.
Today’s Action
For today, we have the 20-day EMA to work against
in either direction, and if there is an early rally, as I see the futures
trading slightly green at 8:30 a.m., we have yesterday’s gaps to work with for
possible short setups depending on today’s dynamics. For example, the SMH closed
at 36.50, just below the 36.66 20-day EMA, which is your initial focus both
ways. Then you have yesterday’s gap between Friday’s 37.30 low and yesterday’s
37.10 high. The gap for the SPY is 103.40 – 102.96 with yesterday’s close at
102.55, and the 20-day EMA just below at 102.39, so you’re definitely in a key
zone for some action either way. When the price brackets inflection points, you
will get opportunity, and in many cases, in both directions.
Have a good trading day,
Kevin Haggerty
