You Were Ready For The Semis, And They Didn’t Disappoint
What Tuesday’s Action Tells
You
The SPX
(
$SPX.X |
Quote |
Chart |
News |
PowerRating) had a lower high and
lower low, 1124.37 vs. the previous day, but did have a higher close at
1134.41,
+0.4%, while the Dow
(
$INDU |
Quote |
Chart |
News |
PowerRating) was +0.2% to 10,395. NYSE volume expanded
a
bit from Monday to 1.37 billion, with the volume ratio 64 and breadth just +289.
Toward the end of the quarter, it is not unusual to see this more frequently
as
money is more apt to go to the Generals’ largest holdings, so there can be a
concentration of volume in a smaller amount of stocks.
It was a trader-friendly day with some defined
entries for the major indices, but our two focus sectors were the leaders,
as
the semis had a big day with the SMH closing at 36.80, +3.0%, and the
brokers
(XBD) finishing at +1.4%. You should not have been surprised at volatility
in
either the semis or the brokers because you had anticipated it.
The SPX remains in a 10-day flag pattern
consolidating the 18-day gain from 1076 to 1142, so it is in a favorable
technical pattern if it holds for the “gang” to break it out into
the June
month end. One of the Generals’ major holdings,
(
MMM |
Quote |
Chart |
News |
PowerRating), was taken to new
all-time highs again yesterday, closing at 89.62.
Many individual semis didn’t have a
significant
volume increase above their average volume whereas the SMHs did, trading
25.5
million, the most up-volume since 05/10. Why take individual stock risks
when
you can get long/short exposure to the semis through the SMHs? Also, it is
much
easier for hedge funds to cover shorts.
For example, large price moves on less volume
in
the semis were
(
TER |
Quote |
Chart |
News |
PowerRating) +5.6% on 91% of its average volume,
(
NSM |
Quote |
Chart |
News |
PowerRating) +3.7%
on
83%,
(
KLAC |
Quote |
Chart |
News |
PowerRating) +3.6% on 87% and
(
NVLS |
Quote |
Chart |
News |
PowerRating) +3.1% on 78% of its average
volume.
(
AMD |
Quote |
Chart |
News |
PowerRating), +4.0%, and
(
MU |
Quote |
Chart |
News |
PowerRating), +1.0%, did trade with 50% or more
above
average volume.
(
BRCM |
Quote |
Chart |
News |
PowerRating) broke out of its trading range since January on
30%
above its average volume and was +5.0%.
Another price/volume thread from yesterday
was
the telecom sector as there is a conference going on, so many of the smaller
hedge funds are back trading the low-priced stocks in that sector, like
(
JDSU |
Quote |
Chart |
News |
PowerRating),
(
CIEN |
Quote |
Chart |
News |
PowerRating) and
(
LU |
Quote |
Chart |
News |
PowerRating). It would be more interesting if they
break
(
JNPR |
Quote |
Chart |
News |
PowerRating) out of the 21.80 – 20 box right at its 200-day EMA.
Â
|
|
6/16 25.5pt’> 6/17 25.5pt’> 6/18 25.5pt’> 6/21 |
 |
 |
 |
 |
1139.08 |
9.0pt’>1135.05 | ||||||||||||
|
|
 |
12.0pt’>1124.37 | |||||||||||||||||
| Â |
12.0pt’>1134.41 | ||||||||||||||||||
| Â |
12.0pt’>+0.4 | ||||||||||||||||||
| Â |
12.0pt’>10.7 | ||||||||||||||||||
| Â |
12.0pt’>94 | ||||||||||||||||||
| Â |
12.0pt’>10395 | ||||||||||||||||||
| Â |
12.0pt’>+0.2 | ||||||||||||||||||
| Â |
12.0pt’>1994 | ||||||||||||||||||
| Â |
12.0pt’>+1.0 | ||||||||||||||||||
| Â |
13.5pt’>36.65 | ||||||||||||||||||
| Â |
12.0pt’>+1.4 | ||||||||||||||||||
| Â |
 |
12.75pt’>Â | |||||||||||||||||
| Â |
12.0pt’>1.37 | ||||||||||||||||||
| Â |
12.0pt’>848 | ||||||||||||||||||
| Â |
12.0pt’>475 | ||||||||||||||||||
| Â |
12.0pt’>64 | ||||||||||||||||||
| Â |
12.0pt’>56 | ||||||||||||||||||
| Â |
12.0pt’>57 | ||||||||||||||||||
| Â |
12.0pt’>1775 | ||||||||||||||||||
| Â |
12.0pt’>1486 | ||||||||||||||||||
| Â |
12.0pt’>+289 | ||||||||||||||||||
| Â |
12.0pt’>+256 | ||||||||||||||||||
| Â |
 |
12.0pt’>Â | |||||||||||||||||
| Â |
12.0pt’>+3.0 | ||||||||||||||||||
| Â |
12.0pt’>+.03 | ||||||||||||||||||
| Â |
12.0pt’>+1.4 | ||||||||||||||||||
| Â |
12.0pt’>-0.7 | ||||||||||||||||||
| Â |
12.0pt’>+0.7 | ||||||||||||||||||
| Â |
12.0pt’>-0.3 | ||||||||||||||||||
| Â |
12.0pt’>+1.0 | ||||||||||||||||||
| Â |
12.0pt’>+0.2 | ||||||||||||||||||
| Â |
12.0pt’>-0.3 | ||||||||||||||||||
| .75pt’>XAU | .75pt’>Â +0.6 | .75pt’>+0.9 | +2.0 | .75pt’>+1.2 |
^next^
For Active
Traders
You were ready for the semis, and they didn’t
disappoint, as the
(
SMH |
Quote |
Chart |
News |
PowerRating) gave us an excellent trade with sequence and
symmetry. I have included two charts to highlight the trade
progression.
Yesterday’s 35.67 low set up an RST long
pattern
after it took out Friday’s 35.81 low. Those of you that have learned the RST
anticipated that going into Tuesday’s trading. You had also anticipated the
Fib
extensions of the last significant leg up (five-minute timeframe) from 35.81
to
36.50, and as you can see, the 1.272 Fib extension of the XA leg is 35.62.
You
also knew that 35.67 was in the three-month 2.0 standard deviation band
zone,
which is 35.25. You had an RST setup with sequence.
The RST setup entry was above 35.75, and this
ran
to 36.23, which is the . 786 retracement to 36.50, the 240 EMA and the 1.0
volatility band, which was 36.27. It was also the 10:00 a.m. ET bar, which
is a
key reversal period in first-hour trading. This was a +1.3% move from the
35.75
entry.
The contra move from 36.23 went to 35.82 vs.
the
.618 retracement to 35.67 of 35.88. Price resumed the direction of the open
(90%
– 60% Rule). The initial opening run to 36.23 was on good volume, while the
contra move down was on light volume, so if you missed the RST, you got a
.618
retracement entry above 35.89. If you didn’t take either one, and you have
my
strategy materials, then you had better review them again.
It was trend up after the .618 retracement entry
that ran to 36.50. This was the 1.272 Fib extension of the leg down to
35.82. It was also the 1.28 volatility band level, in addition to the 480 EMA
(equivalent to the 20 EMA on the 120-minute chart). This sequence was enough
to
initiate a retracement to 36.15, the 60 EMA (20 EMA on a 15-minute chart),
and
was also the .50 retracement to 35.82 from 36.50. Price then advanced to
36.74
with the 2.0 volatility band at 36.81 and the 1.618 Fib extension of the
36.50 –
36.15 leg at 36.72. The SMH didn’t hesitate more than two bars, then went on
to
make a new intraday high of 36.88, +3.3% from the 35.75 entry and closing at
36.80, +3.0% on the day. Great travel range.
Net net, in Tuesday’s commentary, you knew
the
SMH was down -8.2% in eight days from 38.83 – 35.63 and that some percentage retracement up wouldn’t surprise you. I also said that it is a decision
level
zone for the Generals in both the semis and brokers, not to mention they
were
both sectors you were focusing on. It was simply an excellent sequence day
in
the SMHs and individual semiconductor stocks.
All of this material and much more will be
covered in the seminar this coming weekend, both live in New York and on the
Internet. If you played the 1,2,3 higher bottom in the
(
SPY |
Quote |
Chart |
News |
PowerRating)/futures, it
was
also a decent trade. The SPY had entry above 112.86 and ran to 113.81, where
it
closed. The ESU4 entry was above 1125.50, and it ran to 1135.25.
The
(
QQQ |
Quote |
Chart |
News |
PowerRating)s also gave you a 1,2,3 higher
bottom above 36.15, which ran to 36.69, and if you were very aggressive
early,
you took the 1,2,3 lower bottom with entry also above 36.15. Either way, you
had
the same entry.
The positive divergence in the SMH was
evident
right after the RST entry on the first bar, and then the contra move/Fib
retracement to 35.82, which was obviously a higher low relative to the
previous
day’s 35.67 low. On the other hand, the SPY/futures took out the previous
day’s
low on the contra move down to 112.67, and the 1,2,3 higher bottom entry
wasn’t
until the 11:55 a.m. or 12:00 p.m. bar.
The XBD made a similar Fib retracement as the
SMH, but did take out the previous day’s low on the first two bars. However,
the
XBD gave you a 1,2,3 higher bottom entry on the 11:25 a.m. bar.
Today’s
Action
Buying weakness is the better side, as the
Generals, barring overt news, won’t let the SPX get away too much on the
downside going into their six-month and quarter-ending-June report card. Any
upside out of the flag pattern will provide short opportunities after any
mark-up. Some more names for your focus list because of their current
position
are
(
QCOM |
Quote |
Chart |
News |
PowerRating),
(
BRCM |
Quote |
Chart |
News |
PowerRating),
(
BA |
Quote |
Chart |
News |
PowerRating),
(
LLL |
Quote |
Chart |
News |
PowerRating)
(
XOM |
Quote |
Chart |
News |
PowerRating),
(
ESV |
Quote |
Chart |
News |
PowerRating),
(
SWK |
Quote |
Chart |
News |
PowerRating),
(
APOL |
Quote |
Chart |
News |
PowerRating),
(
MERQ |
Quote |
Chart |
News |
PowerRating) and
(
EBAY |
Quote |
Chart |
News |
PowerRating).
Have a good trading day,
Kevin Haggerty
