Zone Win

June 10, 2002
Kevin Haggerty

Friday
was a homerun for those of you that
played from the zone. The strategy has been to take the intraday position at key
inflection points and hold only if profitable at day’s end. You had a win-win
decision on Friday. All of the major indices and the
(
SMH |
Quote |
Chart |
News |
PowerRating)s hit zones that
you were prepared for in advance. At the end of the day, the major indices
didn’t tell the story of the advance from the levels.

The SPX move started
right from the number mentioned
Friday, which was 1013. The intraday low was 1012.49, then you had an entry
above 1014.70 from a narrow-range 3 pattern, more commonly called a dynamite
triangle. The index ran to 1033, which was the 260 EMA on your five-minute chart
and is also the .618 retracement from the 1177 high. It backed off to 1025 and
closed at 1027.53. You had the choice to close out a great daytrade or carry it
over because it was a profitable trade by a significant amount. Nice to be in
that position. That is the benefit of entry at the lowest common denominator, as
all of you seminar veterans are aware of.

The Nasdaq Composite gave
you entry above 1501 from the same kind of pattern, running to 1549 and closing
at 1535.48. The
(
DIA |
Quote |
Chart |
News |
PowerRating)s also hit the zone with an intraday low of 94.87 with
entry above 95.18 and running to 96.85 before closing at 96.22.

My favorite trading
vehicle, the SMHs, hit a 33.40 intraday low, gave you entry above 33.69, and ran
+4.3% from entry to 35.15, closing at 34.70. It was a very extreme opening down
for the SMHs due to Intel’s demise. The 3.0 Volatility Band was 33.73, which
certainly precedes a reversion to the mean of some degree. The zone you were
waiting for was 35 – 34, so the extra kick down set up a great trade for us, and
it was from the same narrow-range 3 pattern we saw in the major indices. Save
the previous
text which indicated the levels you were looking for, and also the charts
from Friday, which gives you examples of defined entry patterns. This is just
one lesson in sequence trading, but an important one to remember.

Also, the
(
QQQ |
Quote |
Chart |
News |
PowerRating) zone
we were waiting for was 27.75 – 27, and they made a 27.52 intraday low. It gave
us entry from the same narrow-range 3 pattern above 27.70. It hit an intraday
high of 28.79 and closed at 28.30. You should also make note that the 2.0
Volatility Band for the QQQs was 27.59. The SPX’s 1.5 Volatility Band was 1013,
and 94.71 for the DJX. Needless to say, there were many stocks that gave you
excellent Trap Doors and Volatility Band plays.

Friday is now history,
and we start new today, but we must once again thank fear for Friday’s win.

Stocks
Today

The primary focus remains
on the indices and HOLDRs because the world events haven’t changed over the
weekend, and all we had Friday was a reflex from a key zone, of which the
duration is unknown.

Needless to say, with
Intel down here, everyone will have a different way to play it, but you’ve got
to be involved.

Have a good trading day.

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

Five-minute chart of
Friday’s NYSE TICKS

Zone Win

BUY THE FEAR, SELL THE GREED

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