Three Key Trading Strategies in Action Yesterday

From 1990 to 1997, Kevin Haggerty served as Senior Vice President for Equity Trading at Fidelity Capital Markets, Boston, a division of Fidelity Investments. He was responsible for all U.S. institutional Listed,OTC and Option trading in addition to all major Exchange Floor Executions. Mr. Haggerty is a co-founder of Tradingmarkets.com and is the founder of www.KevinHaggerty.com.

Volatility was the game last week as the $SPX went +1.9% on Thursday, and -3.1% on Fri. It started with Bernanke and Treasury Secretary Paulson jawboning up the $US Dollar and the shorts were all over crude oil. However, that was short lived as there was a surprise rate hike by the Europe Central Banker, and the increase in the unemployment rate from 5.0 to 5.5 which was the biggest increase in over 20 years. This sent the $US dollar south and crude oil and other $US dollar based commodities soaring. Crude hit $139.12 Friday before closing at 138.54. Wall street dealers had to scramble and buy futures to cover their $140 strike price agreement with businesses like airlines and other big investors that hedged the crude price, in addition to the regular shorts scrambling to cover, so it was like a perfect storm last week.

The $SPX made a new low in the current decline yesterday at 1350.62 before a bounce into the close of 1361.70 The financials led the downside, as usual with the $BKX -3.2, and $XBD -2.3, led by the ongoing saga with Lehman Brothers (LEH | Quote | Chart | News | PowerRating) -8.7. The energy and materials sectors were strong right from the opening bell as anticipated, and finished that way with the XLE +2.9, OIH +2.6, and XLB +1.5 Both these sectors have been a primary focus in the Trading Service for quite some time because they are in strong uptrends, have excellent volatility, liquidity, and are also at the right price levels for daytrading, as opposed to so many of the lower priced Technology stocks. I included the NOV 5-min chart from yesterday, which is an actual trade, and trading service members had three different defined Strategy trade opportunities.

The first was the RST entry above 84 at the 480EMA, which is the same as a 20EMA on a 120-min chart. The second strategy was an Opening Reversal (OR) with entry above 84.38, and the third strategy entry was the 1st Consolidation B/O to new intraday highs above 85.04 The trade was exited into the +2.0 STDV volatility band zone (87.94) which has a 95% probability that price will be contained within that band. It may go higher first, but will most likely finish lower 95% of the time on a one day basis as volatility reverts to the mean. In this case, NOV made an 87.81 intraday high then traded down to 84.66 on the 2:20PM bar, before closing at 86.56 as the $SPX rallied into the 1361.76 close from the 1350.62 intraday low

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There was significant time symmetry last week and this current $SPX leg down started after a pullback to the 200DEMA with the 1406.32 high on 5/29. The next key price symmetry is 1349-1347, and then 1327-1326. The .50RT to 1257 from 1440.24 is 1349, and the .618RT is 1327. Both 1347 and 1326 are key angles from the 14440.24 rally high. There is a high probability for a reversal from this 1349-1326 zone, and there is also key time symmetry today, which is the 2.618 Fib ratio of the last two significant lows on 1/23/08 (1270) and 3/17/08 (1257). The time factor will almost always play out +/- 2 days of the time date (6/10/08).

The pre market $SPX futures are -12 points as I complete this at 8:30AM ET so the initial 1st hour reversal strategies could kick in right around that 1349-1347 zone if the futures level holds into the 9:30AM opening.

The next commentary is Thursday 6/12/08.

Have a good trading day!

Check out Kevin's strategies and more in the 1st Hour Reversals Module, Sequence Trading Module, Trading With The Generals 2004 and the 1-2-3 Trading Module.