Key reversal strategies for traders

Kevin Haggerty is a full-time professional trader who was head of trading for Fidelity Capital Markets for seven years. Would you like Kevin to alert you of opportunities in stocks, the SPYs, QQQQs (and more) for the next day's trading? Click here for a free one-week trial to Kevin Haggerty's Professional Trading Service or call 888-484-8220 ext. 1. 

The SPX finished at 1311.45, +0.1%, while both the QQQQ and Nasdaq were -0.4%.The price-weighted Dow was +0.6%, skewed by (GM | Quote | Chart | News | PowerRating), +10.1%. This points out how easily a 30-stock price-weighted index can be manipulated if "They" want to mark it up. Of course, the options will be bought prior  accelerating four or five key stocks. This was not the case yesterday with a dog like GM. After big advances, gold and copper stocks snapped back yesterday, with the XAU -6.1%, FCX, -6.1%, and PD, -4.5%. The TLT, which has not rallied since the Fed rate-ending hype closed at 84.31 and the 10-year yield remains above 5%. NYSE volume remained on the high end at 1.75 billion shares, with the volume ratio 55 and breadth -192. The SPX has advanced small for two days and the internals have a negative divergence, which is not unusual seeing that the SPX hit a 1280.74 low on Monday, so it's been a sharp advance.  The SMH led the primary groups yesterday at +1.0% and is now +8.7% in 23 days from the anticipated key price zone, which was preceded by a positive momentum divergence. It closed at 38.25 into the 38.56 retracement zone to the 40.64, 01/12/06 high.

Although the SPX was only +0.1% yesterday, the travel range provided day traders with a bonus. If you played the opening reversal (OR) above the previous high, it was a good run, and that was followed by the volatility band short sale below SPX 1316.47, which traded down to 1306.38 before reversing. This was the anticipated SPX strategy for the Professional Trading Service members yesterday morning. These members also had a double take in the energy sector. The OIH was an RST sell entry below 160.75, which traded down to the -2.0 volatility band level (155.58), which then reversed off a 155.61 low, with long entry above 156.38. This entry ran to 160.59 before the strategy reversal below 159.86.

The XLE long could also have been taken because it made a 57.53 low vs. the -2.0 volatility band at 57.54. These volatility bands are very significant in all of the key reversal strategies. The volatility band service is also incorporated into the professional trading service.

April is +1.3% so far and the Generals will try to push that it into month end if they can and maybe squeeze some shorts along the way. The next key time zone also occurs next week into month-end and then the bias will shift once again.

Have a good trading day,

Kevin Haggerty