A High Probability 1st Hour Strategy

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 Trap Door 1st Hour reversal strategy caught the trend up day in the major indexes on Friday. The 1st half-hour decline in the SPX hit the .618 retracement zone to the previous low on the 9:55 AM bar, and the Trap Door entry followed above 1522.35, which traded up to 1532.40 before closing at 1530.44. If you trade the future or SPY, you should key your reversal strategy off the cash ($SPX). The SPX E-mini entry was on the same 10:00 AM bar above 1533.50 and it hit 1544 before closing at 1542.50. The symmetry on the Trap Door was the Fib retracement, and key 9:55 AM-10:10 AM reversal period. The internals confirmed the reversal, and TICK went from -605 to -131 on the signal bar, with a close at the top of the range. The 1st Hour Trading Module covers in detail the different trading strategies that occur in the 1st hour, and how to use the "primary tools" to identify symmetry which makes them higher probability daytrades. The same Trap Door was available in the IWM, QQQQ and DIA.

NYSE volume was only 1.24 billion shares on Friday, with the volume ratio 71 and breadth +711. All primary sectors were green across the board. It was a positive holiday week in a key time period, as the SPX finished up +1.8% and the $INDU +1.6%. The QQQQ led the week at +2.6%, and has advanced 5 straight days as the technology seasonality got off to a fast start (see July 6 commentary), so there is no edge starting this new week. With the $US dollar weakness challenging its previous 81.25 low with a 10-year low at 80.39, the gold index ($HUI) was +2.7% on Friday and +6.9% on the week, while the TLT was -1.7% for the week. The other primary Trading Service sector focus is energy, and the OIH finished the week +3.6% and XLE +3.4%. The OIH broke out of a 13-day trading range and made new cycle highs to 181.92 before closing at 181.10, but is extended, having advanced +6.5% in 7 days. Crude oil ($WTIC) is up 7 straight days to 72.81, and has a key price zone from 72.50-73.85, which includes the 73.69 Fib .786 retracement to 79.86 from the last significant low, which is 51.03, and also 2 primary Gann angles at 72.49 and 73.85.

The SPX is back to the top end of its 8-week trading range, with a 1540.56 high and the $INDU 13615 versus the 13690 range high. The QQQQ has advanced 5 straight days and broken out of its trading range, so both of our primary trading focus sectors are leaders, and that has been reflected in our daily trading focus list, as yours should be also. Both sectors are extended, so trade them accordingly. Don't chase continuation new highs.

The usual TV spinners are even having trouble spinning the many obvious negatives in the growing subprime problem, residential housing market, weak $US Dollar, rising gas prices, lower productivity and rising wages, not to mention the increasing amount of bogus economic numbers that are constantly being revised to the negative. The business cycle is not going away, global or not, so that means bull and bear markets will continue as usual. This one just happens to be the longest one in 50 years, and the second longest relative to the 4-year cycle lows, compared to the 1898 calendar days between 8/9/82-10/20/87. The 2 summer months are key time periods, because July and August are months 89 (Fibb) and 90 (Gann) from the 3/24/00 1552.87 last bull cycle top.

Have a good trading day,
Kevin Haggerty

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.