Nasty but Interesting Intraday Action

Feb 19, 2008: 7:23 PM CST

The market action today was quite stellar, but ended lower after an amazing morning gap.

Let’s look at some of the set-ups and trades that you could have taken today:

First, “fade the gap” which occurred over the weekend. The gap actually filled halfway (which classifies as an official full gap morning failure) into moving average support, which set up the “Impulse Buy” momentum trade.

A second pullback in the upwards price trend occurred around 1:00, which exceeded its price target (the most recent swing high) and then price pulled back but failed into the final hours with a massive breakdown that took price down $1,40 (140 Dow points) in less than 30 minutes.

Morning traders who were excited at economic news were slammed today, and their expectations of bullishness were dashed.

Let’s look the NASDAQ ETF (QQQQ) which was even more bearish than the Dow Jones ETF (DIA) today:

The initial gap fade play went further than the 50% retracement the Dow experienced, but also found significant support at the rising 50 period moving average and also set-up an “Impulse Buy” trade. The second pullback trade worked (but barely exceeded its price projection) and then price began to fail.

Notice the super-trade that occurred as price rallied up to significant resistance from the crossing (and simultaneous price) of the 20 and 50 period moving averages.

The final hour showed a positive momentum divergence before a massive 5-minute up-bar was observed.

Today offered many clear-cut trading signals and low-risk opportunities. If only every day was as easy as today.

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