Intraday Trend Day Yet Again

May 15, 2008: 9:21 PM CST

The market indexes gave us another strange styled trend day today, with the market opening on the lows and closing on the highs while providing excellent retracement entry trades along the way.  Let’s examine it:

While traditional (or powerful) trend days begin with an opening gap, today’s price action opened very close to yesterday’s close.  I would guess most people (myself included) didn’t expect a powerful up-move was in the works today, but we must play the structure as best we understand it as it develops.

Nevertheless, one of the first trades of the day was a ‘fade back to the open’ day as we were expecting a range-bound style day.  This set-up around 11:00 with the target being either yesterday’s close or the 200 period moving average.

A ‘buy’ trade (again, expecting a range consolidation day) was entered targeting the intraday high which was exceeded, and price began to wind back down to equilibrium near the 20 and 50 period rising moving averages.  A ‘support’ or retracement style trade could have been entered here with a stop beneath the moving averages, but there was little justification to play for a ‘big win’ or even a trend style trade.  nevertheless, aggressive bulls were rewarded as they pushed prices to new highs suddenly into the close.

I also wanted to highlight two ‘range contraction’ plays on the QQQQ (NASDAQ) index:

These are also known as “Bollinger Band Squeeze Plays” which often lead to larger moves as price expands out of a tight consolidation area.  Bollinger Bands are based on standard deviation functions (typically of the last 14 bars) and as bar range narrows, so does the standard deviation function.

Squeeze Plays are one of the rare set-ups that allow you to play for larger targets intraday.  Two such ‘plays’ happened on the index charts today (especially the QQQQ’s).

Today’s trading has taken us above (or just at) the 200 period daily average on the major US Stock Market Indexes!  Let’s see if bulls can continue to push prices higher, as they’ve done so without a major pause (retracement) yet.

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