Todays Markets 12/07/10

Trading this morning was difficult as the SPY gaped higher above yesterdays trading range make new 52-week highs around the 124.00 level. While the longs have been the better trade over that past few weeks in this strengthening market, it was important to be patient during the open and wait for the proper signal to execute trade ideas during the first pullbacks, due to the near one hundred point gap higher at the open. Unfortunately as the morning pushed forward the markets continued to push lower making it harder to justify longs and to distinguished between risk only trade and trade that actually had a high probability for follow through.

On the flip side while long were not working out it was difficult to load up on shorts due to the recent strength in the market during this past few weeks. While it was prudent to wait for conformation on short ideas this could have resulted in missed entries and difficulties managing shorts.

In the afternoon trading we started to make a move to the highs of the day but could not hold the rally as we sold off hard into the close breaking lunch time lows and closing inside yesterdays trading range. In the markets today we did not see performance from the energy or technology sector which has been pushing the market higher. Both the oil service (OIH) and the semi-conductors (SMH) and its components has unenthusiastic performance in today’s trading.

A few trade ideas that worked out well for Keystone traders today was a short in United Airline (UAL). A short below yesterday lows was the entry area as we were below the 15 min ORB and below the 50 sma on the daily charts, which provided momentum as the stock pushed lower. The stock traded a dollar-plus below the entry area (shown in the charts below). The price action also provide a great exit signal in form of exhaustion on the five minute chart with the huge increase in volume near the 25.50 October support area. This increase in volume was a perfect clue to tighten stop or get out of the short position altogether.

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