The Trader Daily

 | Apr 02, 2014 | 7:30 AM EDT  | Comments
  • Comment
  • Print Print
  • Print
Stock quotes in this article:

spy

,

IWM

,

QQQ

,

EWZ

,

pbr

,

cig

The mid-March slide across the major equity indices hit the NASDAQ and Russell 2000 particularly hard. It shouldn't come as too great a surprise that they have also seen the sharpest and most dramatic rise over the past two days.

The important question now is whether the indices can consolidate their gains for a day or two and press higher. Or whether another morning of buying, ahead of Friday's employment data, will finally result in a sharp response from the sell-the-rip cabal.

From my vantage point, I continued to believe the SPDR S&P 500 (SPY) and iShares Dow Jones Industrial Average (DIA) are best positioned for a sustained push higher, as neither of these ETFs were sold as aggressively as the Power Shares Trust (QQQ) or iShares Russell 2000 (IWM). Speaking of the QQQ and IWM, I see real potential for a sell the rip scenario developing if they continue to sprint higher at Wednesday's open. As I discuss below, I plan to watch the IWM closely during Wednesday's session for a day time frame short-selling opportunity.

Let's switch gears for a moment, and review the Brazilian stocks I covered in Monday's report. You'll recall I pointed to the overbought condition in stocks like Petroleo Brasileiro (PBR), iShares Brazil Capped ETF (EWZ) and Companhia Energetica De Minas (CIG). I also suggested that aggressive traders could either stalk these stocks for quick shorts, or sit patiently as they consolidate their gains. It's worth noting that while the U.S. markets have sprinted higher this week, these three stocks have gone absolutely nowhere. In CIG's case, the stock has actually pulled in a bit.

In any event, I still believe the best risk-reward play in this sector is to allow these stocks to wear off their overbought condition, and then look for a favorable long entry. As discussed before, my interest on the long side will increase as the ten-day and thirteen-day exponential moving averages catch up with price.

Turning our attention to Wednesday's SPY trading, I expected to begin the day focused on $188.30. The bottom line is that all trading above that level keeps the bullish momentum intact, and encourages buyers to bid prices up toward 188.65. As the bulls recapture $188.65, our next most probable reference point will be the March 7 premarket highs of $189 -- $189.25.

Since the March employment report is released this Friday, I believe it's worth remembering that the $189 to $189.25 premarket highs from March 7 were the result of February's employment report. Put another way, the SPY has gone absolutely nowhere since the last employment report.

5-Minute Volume Profile SPY
eSignal

Thanks to snap-back rallies in a number of tech names, the QQQ had no problem pushing its way through Tuesday's $88.15 to $88.25 rejection line, and finishing the session above $89 (reviewed in Tuesday's report). As long dip buyers remain active near $88.82 on any opening weakness come Wednesday morning, I believe the ETF can continue along its way toward $89.45 and $89.90.

Active traders interested in stalking a potential day time frame short in the QQQ will want to begin their search toward $89.45 to $89.50. Any hesitation near that area would offer scalpers an opportunity to sell the ETF back down toward Tuesday's closing level. If you fancy yourself and day time frame scalper, please recognize that such a trade would be little more than a scalp. The QQQ doesn't begin to weaken until a collapse in demand is witnessed near $88.82.

15-Minute Volume Profile QQQ
eSignal

Despite my affinity for the SPY, I expect to devote the bulk of my attention on Wednesday to the IWM. Another bottle-rocket-like move in the IWM will set the ETF up for a quick bout of profit taking. The area I will be stalking is $118.45 -- $118.65. Failure to recapture that area (read: selling tails and doji candles) would have me pursuing a short trade. And my primary target areas would be $117.50 and $117.

The flip side of any selling would obviously be a continued surge higher. If the bulls manage to sustain a break above $118.65, I would have no interest in pursuing that ETF from the short side. In fact, I'd be looking for a continued push toward $119.90.

15-Minute Volume Profile IWM
eSignal

Any trading or volume profile related questions can be posted in the comments section below, emailed to me at parkcityyeti@gmail.com or posted to my Twitter feed @ByrneRWS.

Columnist Conversations

BL Regarding my post in Comments Section on sales/earnings guidance (that was posted on Zero Hedge) .... I gue...
The next hurdle in AAPL is for it to take out the prior swing high at 114.85. The upside potential is to the ...

BEST IDEAS

REAL MONEY'S BEST IDEAS

Columnist Tweets

BROKERAGE PARTNERS

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data provided by Interactive Data. Company fundamental data provided by Morningstar. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by Interactive Data Managed Solutions.


TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

IDC calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.