The Trader Daily

 | May 30, 2014 | 7:30 AM EDT
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I devoted a significant amount of time to the bonds in Thursday's Trader Daily report and, as luck would have it, the trading gods cooperated by allowing the iShares 20+ Year Treasury Bond ETF (TLT) to trade higher before hammering it back down toward Wednesday's opening point.

Please recall, however, that while I think short-term buyers got out over their skis, I see no reason for longer-term participants to abandon their bullish posture. The bottom line is that the TLT reached an overbought condition and the odds favored a correction in price. Until a more meaningful technical breakdown is seen, I will remain bullish on bonds on a higher timeframe.

A quick look at J.C. Penney (JCP) reveals the potential to earn dollars. Ever since the late-February surge in Penney, I've been monitoring the stock for an opportunity to participate in a potential second leg higher. And I think the stock is finally set to break higher.

In my view, an aggressive buyer could jump on the stock right now with a stop on close beneath either the 50-day simple moving average, or $8 even (just beneath the early-May swing low). I, for one, would opt for the more liberal stop of $8. A more conservative trader seeking further confirmation might wait for the stock to close above $9.20. Again, however, I'd reference the two suggested stop loss levels above.

In any event, I like this setup and expect to get involved in the immediate future. And for what it's worth, having both Jim Cramer and Brian Sozzi opine bullishly on the company's turnaround prospects is an added bonus.


J.C. Penney (JCP) Daily
Source: eSignal


Friday's SPDR S&P 500 (SPY) trading is expected to hinge on whether or not it can remain above Thursday's low volume area (shaded in yellow on the chart below). As long as demand remains intact above $192.10 to $192.16, I see no reason why the SPY can't continue to auction higher. And as an added confidence booster for bulls, Thursday's SPY auction closed with a poor/weak high (indicative of additional gains to come).

Failure to hold above the low volume area likely results in an immediate slide back down toward $191.73 (a few ticks beneath Thursday's volume point of control, or value). My gut says a backtest of $191.73 fails, as the setup would be nearly identical to the one witnessed in the TLT on Thursday (that resulted in relatively aggressive selling). As such, I'd be incredibly cautious about bidding into that $191.73 support line. Wait for demand to materialize before jumping back in with the bulls.

Downside continuation beneath $191.73 has a simple target of the bottom of balance, or roughly $191.10.


E-Mini S&P 500 -- Five-Minute Volume Profile
Source: eSignal


Additional Notes:

1. IBM (IBM) found buyers back against the mid-March low of $182.35, so if you're long, this is a hugely important pivot that the stock must continue to hold. A failure from here has the potential to unwind all of 2014's gains and send the stock back down to levels not seen since September 2011. Unless you're taking a shot at the stock holding the $183/185 support window discussed in prior Trader Daily reports, I'd simply steer clear of this name.

2. The natural gas futures contract closed back above its 50-day simple moving average on Wednesday, and despite coming under pressure Thursday morning, the contract managed to remain above its 50-day. The current focus here is $4.6 to $4.7. As the contract trades through that 10 cent area, I'd expect buyers to become more aggressive and begin pressing their bets higher.

3. To the amazement of bulls, such as myself, Freeport McMoran Copper & Gold (FCX) has held its ground while the entire gold mining complex has been decimated. Shortly after Wednesday's opening bell, the stock was hammered through both its 50-day and 200-day simple moving averages. However, the stock recovered more than half its losses by the close of Wednesday's regular session. And on Thursday, the stock pushed higher, along with the major indices. I am still long FCX and expect to remain so as long as the stock respects its 50-day simple moving average.

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

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