The Trader Daily

 | Jun 02, 2014 | 7:50 AM EDT  | Comments
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Stock quotes in this article:

spy

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IWM

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intc

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msft

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glw

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ibm

Last Thursday and Friday, the best part of the trading in SPDR S&P 500 (SPY) is that we've been given a crystal-clear level against which to trade. The bulls will maintain their advantage as long as the SPY remains above $192.02. Put another way, if you're hell-bent on fighting the current advance, force yourself to remain on the sidelines until the price breaks back beneath $192.02. Once such a break is sustained -- identified as a 15-to-30-minute bar close for swing traders, or a five-minute-bar close for scalpers -- day time frame traders would be expected to sell the SPY back down toward $191.10.

SPY -- 15-Minute Volume Profile
Source: Dynamic Trader

Assuming the recent bull trend remains intact, I believe the iShares Russell 2000 (IWM) is best positioned for long-biased short-term traders. After bouncing from $108.50 to $113.80 in the span of four days, the IWM has spent the past three sessions trading flatly to moderately lower. As long as buyers continue to defend the $112.50 area, my baseline expectation is for a trade through $113.65, and on toward $115. 

The obvious caveat here is that a failed trade from $112.50 would likely result in a swift slide toward $111.60 and $111.30. 

IWM -- 15-Minute Volume Profile
Source: Dynamic Trader

Additional Notes:

1. It may be too late to chase Intel's (INTC) recent price momentum, but I believe the time is right to pick up shares in Microsoft (MSFT), and potentially in Corning (GLW). With Microsoft breaking through a two-month trendline Friday, I think its shares can be bought with a stop back under $39.20. My reason for identifying $39.20 as a logical stop is that it's a few cents beneath the May 16 swing low, and it represents the lowest weekly close since mid-March. 

As far as Corning is concerned, I'd wait for a close above $21.60 before I'd recommend initiating a position. Keeping in mind that one's stop placement -- on any swing trade -- should be located at an area where one's trade thesis is clearly wrong, I'd be inclined to use a stop of $20.39, though $20.66 would suffice for more conservative traders. Should Corning trade beneath that level, I believe we can logically assume the stock's trajectory is no longer bullish.

2. IBM (IBM) continues to hang on by the skin of its teeth. In prior Trader Daily reports, I discussed the mid-March swing low as pivotal. As luck (for IBM bulls) would have it, demand has remained intact in that general area. For two days in a row, buyers have stepped in near $182.50 -- and, as long as they continue to defend that level, the potential exists for the stock to trade back up toward the $188-to-$189 area. That said, several days of consolidation, followed by a fresh break lower, would likely result in a price slide of close to 10 handles.

When it comes to IBM, the bottom line is that there are easier stocks to play. As I've opined in the past, my inclination is to avoid IBM on both the long and the short side.

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

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