Trader's Daily Notebook: Folks, This Is a Crummy Range

 | Aug 03, 2017 | 7:00 AM EDT
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Stock quotes in this article:

aapl

Wednesday's auction provided some much-needed opportunity for day timeframe scalpers, but when it comes to higher timeframe participants, I'm afraid we're still in a holding pattern.

Let's begin today's note with a brief review of Apple's (AAPL) post-EPS trading, since more than a few of you sent in questions regarding the day timeframe price action.

5-Minute Intraday Apple (AAPL) chart
 

The stock rotated between $158.30 and $160 during the pre-market, only to open the day session at $159.28 and immediately trade beneath its opening print and developing volume weighted average price (VWAP). Was there an opportunity for scalpers to get short the stock? Of course. And provided you ran the trade with some type of stop above the opening print or pre-market high, you likely did pretty well on the trade.

That said, I would not view the lack of price extension above $160 as bearish. The stock is in a powerful uptrend, and I'd expect both a dip toward a 20-day moving average (MA) and/or a break above $160 to attract buyers.

Remember, it's always easier to see these types of trades after they've played themselves out. The key to participating is to identify your trigger point, which in our case was a break beneath the opening print and VWAP after the first 15 minutes of regular-session trading, followed by a protective stop that you believe accurately represents (and protects your capital from) a failed trade idea.

As far as Wednesday's E-Mini S&P 500 futures (Es) auction is concerned, scalpers enjoyed a bit of volatility when the bullish gap above our 2474.25 area of interest quickly collapsed, and price sank to within a whisker of our 2463 to 2461.50 support zone. The afternoon rally back to 2473.25 simply served as our daily reminder that while the occasional spot of day timeframe selling can occur, the auction still lacks a powerful and motivated seller. Take a look at a chart of the last 11 Es sessions to see what I mean.

Daily S&P 500 Futures Volume Profile, first chart
 

As you can see, the value area over the past 11 days is 2465.50 to 2475, and the most actively traded price (value) is 2468.50. Put another way, approximately 70% of Globex session volume for 11 sessions in a row has occurred within a 9.5-handle range. Folks, that's a crummy range. And not one that most traders should be actively participating in.

If you're looking to take something away from the chart above, let it be that a close above the mid-2470s encourages a push to new swing highs (let's hope it's not followed by another 11 days of sideways chop), and a close under the mid-2460s shines a light on the 20-day MA (a whopping seven to eight handles lower).

Daily S&P 500 Futures Volume Profile, second chart
 

If we take a step back from the screen, it's pretty easy to see the overall trend. All timeframes remain bullish, and while short-term price momentum may be nearly nonexistent, I don't see any reason to assume the next major move will be lower. With a bit of luck, maybe we'll get a chance to see how buyers react to an intraday test of the 20-day MA (around 2460) before pushing on toward 2500.

Moving on to Thursday's Es auction, we'll continue to focus on the same general areas we've been using for the past few days, and assume the choppy and range-bound conditions will remain in place. Using 2469 as our day timeframe pivot, we'll look for all trading above that figure to be pulled toward 2475, while a break beneath it will encourage sellers to make a break for 2463 to 2461.50.

15-Minute S&P 500 Futures Volume Profile
 

A sustained trade above 2475 is not something I'll want to fade, especially as long as price is above the session's opening print and developing VWAP. All trading above that figure supports buyers and their attempts to auction prices toward new contract highs.

As we've discussed in the past, the next warning sign for short-term bulls will be a session close beneath the 20-day MA, or approximately 2460. So keep that level (on a closing basis) on your radar.

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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