Despite Monday's regular-session E-Mini S&P 500 futures (Es) contract triggering an inside day (where the current session's range fails to extend beyond the prior session's range), plenty of opportunity existed for the day time-frame participant.
We entered the day looking for reasons to fade strength between 2000.50 and 2004, and despite it taking until almost noon ET for the contract to reach that 3.5-handle zone, sales within that area were rewarded several hours later. Traders focused more toward the long side also found opportunities shortly after the regular-session open, and again during the final hour of trading. So regardless of one's directional bias, there were several good trading opportunities.
As far as the closing numbers are concerned, the session's big winner was light crude oil, which managed to climb nearly 5% higher. On the equity side of things, the SPDR S&P 500 ETF (SPY) and SPDR Dow Jones Industrial Average ETF (DIA) gained between 0.1% and 0.35%. The iShares Russell 2000 ETF (IWM) continued its outperformance, rallying another 1.1%. And the PowerShares QQQ ETF (QQQ), the big loser on the day, declined a bit more than 0.6%. (IShares Russell 2000 ETF is part of TheStreet's Stocks Under $10 portfolio.)
Moving on to Tuesday's trading, I expect day time-frame stock traders to be actively stalking tradable highs in some of the heavily shorted energy stocks that have spiked anywhere from 50% to as high as 300% (or more) over the past week. Names like Noble (NE), Tidewater (TDW), Chesapeake Energy (CHK), Whiting Petroleum (WLL), Murphy Oil (MUR), Unit Corp. (UNT) and EP Energy (EPE) have all enjoyed spectacular gains. While I have no interest in commenting or opining on the future business prospects of the stocks listed, the day trader in me is always interested in trading stocks that are hyperactively in play.
If you're going to trade these smaller-cap energy stocks, especially if you opt to do so on the short side, don't do so in a cavalier manner. Several of the names listed above, and about a dozen I didn't list, can all whip around by 25 to 50 cents a share in a matter of seconds when volume is running high and liquidity is low.
As far as Tuesday's Es auction is concerned, I expect to begin the session with a heavy focus on 1999.50 to 2001.25. As long as value remains beneath that zone, my baseline expectation is for sellers to aggressively push to test levels near 1990.50 and 1984. Those wanting to stalk the first area likely to attract a more aggressive dip buyer should wait for momentum to slow closer to 1979 to 1977.
A sustained trade above 1999.50 to 2001.25 is not something I'd want to be too quick to fade (sell short). In this situation, I'd likely sit on the sidelines (unwilling to chase price momentum long) until the contract slipped back beneath both 1999.50 to 2001.25 and the session's volume weighted average price (VWAP).
As value migrates above 2001.25, the odds begin to shift in favor of bullish extension toward 2009.75 and 2017, with 2025.75 being our more extended target.
Any trading or volume profile related questions can be posted in the comments section below, emailed to me at firstname.lastname@example.org or posted to my Twitter feed @ByrneRWS