For a day where the E-Mini S&P 500 futures (Es) gained a mere 2.25 handles on exceptionally low volume, we saw some incredible moves in the oil and gas, biotech and, to a lesser degree, industrial-metals stocks.
The most eye-catching moves occurred in oil and gas, as large-cap stocks like Conoco Phillips (COP), EOG Resources (EOG) and Chevron (CVX) all exploded higher. Even Exxon Mobil (XOM), a name I've been trading short against $90 for nearly a month, finally closed above resistance.
With light crude oil closing comfortably above the $50 mark on Tuesday, I see little reason to bet heavily against a continued rise toward $52.25 to $54.70. And given the sectorwide strength across the offshore drillers, major integrated and independent names, it seems fairly obvious this is a great area for day time-frame traders to be searching for short-term trades.
Aside from the still beaten-down, lower-quality offshore drillers, Noble Energy (NBL) has an interesting chart. The stock's been consolidating above its 200-day simple moving average (SMA) for roughly a month and appears ready to push higher. If you fancy the bullish energy trade, this is a good stock to keep on your board view.
Switching gears away from the bullish action in oil and gas, we saw several members of the biotech sector taken out back and shot. Both Biogen (BIIB) and Alexion Pharmaceuticals (ALXN) were slammed for more than 10% on news they failed to meet primary goals in their respective drug studies. The silver lining for both BIIB and ALXN, if one is to be found, is that neither stock broke to a new swing low. That said, neither chart looks particularly appealing on the long side, and I'd avoid these names for the time being. (Biogen is part of TheStreet's Action Alerts PLUS portfolio.)
Valeant Pharmaceuticals (VRX), a stock that refuses to stay out of the spotlight for more than a few days at a time, was hammered for another 14.5% Tuesday. The lack of clarity surrounding the company forces us to avoid it on any time frame greater than a single session. But for those focused on day time-frame trading, a push above $26 (past support) might make the stock worth scalping on the long side.
From a sectorwide standpoint, the most concerning thing I see in biotech is the declining 200-day SMA. While short-term traders are willing to trade anything during the day time frame, it's tough to adopt a genuinely bullish posture on biotech when the iShares Nasdaq Biotechnology ETF (IBB) is still trading beneath the 200-day SMA.
Another area of the market that caught my attention Tuesday was the industrial metals. Despite the concerning look of front-month copper futures, I don't currently see a worthwhile trade in it, or the stock equity traders tend to focus on Freeport McMoRan (FCX).
The day-to-day volatility in copper, along with many of the industrial-metals stocks, remains random and virtually untradeable. This is one of those times where unless you have a very specific and focused thesis, simply avoiding this area of the market is probably a wise move.
Moving on to Wednesday's Es auction, it's important to remember that while Tuesday's auction weakened into the close of regular-session trading, the contract is still closing above all short, intermediate and higher time-frame moving averages. Put another way, the trend is still bullish.
With expected resistance around 2116 and support near 2108, I see little reason to adopt a bearish posture, even on a day time-frame basis, as long as the contract is closing above 2100. My inclination remains toward buying dips, and largely avoiding the temptation to sell short into rips.
The market will most certainly weaken at some point. But until the day time-frame price action points toward higher prices cutting off demand, I see no sense in haphazardly guessing at a top.
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