The major indices bent on Monday, but they didn't break. As a rule of thumb, I never want to fade an uptrending market until prior session lows begin to give way. Monday's market, however, threw a wrench in those plans.
For the first time since May 21, the E-Mini S&P 500 futures contract closed a regular session without displaying unfair highs, or a lack of symmetry. In essence, this means we finally had a decent close where prices reached levels deemed unfair by both buyers and sellers (though obviously at different points during the day). Remember, a completed auction is one where the volume profile resembles a bell-shaped curve. Where the tails of the curve indicated unfair highs and lows, and the belly represents fair value (or acceptance).
The bottom line is I believe the odds are high that Monday's session will ultimately prove to be the beginning of a balancing period in the E-Mini S&P 500 futures and SPDR S&P 500 Trust (SPY). As such, day and generally short-term participants will want to ready themselves, and their trade plans, for a more two-way opportunistic trading environment.
Let's switch gears and consider the stock of a product we all like to use, but rarely want to own. Twitter (TWTR) has traded horribly since collapsing at the end of 2013. And while I don't see any reason to assume a long lasting bottom is in place, I do think the stock is ripe for a bounce toward $41. As you can see on the stock's volume profile below, I'm looking for demand to increase above $35 and push the stock toward the high volume node shaded in green (roughly $41).
As discussed above, my baseline view is that the imbalanced, uptrending auction that began on May 21 is finally beginning to transition into a more balanced state. As such, day timeframe traders will want to enter Tuesday's SPY session with an eye toward burgeoning supply between $195.70 and $195.80. Assuming supply begins to outweigh demand within that general area, we'll want to look for more frequent attempts to break price down through $195.10, and on toward $194.43.
Any shift in value above $195.80 should still be viewed as bullish. So if you're stalking a short, flexibility and discipline will be key (as always).
- Sarepta Therapeutics (SRPT) has been on my radar for a while, and while I'm a bit dismayed that it hasn't made much of a run with the rest of the biotech sector, I still expect demand to materialize above $35.50. As with anything in the biotech sector, be sure to do your homework if you're going to approach this stock from anything other than a day/short-term timeframe.
- As some may recall, I introduced PetSmart (PETM) as a potential higher timeframe swing short idea back on May 7. Unfortunately, the stock was destroyed in mid-May before I could ever initiate a position. With the stock slowly grinding its way back toward $60, I thought this would be an opportune time to remind everyone that the stock is still broken, and remains front and center on my radar. The closer the stock gets to its now shattered head-and-shoulder neck line (approximately $62.40), the most interested I'll become.
Any trading or volume profile related questions can be posted in the comments section below, emailed to me at email@example.com or posted to my twitter feed @ByrneRWS