Swing High Compression

The Nasdaq is up a touch, trading in the upper half of yesterday’s range. Price exceeded yesterday’s high briefly this morning on [untrue] reports of an agreement of sorts in Greece. The move went on to test the 4400 century mark before falling back into the weekly long value/balance we have formed.

At 8:30am Initial/Continuing Claims came out a touch worse than expected as was the revision to the prior number. This brought in a small bit of buying but nothing overly notable. At 10am we have Leading Indicators and the Philadelphia Fed, at 10:30am the Natural Gas Storage statistics, and at 11am Crude/Gas Inventory stats.

Wal-Mart reporting earnings this morning and they are often considered the purest data point to the overall health of the retail front in America. They are trading a touch lower premarket after beating earnings expectations and raising the dividend. The selling pressure may be attributed to their guidance where they cite the strong dollar as a potential headwind to forecasts.

As stated earlier, we are in 3 days of balance. This is occurring just after the market made new swing high and as we push through the monthly option expiration week. The action is in stark contrast to the rest of the year so far, which has featured large/fast ranges.

Heading into today’s session my primary expectation is for sellers to push into the overnight inventory and test down to 4382. Below here I will look for buyers to respond and start working toward yesterday’s high 4393.50.

Hypo 2 is sellers push down through the overnight low 4376. In this instance I will look for responsive buyers at 4372.75. They struggle to reclaim 4382 setting up a liquidation lower to target 4363.25 then the naked VPOC at 4360.00.

Hypo 3 is a variation of hypo 2 where the responsive buyers at 4372.75 hold and 2-way balance ensues a bit lower.

Hypo 4 is we drive and take out the overnight high 4400 century mark to target the measured move to 4417.50.

Levels are highlighted on the following charts:

It appears participants will be debating this question during today’s session. If history has any lesson, look for buyer aggression from $49.90-$49.50—below there bulls may start stressing:

Trading in the Nasdaq is all but dead. This week if I cannot extract my stipend by 9:40am there is little more I can do to earn.

Local-to-local robot action is not conducive to my order flow style. Thus, my attention is more on stocks:

Zillow has been on my radar as a short for most of the year. Now I just don’t know. It will need to pull a GoPro and give back its entire massive day in a scant 24 hours to reignite my thesis.

GoPro, the Angie’s List of 2015. I took calls in GoPro at about -8% and watched it waterfall another 3.5% into the bell. Such brutality following a big move—the fake move, make move logic is still prevalent. Many see a downtrend when they look at a GoPro chart, but I see a consolidation gearing up for a big break. I was looking for more of a reaction at $46, thus I may be served a heavy dish of red sauce to wrap up OPEX week.

Then there’s ANGI pulling a power move. You want to turn away but at the same time the action is such a gross spectacle your eyes are glued.

VA reported a nice profit, traded handsomely before it started drifting lower during the conference call. Maybe I am not the only one who thought Richard Branson would make an appearance during the first call. SUNE is taking an after hours poo after reporting a quarterly loss.

We haven’t found the sellers yet but index buyers are running out of steam. Oils doing the 3.5% daily shuffle, and momo pockets are narrow.

In summary, Raul spent 10 minutes making money and the rest of the day chasing his tail, like dog. I will now seek vengeance by squeezing dumbbells until they bleed.

The Nasdaq is off to a slow start this week, and the tranquility continued into globex overnight where both range and volume compressed to below-normal levels. The overnight session is pressing its lows as we head into cash open after taking out yesterday’s high last night.

At 8:30am we have Housing Starts/Permits which came in worse than expected. We have Industrial Production stats just before the open at 9:15am and most importantly the FOMC minutes at 2pm.

After the holiday on Monday, yesterday we saw 2-way short timeframe participants performing the balance trade atop 2 weeks of rallying. Buyers managed to extend the range up slightly. Heading into today we are trading inside yesterday’s balance range.

Early on my primary expectation is for the two-way trade to continue. I will look for signs of a higher timeframe around the open, but they may not become active until the afternoon. I am looking for an open auction inside yesterday’s range to test down to 4272.25 before finding responsive buying back up to 4386.50. from there I will look for buyers to made a run at overnight high 4390.50.

Hypo 2 is sellers push through the low-end of yesterday’s range 4272 and continue working lower to target the naked VPOC at 4360 and then a stretch target of the gap to 4345.75.

Hypo 3 is buyers are aggressive early, take out overnight high 4390.50 and work toward the measured move target of 4417.50.

Note, the volume profiles and market profiles are quite similar today:

Oil prices are hanging out near the upper end of intermediate term balance. For the third time we are seeing responsive sellers defending the top bracket of this range.

Keep an eye on the support levels below, and how they are treated. A slow, 2-way auction at these levels suggests buyers are still interested enough to put up a battle. A knife through could suggest a shift in perception—perhaps a higher timeframe coming in and disrupting price.

Note—due to Monday’s holiday, the energy inventory reports are scheduled for tomorrow.

Key levels below:

Today was comparatively slow. It seems most participants are out fueling their last dose of vice before hunkering down for a good Christian cleanse. The three day weekend transforms into the five day weekend and what we’re left with is a slow drifter in the Nasdaq exchange.

17.75 points is borderline catatonic and after making money in the first 30 minutes of trade opportunity all but dried up. From then on I was managing existing positions, listening to podcasts, and other productive non-trading desk activities.

There was little for me to do. I closed out some February risk that faltered, perhaps a play too conservative, and took a scale in oil.

This is OPEX. We have FOMC tomorrow afternoon. Stay sharp and expect the market to exact some sort of punishment on the weary hung-over pagan types tomorrow. And if that doesn’t happen, don’t be surprised either. Do not let any initial impression knock you off your feet. Instead, step back and logic your way through it.

Nasdaq futures are pairing back some of their overnight gains as we head into cash open. The overall structure is balanced on a normal range for Globex but on slightly abnormal (2^nd sigma) volume.

At 8:30am Empire Manufacturing came in lower than expected and introduced some selling to the market. Also on the agenda today are NAHB Housing Market Index at 10am, Fed’s Plosser speaking at 12:45pm, and Net Long Term TIC Flows at 4pm. Traders will also focus on tomorrow afternoons FOMC minutes which are just on the horizon during this option expiration week.

Taking to the charts, we see buyers probing up above prior swing highs after chopping through a multi-month range dating back to late October. Thus the long term is neutral-to-bullish—the risk of mean revision back into the range is still present.

Intermediate term we are bullish. Price and value have been migrating higher for over two weeks. Along the way we left some open gaps and naked VPOCs. Friday we printed a normal variation after sellers could not range extend lower and close the overnight gap. Instead we traded higher into the weekend.

Heading into today, my primary expectation is for sellers to push into the overnight inventory and test down through the overnight low 4364.50 to tag the NVPOC at 4360. Here I will look for responsive buyers to take us back up to Friday’s close 4377.25 then take out the overnight high 4385.75 to target the measured move up to 4391.25.

Hypo 2 is buyers defend around Friday’s close 4377.25 and continue exploring higher prices. Take out overnight high 4385.75 and measured move target 4391.25 to begin working toward 4417.50.

Hypo 3 is sellers aggressive and overshoot the NVPOC at 4360 to test the LVN at 4353 and then eventually close Thursday’s gap down to 4345.75 with a stretch target down to 4326.75.

These levels are highlighted on the following volume profile chart:

With the way oil is balanced on a volume peak here at $53, there is potential for a two dollar move in either direction. The pockets on either side of our current price are conducive to an accelerated move. See below:

The short term levels hindering this exploration move are the value areas shown on the current market profile:

Everyone is different. We all have our own strengths, resources, and abilities and success in trading is becoming aware of these facts and using them to your advantage. Being among others who have a similar pursuit makes sense, but any attempt to mimic them exactly is likely to result in frustration.

As a full time trader I advocate a few ways of achieving this. Foremost, keep as many details as possible about your actual trades. Some platforms are better at this than others. For example, one of the great tools Stage Five offers is a Trade Analyzer tool. It automatically records harder to capture data like maximum favorable excursion, maximum adverse excursion, time in trade, and time between trades. These stats can help you spot issues and also when your optimal performance window exists. But you can keep these stats on your swing trades too, and the time resources you commit to it will pay huge dividends.

Another useful tool is recording your performance. Use a screen capture to record your charting computer during the day so you can review the tape. You can speed the tape up and pause it to watch your performance much like any high level performer would. You can also use a laptop cam to record yourself and pick up on postural cues, abnormal breathing, and more.

Finally, keeping a journal where you detail not only why you took a trade but also what you were feeling. I know this sounds a bit gushy but you will encourage introspective and help you improve your ability to flow. Just as important as keeping a journal is consistently reviewing it for themes.

Subs, this week’s Strategy Session is out. It is an honor to produce and I sincerely hope it adds value to your trading.

Trade’em well this week, and if you have any questions about these ideas and/or want additional resources to work through just drop a comment below.

People ask, “Why are you always dealing in the hottest issues? What do you think of [insert beta 1.0 stock]?” It is likely they never press 50% common stock gains.

Here we are, FEYE earnings out of the way, and my cost basis is 50 deep. Now what? I’m invested, and cyber terrorists are everywhere. One day your children will graduate with a finance degree, pull up a FEYE weekly chart, and WISH they were around to buy down on those lows. It will look like it was a no-brainer, simple decision.

And, to be frank, it was one of the mildest momentum rides of the last six months.

Now I love trading Nasdaq futures, I love it. The open is pure auction flow. But my efficacy and navigation are limited up at swing high, and aside from some of the basic trades, it is time to focus more on MoMo.

It is time to whip some charts together and take some clean risk.