Gap-Up Puts Buyers in a Tough Position

Some individual stock trade ideas are cropping up

Technical Edge — 

• NYSE Breadth: 64% Upside Volume

• Advance/Decline: 52% Advance 

• VIX: ~$20.75

Gap-ups in a tough tape put bulls in a tough position. That’s as they don’t get a very good R/R setup.

Look at the SPY for instance. It’s gapping up almost 1% in the pre-market. Do buyers then chase the open and get long? If so, where do they put their stop?

I’d much rather buy a down open that reclaims the prior day’s low and at least gives us a setup with a defined risk point to trade against. With that, let’s see if today’s rally fizzles out or if it’s got legs. If it’s the latter, we can look to buy a dip into some of the intraday moving averages (like the 10-ema on the 30-min chart for instance). If breadth is strong — 70%+ — then that may be a reasonable approach for the day.

Otherwise:

S&P 500 — ES

My gut says not to be too trusting of the rallies, even if the market puts together a multi-day gain. That said, we are oversold and the market has been finding its footing. 

See if the ES can reclaim the 50-day at ~3890. The better R/R selling opportunity is at 3920-ish, where the ES finds a key pivot level and the declining 10-day moving average. 

On the downside, keep 3855 in mind. That’s last week’s low and we’ve closed below it in both sessions so far this week. It also marks today’s Globex low. If the ES loses 3855, it’s not a good look. 

SPY