Wednesday Prep

The bullish move in yesterday’s overnight session did not give back after the open and once the breakout above the prior day triggered buy stops, the momentum continued and accelerated higher, with underlying stock momentum and breadth strong. The NYSE advance/decline line had hit 2000 by lunchtime which was a very strong tell that things were more likely to continue, in the absence of any news. The jagged volume profile is in keeping with a trend day and as new shorts enter the market their stops continually get triggered helping the move. Earnings season continues to be positive in general, and NFLX had blowout numbers after hours.

One of the best buying opportunities was the pullback to the overnight high (2774.50) about an hour after the open, as positive momentum and market breadth was sustained and prices were close to breaking out of the multiple inside days which was going to force short covering. I’ve learnt the hard way, as most people do, to not fade these types of days but just get onboard the move on pullbacks.

Overnight so far has seen an attempted move higher and reversal, with the range currently 2805.50-24.25 versus settlement at 2817.75. Yesterday’s profile left several areas of single prints as the forcing action of the short squeeze left little time at breakout points. We could see an attempt to back and fill some of these, though odds favour that the move is either going to consolidate at higher prices or continue higher, over there being a complete reversal (news headlines aside).

Zones for today are below. My main expectation is for buyers to step in on dips and continuation higher if we see the Nasdaq and Russell in alignment. Note that the 50% retracement of the all time high to the recent swing low is at 2829.75, so worth watching order flow closely if it gets there. The 2798.00-00.50 zone has potential to see support on first test. Failure to hold that puts price back inside the last Wednesday’s range and questions the strength of the breakout. As always the underlying momentum and market breadth is going to help context to trades.