Trading Notes for Today, July 3rd

The Watch List and Play List have been updated for today. Review and execute according to your risk and investment objectives. If you have specific questions on any posts please forward them directly to Jim@JimsNotes.com.

Sectors to Watch:

  1. The broad market indexes remained at resistance of 1620-1630. Direction or conviction on a direction remains a challenge for investors. Do we move higher or test lower again? What we are watching today on the S&P 500 index? Buyers attempting to push markets higher, simply put. The futures however, are pointing to the downside. The global markets get the credit once again for the direction. China news is bad, Egypt is getting worse and pushing oil higher and Portugal bond yields are spiking on fear of collapse. In other words news is driving the direction and this may add up to nothing more than an event. Typical day at the office. The anxiety will be heightened with this being a holiday shortened trading day with the markets closed on Thursday to celebrate Independence Day.
  2. The S&P 500 Model is updated relative to our outlook for the trading week. I am still looking for a test or continuation of the downside trend. Monday had other ideas as buyers continued to push the upside of resistance, but the late day selling is still a sign that conviction is missing for a continued move higher. Tuesday opened higher as well and again the market sold lower and bounced in the last hour of trading to end the day flat. The Watch List is updated and we continue to look for a  retest of the lows for now.  Both XLU and IYR sold lower as interest sensitive assets continue to come into question short term. VXX was also updated relative to the entry point. Still taking a cautious approach looking forward.
  3. The Sector Rotation Model is updated to address this weeks trading plan. The Watch List is updated for Tuesday’s trading. The downside is still the trade set up and watch today as it get a negative start. The short term scans show only 7 ETFs with negative momentum and 21 ETFs with positive momentum. This has shifted significantly over the last week, but as you can see the lack of clarity on leadership is impacting the opportunities to put money to work. We have to be patient for now.
  4. The ONLY ETF Model continues to take on the higher risk trades that we are finding and has done well with them to this point. We added the trade in Japan (EWJ) and Short China (FXP) on Tuesday. Treasury bonds are attempting a bounce and I we added the leveraged ETF TMF Monday to the model. I also added IWM as small caps continue to look positive. Raised the stop on QLD to protect against any reversal short term and we adjusted other stops in the model. Still managing the risk of the short yen trade as well.
  5. The ONE EGG Model has been set on the short play of the NASDAQ and is near the entry point. Negative open set up today watch to see if the entry is hit in early trading. This is a leveraged ETF and expect some volatility. With the holiday may add only 1/2 position to manage the risk into the shortened trading week. This is the same trade setup for the ONE EGG Fund/Annuity Model.
  6. The Fund/Annuity Model is defined similar to the Sector Rotation Model above and will take on the same short NASDAQ and S&P 500 index trades if the entries are hit.
  7. Manage your risk into the shortened trading day. The issues in the news make the volatility higher and with an extra day of the markets being closed can cause more volatility when they reopen on Friday. Our bias has been to the downside and the news is pushing the markets in that direction temporarily. All trends need catalyst and this may be the one? Be patient and don’t speculate.

Pattern Setups For Today:

  1. No New Posts into the shortened holiday period.
  2. Follow up on previous posts:
  3. URBN – V bottom. Break above resistance at $40.53 and target of $42.65. Made move Tuesday and held for entry.
  4. IEF – bear flag. The downside play for the bond is set up short term. PST is the inverse fund with the same setup (bull flag). 29.75 entry.
  5. FXE – bottom reversal. $129.50 trade. Reversed and closed lower
  6. FB – ascending triangle. $24.90 entry on breakout. Still testing the move higher? Watch
  7. TJX – downtrending channel. $50.80 breakout and resistance break.
  8. SJT – $16.10 break from trading range.
  9. RF – Consolidation breakout test. $9.36 breakpoint and test. gapped higher on Monday.
  10. AAPL – bounce off support – resistance $403. Clears on volume look for upside trade. $405 August call option taken on Monday $16.50. Failed to break above $420, willing to take half the trade off here.
  11. PMCS – Trading range breakout. $6.25 is the top end of the range to break above which closed higher on Thursday. $6.35 Entry if the move holds (Friday entry). Set stop at $6.14.
  12. UNG – support break $19.90 short set up if stays below this level. The set up for downside entry play followed. $19.70 entry was hit. $19.15 stop on UNG or KOLD $84 entry and $86 stop.
  13. KRE – Triangle pattern. $32.90 entry on the move higher. Hit the entry. Use $34 as the stop on the trade. Achieved the target — raise stop and manage the trade.
  14. AMZN – Breakout test. $270 was the break from the consolidation range. Took the trade entry $273. (hit entry). Stop $273.
  15. KBE – Triangle pattern. Break to the upside trade at $28.50 entry. Watch the downside. Hit new high and stop at $28.75.

Facebook (FB) Update:

  • Facebook – The sentiment towards the stock has been shifting as seen in the found support at the $22.80 level and is in the process of moving to the top of the trading range. Move above $24.75 look to add as small position.
  • Added position at $24.75 Friday (1000 shares). Stop is $22.75 for now. A move back above the 200 day moving average we will add to the position.

NOTE: The pattern trades above are setups that I see for a potential swing trade or trade opportunities. Some will fail to follow through on the pattern, some will break and trade according to the pattern. The key is to use discipline in the trades. Entry, Exit and Target on all trades is vital. I am posting these as opportunities that I see when doing scans daily. You can use them as a teaching tool or you can trade them, either way please use discipline.

All investing comes with risk. Our job as investors is to manage the risk. Markets remain choppy and directionally challenged for now. Keep your focus and discipline in place.