Notes, Opportunities and Trades, April 10th

Jim’s Market Notes:

Story line for Thursday was the energy sector moving up 1.6%. It puts the losses from Wednesday back on the chart, but the confusion is keeping investors from committing. Healthcare stocks were up 0.7% as the second best performing on the day and moves XLV past the $73 resistance mark. Earnings are in the wing next week and it should set the tone for the markets looking forward.

Semiconductors (SOXX) were up 1.3% to regain the 50 DMA and inch higher. A follow through today would be helpful in the latest attempt to regain the upside move. INTC ended the bid for ALTR with both companies moving up. Plenty of rumors now on the takeover options in the space. Watching.

Retail (XRT) mixed on earnings news. BBBY fell 5.4% in response to their Q4 numbers. WBA was up 5.6% on earnings. This has been a positive sector and the trend remains on the upside. Plenty to watch with the March sales report due out on Monday.

Software (IGV) moving back near the previous high and in position to break higher, but failed to make a move on Thursday.

China (YINN) parabolic move continued Thursday. Money flow into the Hong Kong (EWH) has been on fire. We recommended raising stop and taking some profits.

Markets are still involved in a tug-o-war and investors are looking for the next catalyst. Patience is still recommended short term.

SECTOR NOTES OF INTEREST:

S&P 500 Index (SPY) Holding above the $204.50 level and consolidating again. Need to clear $209 on upside. Trendline off the October low is in play. Opportunity is in the break from the range or consolidation on volume.

NASDAQ (QQQ) $104.83 support and $106.75 breakout is the opportunity on the upside. Hit the entry point as the large caps lead the index higher. Use $104 support at the stop on the upside move.

Russell 2000 (IWM) tested the $123.75 mark on Thursday and bounced back on the day, but the downside was of interest. I would use $123.25 as my stop if the downside steps up. Opportunity is the break higher $125.50 willing to add to the position.

Volatility Index (VIX) settling into a range of 12.75-17.10. Neither side shows much in terms of conviction and not even a negative jobs report tipped the scales. Investors are becoming lethargic again. Opportunity is break from the range with some momentum.

Transportation (IYT)¬†Watching as indicator for the broader indexes. Moved back to the bottom end of the range with support at the $154 mark broken on Monday, but recovered on Tuesday and some follow through on Thursday. Closed back above¬†the 200 DMA… Gained some breathing room and still not showing signs of buyers.¬†Opportunity is if the broad market rallies along with transports. $157.50 entry.

Dollar (UUP) held the $25.25 level of support. gapped lower, but managed to bounce back with solid follow through on Thursday. Dollar getting strength back Opportunity is short the euro (EUO) and the yen (YCS).

Bonds¬†(TLT)¬†Rallied on the FOMC news… the endurance question¬†has been on the table the last two weeks. Weaker jobs impacted initially, but that didn’t last. Thursday it was the inflation factor or rumored factor that push yields higher and the bond lower. This changes the land scape with the below the $129.50 support. Opportunity is the breakout. Confirms TBT is the trade relative to the bond. $42.65 entry.

Crude Oil (OIL)¬†Simply put volatility within the trading range ($42.60-53.80). Catalyst is in play… speculation about demand rising… oops the data showed supply is still rising not demand. This pushed oil down¬†and held the $10.80 level, but watching as traders push it back and forth. Energy stocks rose however to lead on Thursday.

Semiconductors (SOXX) Need to clear the 50 DMA on the upside if it is going anywhere short term. (Did that on Thursday.)$92.58 support and $95.15 resistance (closed above that on Thursday). Decision time. $95.70 is the entry if we follow through on the buying today.

Financials (XLF) bottom of the range again with $23.75 support. Remains stuck for now. The buzz about the Fed not hiking rates is taking a toll on the sector outlook and thus it is stalled. FOMC minutes helped on Tuesday, but not enough. Opportunity is shaping up on the downside.

Biotech (IBB) tested 50 DMA bounced. Needs catalyst and if the upside gains traction in broader indexes could offer momentum back to the sector. $342.80 is level to watch on upside opportunity. Hit the breakout and buy opportunity on Wednesday. Now needs to clear the $352 resistance with confirmation. Stop at $340.

Solar (TAN) second test of the move higher. $42.30 support, held $43.75 level and bounced back to new high on Monday. I like the upside continuation in the sector looking forward. Nice upside on Thursday and raise stop to $46.

Housing (ITB) $28.15 break from range confirmed and trade hit the entry point. Sector has positive momentum from the data… could be ready to move higher short term.¬†Tested support at $28 and held, but interest rates are bothering investors currently. Willing to give it some room. Opportunity beyond ITB… CCS, BZH, RYL, MTH, PHM.

Europe (IEV) Tested the $44.11 support. The stimulus from the ECB is in play… It will outperform going forward is the assumption, but we still have to manage the risk and the story line in place. This is a long term position opportunity my view and I expect plenty of volatility to go with it. Not for the faint of heart.

Energy (XLE) Sideways consolidation got a bump of 2% on Monday to break higher. The move above the $78 mark offered some short term upside. Trade tested Wednesday and moved back on Thursday. This is the volatility we stated to expect if you were inclined to be in the sector. Opportunity is to add on the test of the move higher.

Internet (FDN) testing the bottom of the range and bounced? I like the stocks to some degree better than the whole, but watching both. Scan the parts and look for the strength. TWTR gave back most of the gains. AMZN cleared resistance at the $382 mark. Opportunity is to continue the upside and break to new high near term.

China (FXI) still running higher on the stimulus speculation. Upside remains in play for now and we manage the stop$49.50 on gains today of nearly 4% making it a 10% gap higher the last two days. Manage the profit.

“Vision without action is a daydream… Action without vision is a nightmare.” Japanese Proverb.

Long Term Opportunities: 

Long term positions take time to manage and patience to let them unfold. The short term can be managed with hedging or trading off the longer term positions. The goal is to build the position and manage the risk. Sometimes the short term news and events cause anxiety… the goal is to mitigate the risk and protect the downside as we allow the stock time and room to grow. If you don’t like long term holdings don’t read the data below.
  • Facebook (FB) – $73.15 entry (10/16/14) added 1000 shares back relative to the long term outlook following the choppy drop in markets. Earning remain¬†good, but the outlook showed higher costs and has kept pressure on the shares to stay in the current trading range. >¬†Added to position: 500 @ $77.50 – 1/8< ¬†TODAY:¬†¬†Testing the move higher and bounced¬†at support $81.50.
  • Twitter (TWTR) – ¬†(1) Added 500 shares at $42.80 (10/28/14). (2)¬†Added 500 shares at $39.20¬†on¬†1/9/15. Use $45 at exit on shares added¬†(3)¬†Added 500 shares at $40.25 for trade Sold at $46.25 on 3/10/15. This is a long term holding, but we will trade on short term technical data if warranted. TODAY:¬†¬†Nice break finally above resistance and now looking for the follow through on the upside after the test on Wednesday.¬†
  • Bank of America (BAC)¬†Sold all positions as this has become a train wreck of news and write downs. Earnings are here and it may set up trade opportunity with some cheap options?¬†¬†TODAY:¬†¬†$16 calls for April as play on earnings would be interesting at five cents. Tells you what investors think… they expect it to be bad. So far they have doubled to ten cents on the calls.??
  • Whole Foods Market (WFM)¬†(1) Sold our first position for a $6.50 profit on 1000 Shares held from 11/20/14 – 3/11/15. The outlook has improved after making changes to the stores and adding new stores. The earning validated what I have been following for the last year and the company should be at the front side of a long term upside based on fundamental growth. I like the long term outlook for the company. TODAY:¬†We hit our stops, but still looking for the next opportunity as bottom or support is established.$51.50 is holding and could be near term bottom and reversal point.