Notes, Opportunities & Trades, April 9th

Jim’s Market Notes:

The Crude oil and the Fed continue to impact the existing story lines¬†that are attempting to reverse trends. That, as we have discussed, is not an easy process and investors want to see facts and validation… not just speculation. Speculation is good for starting the reversal, but the data has to back up the speculation or investors look elsewhere. Tuesday was one of those days where the fact didn’t confirm the speculation and it reversed the direction in oil. Equally the FOMC minutes showed a Fed that stands ready to raise rates with lesser data points than what was portrayed following the meeting. Both stalled the respected trend reversals and gave cause for a pause. ¬†Now we watch to see how it unfolds and then trade accordingly.

Software (IGV) moving back near the previous high and in position to break higher? SPLK, FEYE, BSFT, PFPT all posted positive moves in the sector.

Biotech (IBB) nice reversal off the 50 DMA. The test lower is still in play, but a follow through today on move Wednesday goes a long way technically. SCMP, CEMP, DYAX, BIIB and GERN all posted positive moves in the sector.

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

S&P 500 index day attempting to fight off the sellers… the few willing to show up, but¬†still not able to get through the 2092 resistance. Watch and see how it unfolds.

I stated this would be a fun filled week and it has not disappointed to this point. Alcoa kicked off earnings season last night as earnings met expectations, but revenue was on the light side leading to it trading lower after hours. Patience remains the theme as the marks chop around in the current range.

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. $198.53 could be the next support level on downside. 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 if it continues to unfold. Watch and see how this plays out.

Russell 2000 (IWM) tested the $121.25 level and held. Moved back above the $123.75 mark and I would use that as my stop if the downside steps up. Uptrend off the October lows still in play. 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 some on Tuesday. Closed below¬†the 200 DMA… Gained some breathing room and still not showing signs of buyers. Short trade or Put options is the opportunity.

Dollar (UUP) held the $25.25 level of support. gapped lower, but managed to bounce back on the day.¬†Fed indecision, weaker jobs, weaker economic picture… weaker dollar. Long euro trade may set up this week.¬†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. Watch for move in bonds. $132.40 is resistance on TLT and $129.50 support. Opportunity is the breakout.

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. This pushed oil down 6.6% and back to news… speculation… facts? I stated it is better to validate that speculate on the trades.¬†Breakout higher on facts I am in.

Semiconductors¬†(SOXX) Need to clear the 50 DMA on the upside if it is going anywhere short term.¬†$92.58 support and $95.15¬†resistance. Decision time.¬†Patience as this unfolds… downside still looks attractive? validate with move below support.

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. 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. Watching the doji on the close Wednesday.

Housing (ITB) $28.15 break from range confirmed on Thursday 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. 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 put the sector on guard. crude supplies wagging the dog currently. 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. Opportunity is to test and continue the upside.

China (FXI) still running higher on the stimulus speculation. Watching for test and opportunity. Upside remains in play for now and we manage the stop$46.50. Gapped up 6% on high volume trading in Hong Kong. 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.
  • 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.