Trading Notes for Today, August 13th

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. Monday was another negative day at the open, but managed to fight back near the even territory before the close. Japan’s economic data and Fed worries were hanging over the market, but that disappeared as Apple gained 2.85% on news of a new iPhone to be released in September, helping lift the NASDAQ into positive territory and the S&P 500 index near zero for the day. When it was all over the broad indexes remain challenged on direction and looking for some catalyst to drive stocks up or down.
  2. Treasury yields remain at 3.66% on the 30 year bond as the volatility remains calm short term. Oil moved back to $106.11 and holding and it seems to be willing to build a trading range of $103-108. Gold gained $20.70 to $1334.20 after moving lower the last two weeks, but found buyers to end last week and is now near our near resistance of $130 on GLD. The dollar held $21.90 support (UUP) and continued higher again today, nothing much, but enough to keep traders on their toes. The short dollar/long euro play was taken in the two egg model.
  3. The global markets have traded higher with Europe (IEV) gaining strength and hit new 12 month high. China broke below $34.20, but managed to regain its upside mojo on positive economic data. GXC was up 4.5% the last three trading days to bounce off support at $67.50 and leaves the uptrend off thee June low in play. The emerging markets reversed as well from the selling, but needs to break above $40 (EEM) to gain our interest short term. Today it pushed back towards that level closing at $39.72. Australia (EWA) was up 4.2% the last three days on stimulus as the central bank cut rates. A move above $24 (closed at $23.98) gets interesting on the upside. All of this news pushed the EAFE index (EFA) above $61.25 resistance with some testing on Monday, and it is the EGG Model play currently. Global markets remain positive and worth owning currently.
  4. Financials are a sector to watch this week as they turned lower, but seem to have found support at the $20.35 mark. There is hesitancy towards the sector as the government continues to attack the banks and brokers. Watch for the sector to maintain it’s upside momentum with volatility. A break below support would be a big negative to the broad markets short term. Looking at using SKF as a hedge against positions if the sector moves lower.
  5. The S&P 500 Model is updated. The stops on our positions are set and we are watching the extend move higher short term. The trade on the Volatility Index (VXX) is a hedge against the current indecision of the index and we are watching 1675 as the level to hold short term. Mange your stops and see how this plays out going forward.
  6. The Sector Rotation Model is updated. This is still a choppy market and one to respect short term. I like our positions in the model, but we have stops set to deal with a shift in momentum on the downside should it take place. We have added to the Watch List.
  7. The ONLY ETF Model is dealing with the VXX trade and giving it room to handle the swings in price. We are scanning and looking for the best opportunities in a sideways moving market, but sometimes the best trade is not trading. We are updating the Watch List and being patient going forward.
  8. The ONE EGG Model added the EAFE index or EFA last week. Nice bounce back from the early push lower. The outlook is still positive for Europe adding to the upside opportunity. Australia moved up and Asia was better with China on the upside again. Manage the risk, but give some room for the move higher.
  9. New trading week and hopes of more upside from investors. The Fed stimulus issues are still a worry for the markets along with the economic picture in both the US and Global markets. The goal is to be patient and let this all play out accordingly. No speculation and no guessing on direction… follow the trend and respect the risk of the current market environment.

Pattern Setups For Today:

  1. AAPL – V bottom breakout with test. $465 entry. Broke on Monday and looking at the Oct $470 call. ($18 max entry on option.)
  2. NKE – Flag – entry $66.60. Watch for break higher and continuation of the move.
  3. SOXX – descending triangle – support at the $63.75 level and a move $64.75 is the entry point.
  4. Follow up on previous posts:
  5. SLW – Bottom base. A break above resistance at $23.60 is the trade opportunity. Silver prices are picking up short term and this is a trade opportunity only. Gap open and watching still to see if it holds the jump higher.
  6. DXD – Short Dow. In the worst shape of the major indexes. Rolling top and break of support creates the short trade. $32.95 entry for trade with target of 33.95. Opened near the entry, but then traded lower. Still watching for upside confirmation of some selling short term.
  7. WFM – Consolidation, double bottom. 56.20 entry on breakout higher.
  8. MSFT – gap lower flag. Broke higher on Thursday above $32.20. Look for test and move higher. 32.65 entry on test of the move. Got the test and added a smaller position. Looking to add more today on follow through.
  9. COG – Pennant. Entry $77.80 with continuation of the uptrend breakout.
  10. VLO – Reversal off low. We were watch this and it failed to follow through on move above $36. Nice move higher. Watch for upside continuation and entry of $36.75. Hit early and moved up slightly.
  11. COH – Short play on gap lower pennant. Short entry at $53. Good sales data, but the negative bias from earnings remains. The downside play is worth watching. Added short Monday on the move lower following positive data.
  12. ED – Consolidation breakout at $60.50. Watch for upside to continue as utilities rebound from interest rate hikes impacting the stocks. Tested lower on day. Hit entry Thursday. Big move lower on Monday. Stop $58.75.
  13. GOOG – Test of uptrend line. If it holds the test of support and the 50 DMA look for upside trade. Entry $896 on bounce higher. Hit the entry last week. Sept 900 Calls $22.05 entry (10 contracts). Test lower, watch and manage your exit. $880 stop.
  14. VMW – Flag gap higher. looking for a continuation of the move from the consolidation. Entry $84.10.  Modest upside.
  15. PFE – double bottom. $29.70 entry on break higher. Testing lower with stop at 28.90.
  16. YUM – Weekly chart 16 month trading range breakout? Move above $74.10 looks interesting with a longer term outlook. Took entry at $74 Monday. Stop is $72.75. Tested move higher.
  17. CLF – Bowl pattern breakout? $19.20 was the resistance level cleared. Watch for test of the move and opportunity to add a position in the stock. Target is $23.50. Entry 19.50. Gained 8.9% on Thursday and 10.6% on Friday! Watch and manage the profit on the trade. Hit target… use that for the stop.
  18. CRM – Pennant upside. Nice move from consolidation at $39 and now digesting the move and looking to move higher short term. $42.75 entry and making the move higher. Solid gain last week. Stop $44.
  19. IHI – Breakout test. The break from the trading range tested and a follow through on the upside. The entry was $81. Moved higher with nice follow through. Move stop to $82.75. Managed the open bid (at or near the stop) removed as we recommend, and let it play out on the day.

Facebook (FB) Update:

  • Facebook – The sentiment towards the stock has shifted as it found support at the $22.80 level and moved to the top of the trading range before breaking higher and adding positions. The move above $24.50 was entry for position.
  • Added position at $24.75 (1000 shares). Stop is $22.75 for now. A move back above the 200 day moving average and we will add to the position. (Added 1000 shares at $25.65 on break) Sentiment towards the stock short term is gaining. Consolidating at the current levels and holding. Still like the upside near term as it is gaining positive comments from analyst.
  • Earning beat expectations on Wednesday and the stock jumped 29%. Here is where greed versus objective comes into play. This is a long term play and if the gains hold up today in trading the upside gain on the position is tempting. We will now have to design a way of protecting or realizing part of the gain short term. Be patient with the position on the upside as you are on the downside. Interesting link on earnings for facebook
  • The stock is forming a pennant on the gap higher from earnings. Watch and manage your upside risk. Testing the new high with the current trading environment. Looking at how to hedge the play. Looking at adding a put to hedge and selling a put to add shares on a test and break higher.

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. Keep your focus and discipline in place.