Trading Notes for Today, August 14th

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. Tuesday gained momentum as the day moved forward. The move from Apple helped the upside of the NASDAQ again and the S&P 500 index benefited as well. The stock was up nearly 5% on the news of a new iPhone release and Carl Ichan stating the company was undervalued and he was taking a large position. XLK, SPDR Technology ETF benefited as well and broke above resistance at the $32.30 level on the day. The VIX index retreated as well showing more positive momentum for the market index. Overall a positive day with the NASDAQ gaining 0.4% and the S&P 500 index up 0.3%.
  2. July Sales data was positive keeping the string alive at four months on the upside. The overall data was positive as revisions for June helped as well. Fed’s Lockhart stated that there is no certainty of the Fed cutting stimulus in September. If the Fed cuts the expectations are rates would rise (see Tuesday’s move) and the dollar will gain (see Tuesday). Despite Lockhart’s comments the belief is the cuts will take place.
  3. Treasury yields jumped 9 basis points to 3.75% on the 30 year bond, and 11 basis points to 2.71% on the ten year bond. This put some volatility back in the bond market. Oil moved to $106.56 and holding and it seems to be willing to build a trading range of $103-108. Gold gave back $14 to $1320 after moving higher on Monday. It remains near resistance of $130 on GLD. The dollar held $21.90 support (UUP) and continued higher again today and it was enough to keep traders on their toes. The short dollar/long euro play was taken in the two egg model. Watch this move towards the stops.
  4. The global markets have traded higher with Europe (IEV) gaining strength and hit new 12 month high. China managed to regain its upside mojo on positive economic data. GXC was up 6.1% the last four 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 $39.97. Australia (EWA) was up 5% the last four 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 which moved above $62. Global markets remain positive and worth owning currently.
  5. 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. Tuesday XLF held and showed some positives in the banking sector.
  6. The S&P 500 Model is updated. The stops on our positions are set and we are watching the extend move higher short term. We are watching 1675 as the level to hold short term. Mange your stops and see how this plays out going forward.
  7. The Sector Rotation Model is updated. This is still a choppy market and one to respect short term. We did hit stop on KBE and YUM as the volatility picks up in both. After the negative move lower in banks they did bounce back. We added a position in EEM to the Model as well today. Choppy markets create choppy results.
  8. The ONLY ETF Model is under invested, but it better than attempting to time the micro trends or false moves based on emotions and news. 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.
  9. 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. Nice move on Tuesday above the $42 level. Manage the risk, but give some room for the move higher.
  10. Too much talk about the downside of the market. Analyst and the talking heads in the media are beating the drum. This can be a self-fulfilling prophecy so manage your risk, but respect the trend in play. Set you stops accordingly and focus on what is happening versus what others are saying.

Pattern Setups For Today:

  1. TBF – Ascending Triangle Breakout – Interest rates rose again on Tuesday. Look for a breakout confirmation on the inverse ETF. $32.70 entry.
  2. MU – Double Bottom Breakout – Semi’s broke higher on Tuesday helping lift the stock through the entry point of $14.15. The target is $16.15 and look for entry on test of the move near $14.50. Don’t chase the trade, but look for the test entry and opportunity.
  3. AMZN – Set up short on break of support. Entry at $290 with stop at $298.
  4. Follow up on previous posts:
  5. AAPL – V bottom breakout with test. $465 entry. Broke on Monday and looking at the Oct $470 call. Added the position on the open Tuesday. Carl Ichan’s announcement resulted in a big move for the trade. Raising the stop to $25 on the move following the announcement.
  6. NKE – Flag – entry $66.60. Watch for break higher and continuation of the move.
  7. SOXX – descending triangle – support at the $63.75 level and $64.75 is the entry point. Hit the entry point on Tuesday and the stop is $63.80.
  8. 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. Tested some on Tuesday, but still watching how it move.
  9. 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.
  10. WFM – Consolidation, double bottom. 56.20 entry on breakout higher.
  11. 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.
  12. COG – Pennant. Entry $77.80 with continuation of the uptrend breakout.
  13. 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.
  14. 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.
  15. 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. Hitting stop level on intraday trade.
  16. VMW – Flag gap higher. looking for a continuation of the move from the consolidation. Entry $84.10.  Modest upside.
  17. PFE – double bottom. $29.70 entry on break higher. Testing lower with stop at 28.90.
  18. 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. Hit stop on missed sales in China… love surprise announcements.
  19. 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.
  20. 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.
  21. 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 broke lower from the pennant. Watch and manage your risk. As stated yesterday we are going to establish a hedge to protect the downside risk. Add a December $37 Put on FB @ $3.35. In addition sell a December $37 Put on FB @ $3.35.  If the stock falls we can put our stock to someone at $37 prior to expiration in December.

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.