Trading Notes for Today, August 1st

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. July comes to a close and we start a new month! Data will tell how strong or weak economy was in July. Today we start with the ISM manufacturing data and tomorrow is the jobs report for July. Both are expected to improve and show growth for in the economy. They could be important to the continuation of the uptrend and provide a catalyst for investors.
  2. The Fed offered no hints or ideas on stimulus cuts and slightly downgraded the economic outlook today. In other words nothing changed, as we stated in yesterday’s notes none were expected. The markets gave up most of their gains following the release and Treasury bond yields dropped lower. That in turn helped the interest sensitive assets that sold off early in the day prior to the release. Does this change anything? Not really, but it also doesn’t help either, and investors were hoping for a hand up from the Fed. Regardless the futures are up on China’s PMI showing improvement and the perception or change in speculation that the Fed will delay cuts in stimulus. Watch how this plays out during the day and if the upside has staying power.
  3. Healthcare was on our watch list for the week and it dropped 1% on Tuesday and rallied 1% Wednesday. The pharma stocks (XPH) was up 1.3%, the providers (IHF) were up 0.8% and medical devices gained 0.6%. All were higher prior to the announcement. The upside remains in play and we will continue to watch for opportunities in the sector.
  4. Technology is on our watch list for the week as well and it has been equally up and down. SOXX gained 1.2% on Tuesday helping XLK clear the entry point at $31.75. Wednesday the semi’s continued higher and gained 0.5%, but down from the gains earlier in the trading day. The sector remains volatile, but we will manage the risk of the trade and watch for the upside catalyst from the sector. Banks (KBE) are holding the 10 day moving average, but the 1.5% gain the sector had posted at 10:45 am Wednesday all but disappeared before the close. We are still watching how it plays out today.
  5. Oil jumped 2% on speculation of increase in demand…again. After falling back to $103 on Tuesday the price closed at $105.15 Wednesday. The news from China has it up 0.6% in the pre-market. The dollar declined on the FOMC announcement holding at the $22.10 mark (UUP) in response to the Fed announcement. But, it is also trading higher today on new globally. Gold is still out of favor, but bounced on the Fed announcement that that will be worth our attention on the trading day.
  6. The S&P 500 Model is updated for Thursday’s trading. The stops on our positions are set and we are watching the extend move higher for weakness. Wednesday’s FOMC results pushed the index back to neutral after posting a small gain. The futures are higher on Friday, but we have to be patient and let this set the course. We continue to look for opportunities, but content with the portfolio currently.
  7. The Sector Rotation Model is updated. Managing the watch list as the test or topping continues. Still scanning for reasonable opportunities short term, but for now content to see how the short term unfolds. Adding banks to the watch list as they are poised to make a move higher.
  8. The ONLY ETF Model continues to take on short term trades offering short term upside. Technology (XLK) was also added on the upside as an opportunity on the test lower from earnings. China is on the watch list as the upside is getting a boost from the government comments on stimulus.  Biotech (XBI) hit entry on Tuesday and continued higher Wednesday. Still scanning for what makes the best opportunity.
  9. The ONE EGG Model scans are coming up with international ETFs this week along with the metals and mining ETFs. The momentum shift towards these sectors is interesting relative to the outlook near term. Australia (EWA) offers the best set up on the chart and isn’t currently overextended. Not panning out as planned and we have been running new scans for the best opportunities. SRS, DGAZ, TBT, and short (IWM) small caps have been coming up in the runs thus far. Watching for clear direction short term. TLT broke lower initially on the day as investors continue to lack confidence in the Fed. Looking for another leg lower in bond prices as yields rise? That is the question to answer. looking at TBF as the Egg on this development.
  10. As long at the trend higher continues maintain your positions and manage your stops.

Pattern Setups For Today:

  1. 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.
  2. VMW – Flag gap higher. looking for a continuation of the move from the consolidation. Entry $84.10.
  3. Follow up on previous posts:
  4. QQQ – cup & handle. break to new high at $75.70 watch for entry on move if it develops. Opened higher (added trade), but struggled into the FOMC results. Watch for entry follow through today.
  5. IAG – flag pattern. Look for the upside to continue if gold breaks higher. $5.40 entry. Still watching
  6. PFE – double bottom. $29.70 entry on break higher. Testing lower today.
  7. AAPL – Break downtrend line? Ready to move higher. The break of the downtrend is a positive on the upside and confirms the reversal off $385 support. $445 September calls is the trade. Added 10 contracts at $16 on Tuesday. Watch and place stop at break even on the follow through Tuesday. Flat on day.
  8. C – Testing $51.30 support. Watch for reversal and entry $52.25. took entry on Wednesday in positive early trading before the Fed release.
  9. Refiners are consolidating in trading range patterns. Watch to see if they break higher as oil prices contract. VLO, TSO, WNR, PSX. Tuesday TSO put itself in position to break higher, $55.80 entry (added on Wednesday). Added PSX at $59.90 Wednesday as well.
  10. YUM – Weekly chart 16 month trading range breakout? Move above $74.10 looks interesting with a longer term outlook. Not making the move higher yet.
  11. 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. Early test on Monday and follow through higher with entry 19.50. $19 stop on play.
  12. CRM – Pennant upside. Nice move from consolidation at $39 and now digesting the move and looking to move higher short term. Watch today for upside to resume. $42.75 entry and holding for now. Stop $42.75.
  13. XNPT. pennant – trend reversal and set up to break higher. $5.75 entry. Hit entry and watch for follow through on upside. Stop $5.30.
  14. 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 $81.50.
  15. RAX – cup and handle. entry at $42.35. Could fill the gap back towards the $50 mark. Nice break higher and added play. Testing? Nice continuation move on upside. $44.50 stop.
  16. GXC – China – bottom reversal. Resistance at $66.30 and added on the move through this level. Watch the volatility in the trade as China is dealing with slowing economic data. Stop 66.50. Finally a solid move higher for the trade up with some testing on Wednesday. Manage your risk .
  17. GLD – double bottom – looking for break above the $124.50 mark. Moved through the entry added. Big move on Monday! Stop at $125.10. Resistance or profit taking? Either way manage the position. $137 target.

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.
  • Added big move higher on Tuesday and is getting overextended. Watching to see how this plays. We will look at a put option to protect the current gains. Tested on Wednesday with some profit taking down 2.1%

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.