Trading Notes for Today, August 21st

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. Bounce back from Monday’s selling, but will it last? Not likely at this point, but we will see how the downside unfolds moving forward. The Russell 2000 index led the upside with ¬†gain of 1.5%. The NASDAQ was up 0.7% and the S&P 500 gained 0.4%. Volume was a bit on the low side and that leaves the question of how much more will we bounce before the sellers make another run at the downside? Proceed with caution is my choice, one day at a time.
  2. Semiconductors – The index is testing support and equally important, the sector direction. As the sector has gone so has the market trend. SOXX Support is $62.30 and if we hold and bounce that is positive for the broad markets as seen on Tuesday with a 0.7% bounce in the index. Watch to see how this unfolds moving forward and the resulting opportunities up or down. SSG is the short play and SOXX is the long play.
  3. Bounce and more downside? I am leaning towards that bias currently and I would use the bounce to exit positions that are not holding up well in the current environment.
  4. The VIX index moved back towards the 14.3 level again on the bounce. Still looking for the volatility index to push higher as the uncertainty looking forward gains momentum. Manage your risk of VXX position. Tuesday was a good day to add to the position if you had not done so already.
  5. Treasury yields were basically flat at 3.85% on the 30 year bond, and 2.81% on the ten year bond. The worry over the Fed cutting stimulus in September remains a challenge for bonds. The TBF trade is still worth holding for now. Oil moved to $105.11 or down 2% on Tuesday. It is still holding within the newly established trading range of $103-108. OIL closed at $24.80 and above the near term support at $24.60. Watch how this unfolds tomorrow as a short trade may be worthy of our attention in DTO at $33.20 entry. Gold gained $6 to $1372 and still above resistance at the 1340 level. GLD continues to move towards the target of $137. The dollar moved below $21.90 support (UUP) as all the Fed worries creep into the dollar. Watch and see how the dollar plays out near term, more downside will offer a play in UDN.
  6. The global markets gave up 0.13% (EFA) Tuesday, but held support. That was a positive sign in reference to our comments on global markets following the US lower. Europe (IEV) was up 0.35% Tuesday showing positive response today. China (GXC) was down 1% in response to the weakness in the emerging markets. The emerging markets (EEM) were down 2% the last two trading day and leading the way lower on fear stimulus cuts will impact the sector.
  7. The S&P 500 Model is updated. Stop were hit and exits made over the last four days of trading. The bounce today was positive, but didn’t change my outlook short term. We added to VXX on the move higher in volatility (lower on Tuesday) and added SH to hedge the¬†balance of the¬†positions in¬†the model (lower on Tuesday). We are holding here for now and we will take what the market gives going forward with our downside protected and our stops in place.
  8. The Sector Rotation Model is updated. The Short Dow play remains and I adjusted the stop for the move. Looking at some downside opportunities on the bounce for entry points.
  9. The ONLY ETF Model updated and heavy in cash. SKF (short financials) advanced nicely on Monday, gave it back on Tuesday and looking to add to the position on Wednesday with the FOMC minutes. If the downside continues we will add more short opportunities this week. Patience is the key.
  10. The ONE EGG Model in cash and looking for the best short opportunity to start the week. Close on the entry for QID Monday, but didn’t add. The opportunity was there intraday to add Tuesday, but we held for the open today to see how this plays going forward.
  11. The market is focused on the news and not the longer term outlook. That is sparked by the consensus that the second half of the year will see the economy improve. So far that has not materialized and the nerves are building. The short term trading range and top is keeping us heavy in cash, but looking for the catalyst of direction short term. The bias is towards the downside and that is the direction we are leaning, but the market still has to validate the move. We got a small bounce on Tuesday and that puts me on alert for the downside to resume as we go forward.

Pattern Setups For Today:

  1.  The downside is in play. I got the bounce I was looking for short term and now it is a question of how much bounce we get and then the downside resumption. Managing positions with a downside bias for now.
  2. EWJ – Triangle. Break lower on the news of retails sales weaker. Is the ETF heading to support at $10.65? Short at $11.20 is worth the downside trade if the break lower stays. EWV is the inverse ETF (low volume).
  3. LL – Cup & Handle – broke above the 98.50 high and held into the close. The homebuilder sector bounced again on Tuesday and helping the sector. Watch for test of the move and continuation of the breakout with target at $107 and entry of $99.50.
  4. NVDA – breakout test. broke from the trading range and tested ($14.85 key level to hold). If holds the move entry at $15.
  5. Follow up on previous trades or posts:
  6. SSG – break from consolidation base. Short semiconductors if they fail to hold support. No volume in the ETF. If you don’t want to deal with this just short SMH. Entry $28.60. stop $27.50. (See Only ETF Model for SMH trade)
  7. GMCR – break from top of trading range. The stock has been added to the NASDAQ 100 index and should get a boost on the upside enough to break higher. Entry $82.15. Stop $81.50. Added on Tuesday’s move higher. Watch.
  8. UNG – Reversal off low. Trade opportunity with entry at $18.15 and target of $20. Technically oversold bounce play. Gapped at the open Monday above the entry and watching to see if we test the gap, otherwise pass. Tested, closed at the low and watching this morning for entry if we resume positive move.
  9. GDX – Base reversal. Has been building a base at the low since April. Look for a break above the $30.35 resistance with a target at $35.80. Expect volatility in this controversial sector.
  10. TBF – Ascending Triangle Breakout – Interest rates rose again on Tuesday. Look for a breakout confirmation on the inverse ETF. $32.70 entry. Took half a position (unfortunately). Stop $33.
  11. AMZN РSet up short on break of support. Entry at $290 with stop at $298. Gapped down on the lower open Thursday. Friday tested back to the upside at $288+, took the short entry at $287.25. Attempted to bounce, but gave up the gains and still in the short. Manage the trade and keep the original stop for now.
  12. AAPL – V bottom breakout with test. $465 entry. Added Oct $470 call. Carl Ichan’s announcement resulted in a big move for the trade. Raising the stop to $27 for now. Manage the position as the stock still wants to go higher. Nice gain on Monday, but gave it back on Tuesday.
  13. 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. Took the play with the Dow moving lower. Nice gain and raise stop to $33.95 and watch as we have hit the target.
  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 on the move lower following positive data. Stop at $53 or break even. Small bounce on retail news, expect the downside to resume.

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
  • 8/13 – 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.
  • 8/18 – Nice bounce on Friday. Watching to see is this establishes a new level of support after the gap higher from earnings.

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.