Trading Notes for Today, August 22nd

Notes for Trading: 

Another positive day for stocks across the board. Investors continue to be willing to take what the market is producing as positive news. Bank of America’s record settlement with the Justice Department for $16.6 billion sparked a rally in the stock and the sector. This helped lead the S&P 500 index to a new high and happy thoughts from analyst and investors.

Eight of the last ten trading days have ended on the positive side as the markets bounce off the August 7th low. The index hit a new high Thursday and all is well.

New homes sales were up 2.4% continuing the positive news in the housing sector. ITB still resting for now. Break above $24.10 is entry point for trade up to $25.25.

Bank of America rises despite a record settlement with the Justice Department. Maybe the clarity for the stock give investors hope… even if the settlement is three year of their forward earnings.

Gold broke lower on the day as the dollar gained strength, Fed is believed to raise rate in the first part of next year and no inflation at the reporting level (you and I are getting killed with it at the store.) The downtrend remains in play and the hope of a rally is off the table, at least for now. Short trades? Not enough negative sentiment here, but it could build.

Trading day is set up for a test… Friday, positive every day this week, low volume, etc. It just has the making of a trade higher in the morning and fade into the close with profit taking on the week. We will see, remember that statement is pure speculation on my part and I will watch to see if unfolds.

Sector Notes: 

Below are some key notes on events and what we are watching looking forward:

  • Biotech (IBB) remains one of the positives for the upside move. The last five¬†days have pushed the sector back to the July high. Look for follow through on the move higher and trade opportunity on the move. Entry $266.50. (Hit the entry point on Tuesday and still looks positive. TODAY: looking for follow through after small test on Thursday.
  • Transports (IYT) jumped 1.7% Monday… cleared $149 resistance and has moved higher since. Positive sign for the transports to move higher. Airlines leading the way. Worth watching the parts as well as the whole. TODAY: watch the $152.25 breakout level against the July high.
  • Consumer (XRT) moved above¬†the $86 level and continued¬†higher. This is a trade on momentum nothing more. Earnings are hitting on the stocks and they are mixed at best, but the issue is the forward guidance. Trade the momentum, but be aware of the issues at hand… lower paying jobs and stagnant wages. TODAY: trade back to the $88.69 resistance following small test on Thursday.
  • Treasury Bonds (TLT) got the¬†reversal on¬†the geopolitical issues subsiding in Russia. The Fed FOMC minutes did little to change the view and rates remain on the downside for now.¬†TODAY:¬†no response to Fed and bond creep higher in price again as yields test the lows.
  • Small Caps (IWM) made a move through¬†the $115 level and the next resistance along with the 200 DMA. The move gives another entry point for the sector if it holds in trading today. $112.50 was the entry point and managing the risk with a first target of $115 now attained.¬†Stop at $112.50 or break even. Signs of some upside momentum¬†finally. TODAY: need to resume the upside and clear the $115.5o level on some better volume. NOT looking overly positive near term on this move or follow through.
  • Russia remains a talking point, but that has shifted to peace talks versus war and that shift the direction of the ETF. Hit entry at $24 on Monday. Nice follow through on Tuesday with 1.7% gain. Stop to $24 or break even on the trade. TODAY: need follow through above the¬†200 DMA.
  • Internet (FDN) remains¬†one of the stronger sub-sectors in¬†tech. Moved above $60.70 as second¬†entry point Monday. ¬†$60.25 entry point on short term breakout from triangle first entry. Stop $59.50. Tuesday continued to add to the upside on the trade. Large cap internet stocks adding to the upside of the index. TODAY: hold the upside momentum and continue the trend after two days of holding steady.
  • Emerging Markets (EDC or EEM)¬†–¬†Bounced off the lows and looking for a follow through on the upside at $44.30 entry. This has been volatile on all the news and geopolitical events. If they remain in the headlines this will remain¬†a volatile trade. $43 stop as result. TODAY: continued break above $45.10 following test on Thursday.
  • Real Estate (DRN) tested support near the $58.40 mark. Entry $61 on trade. Managed to bounce off the lows and has now¬†regained the upside momentum with the move back above the $62.85 resistance and held.¬†The interest rate concerns are being pushed to the side for now and looking to move higher.¬†Holding for now, but keep your stops in reasonable location $61 or break even. TODAY: hold the uptrend and add to the profit.
  • Housing (ITB) jumped and broke through resistance on the starts and permits data reported on Tuesday. One interesting stat in the data was a 33% rise in mulitfamily housing (condo or apartments). Renting is still on the rise due to lower wages and the damage done in the 2008 lending wreck. This helps REITs as many of these projects are packaged in this format. TODAY: break above the $24.10 mark and then the downtrend line at $24.60.

Practice patience and let this new chapter of the markets story unfold.

Monday Trade Opportunities:
Trade Opportunities:
  1. TXMD – entry $5.50. break from consolidation. In the drug sector and in position to move higher. be patient and watch the volume it sometimes falls during day.
  2. ITB – entry $23.50. bottom reversal. The data is showing some signs of bottoming. There is more data out today on permits could help upside. Gapped over entry and watching for test to take the entry. Move above $24.10 offers alternative entry point as well.
  3. FCX – entry $37.05. bounce off support, microtrend reversal. copper bounced need follow through on the metal.
  4. PCLN – entry $1275. descending triangle. good consolidation pattern set up to move higher again.

Pattern Trade Tracking & Follow Up:

  1. AGN – entry $163.50. Test lower and move through resistance. drug manufacturer. Stop $158.90.
  2. ERX – entry $118.90. wedge consolidation breakout. Setting up to move higher as trade. Back to the 50 DMA would be positive. Stop $116.
  3. VXX –¬†entry $27.75. back near lows on VIX and bottom support. Looking for some volatility following more than a week of peace and quiet. $28.60 trade target for position. Stop $27.10
  4. XME – entry $43.50. Break from consolidation. Stocks are moving in the producers and miners logically would follow. max entry $43.80. Stop $43. HIT STOP
  5. YHOO – entry $36.50. trading range break. Internet sector moving higher. Stop $34.40
  6. NKE – entry $77.70. trading range break. Watch for move higher prior to earning on 9/22. Stop $76.
  7. CELG – entry $89. wedge breakout. healthcare leadership short term. Stop $85.
  8. BTU – entry $16.05. double bottom reversal. Energy gained on news… got the¬†follow through for entry in the trade. Stop $$15.70.
  9. RFMD – entry $11.50. pennant upside continuation. Need semiconductors to regain positive momentum if broad markets are to regain upside. Stop $11.
  10. EEM – entry $44.50. break above resistance again. upside trade still looking longer term. Stop $44 for now, but give some room if the volatility picks up.
  11. SSO – entry $113.50. Bottom reversal on test lower. Trade on the bounce only for now. $117 target on the trade. Stop $118
  12. SOCL – entry $20.15. Cup and Handle breakout. Upside back in play. Stop $19.80
  13. FDN – entry $59.85. trading range. Upside still in play. held up well in selling last week. Stop $59.
  14. VMW – entry $100.50. trading range breakout and test. Upside value along with EMC. Stop $97.80. Use some patience on upside move.
  15. PLUG – entry $5.10. Base breakout. Looking for the move from the base to accelerate as the trend is drifting higher. Stop $5.10
NOTE: The pattern trades above are setups that I see for a potential swing trade or short term 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. The best way to treat these as a learning tool is to assume a $100,000 portfolio and each positions receives a 5% allocation. If we state to take a 1/2 position as an example you would only allocate 2.5% to that position. I would use a downside risk of $500 per trade as a maximum loss. That will help  you learn position sizing and risk management. All investing comes with risk. Our job as investors is to manage the risk. Keep your focus and discipline in place.
Long Term Opportunities:

  • Facebook (FB) – Testing the break higher and has held up well in the recent selling. $73.15 entry point to add 1000 shares back on the long term outlook. (see note page for history. ADDED shares on 8/7 – $73.15 — Stop $71.50