Trading Notes for Today, August 26th

Notes for Trading: 

New Home Sales were drag on the sector after coming up light against the estimates. There was some discrepancy in the outcome, but it is still improving and the fact the South picked up was a positive from my view. More economic data out today with durable good orders leading the parade. It will be watched closely for some improvement over last month.

Emerging market countries are showing up in the scans of late and that is a good sign for both the emerging markets and the smaller developed countries. Europe bounced helping the EAFE index and China is back on the upside for the day. Overall the global markets remain a positive on the bounce of the recent lows.

Still in a position of needing to break through resistance points and some breakthroughs from some of the laggard sectors like financials. The sector got a nice boost from Bank of America which has pushed the financials through key resistance at the $23 level.

Stay disciplined this week and take what the market gives.

Sector Notes: 

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

  • The EAFE index (EFA) finally reversed the short term downtrend start on June 19th as Europe (IEV) turned the corner to help the upside of the index. With the reversal off the lows we now see resistance at the 200 DMA on EFA. Getting through this resistance points will be the key to continue the move off the low and any interest in owning a position in the ETF.
  • Biotech (IBB) was one of those at the resistance point ($266.45) and¬†broke through on Monday to continue the upside.¬†The last five¬†days have sector sitting back at¬†the July high. Got the breakthrough on the move higher. Gapped above the entry of $266.50. TODAY:¬†Test of the move or we would pass on adding to the position.
  • Transports (IYT) are at resistance ($152) as well. Need catalyst and follow through on the upside this week. ¬†TODAY: watch the $152 breakout level against the July high.
  • Consumer (XRT) moved above¬†the $86 break from consolidation. Created a momentum trade nothing more at this point. 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 are helping the sector. Got the trade back to the $88.69 resistance.¬†TODAY: Break higher and continuation of the move.
  • Internet (FDN) remains¬†one of the stronger sub-sectors in¬†tech. Moved above $60.70 as second¬†entry point. ($60.25 entry point on short term breakout from triangle first entry.) Stop $60.50. Large cap internet stocks adding to the upside of the of the sector and the NASDAQ 100 index. TODAY: continue upside and challenge the March highs as next resistance.
  • Housing (ITB)¬†reversed off the lows following a reversal in the data.¬†The move back to resistance is the next level of the upside move it must overcome. $24.12 is the level to break and add to the position if we break higher. Added Monday$24.15¬†and then¬†watched home sales push ETF lower. TODAY: Watch to see how it responds in trading today.
  • Emerging Markets (EDC or EEM)¬†– At resistance of $45.10. Need to move through this level short term to maintain the uptrend. Took¬†$44.30 entry. This has been volatile on all the news and geopolitical events it will likely to continue the volatility. $43 stop.¬†TODAY: continued break above $45.10 will add to the position.
  • Treasury Bonds (TLT) got the¬†reversal on¬†the geopolitical issues subsiding in Russia. The Fed FOMC minutes did little to change the positive view and rates remain on the downside for now.¬†TODAY: Test in yields dropping and the $116 support.
  • Small Caps (IWM) made a move back to¬†the $115 level and¬†facing¬†resistance here along with the 200 DMA. The move gives another entry point for the sector if it breaks through. $112.50 was the entry point initially for the position. Stop at $112.50 or break even. Signs of the¬†upside momentum are fading thus the break even stop. Got the move above the $115.50 on Monday. Still have plenty of work to do. ¬†TODAY: need to resume the upside¬†follow through with very little overhead.

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

Monday Trade Opportunities:
Trade Opportunities:
  1. Sector Rotation Model Рupdated with the opportunities discussed above in the Sector Notes.
  2. EGG Model Рupdated with ITB posted as trade opportunity.
  3. XLE – entry $98. consolidation pattern. Energy attempting to make move back to the upside. Positive break take position. Crude holding $92.70 support currently.
  4. BAC – entry $16.30. breakout. Held the move higher and now looking for the follow through to $17.30 short term.
  5. UNG – entry $22. double bottom. consolidating near the lows and looking for a move back to the upside with $24 target.

Pattern Trade Tracking & Follow Up:

  1. ITB – entry $24.15. 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. Stop $23.75.
  2. 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. Stop $5.35.
  3. PCLN Рentry $1275. descending triangle. good consolidation pattern set up to move higher again. Stop $1254. (Trade was the Jan 1270 calls @ $78.80 entry)
  4. AGN – entry $163.50. Test lower and move through resistance. drug manufacturer. Stop $158.90.
  5. ERX – entry $118.90. wedge consolidation breakout. Setting up to move higher as trade. Back to the 50 DMA would be positive. Stop $116.
  6. 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
  7. YHOO – entry $36.50. trading range break. Internet sector moving higher. Stop $34.40
  8. NKE – entry $77.70. trading range break. Watch for move higher prior to earning on 9/22. Stop $76.
  9. CELG – entry $89. wedge breakout. healthcare leadership short term. Stop $89.
  10. BTU – entry $16.05. double bottom reversal. Energy gained on news… got the¬†follow through for entry in the trade. Stop $$15.70. HIT STOP
  11. RFMD – entry $11.50. pennant upside continuation. Need semiconductors to regain positive momentum if broad markets are to regain upside. Stop $11.
  12. 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.
  13. SSO – entry $113.50. Bottom reversal on test lower. Trade on the bounce only for now. $117 target on the trade. Stop $118
  14. SOCL – entry $20.15. Cup and Handle breakout. Upside back in play. Stop $19.80
  15. FDN – entry $59.85. trading range. Upside still in play. held up well in selling last week. Stop $59.
  16. VMW – entry $100.50. trading range breakout and test. Upside value along with EMC. Stop $97.80. Use some patience on upside move.
  17. 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