Trading Notes for Today, August 27th

Notes for Trading: 

Markets continue to push the upside with a low volume modest move Tuesday. The Durable goods numbers were good as the airplane order from Boeing pushed the index much higher than expected. The transports have been led by the airlines the last year and the sector broke to new high last week. The transports (IYT) are back near the July high and looking for a catalyst higher.

The NASDAQ pushed higher hitting 4570 as the biotech stocks lead the index higher. The S&P 500 index close at the 2000 mark for the first time with retail and healthcare leading the index higher. Markets continue to make a push as investors continue to believe in the process in place.

The ‘V’ bottom is complete and now the question is how high to we progress from the this point? That essentially depends on how much gas is left in the tank following the move off the lows. For now all seem content to add to the upside and baring any disturbing news, the market looks content to drift higher short term.

Stay disciplined 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 point ($67) will be the key to continue the move off the low and any interest in owning a position in the ETF. TODAY: looking for the follow through move that failed to hold on Tuesday.
  • 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: No test, just more upside for the sector as it continue to provide the leadership.
  • 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 hit 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 not helping the sector outlook. Got the trade to clear the $88.69 resistance.¬†TODAY:¬†Follow through on the move higher and hold the break higher.
  • 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: Held support and looking for upside to resume.
  • Emerging Markets (EDC or EEM)¬†– Cleared the¬†resistance of $45.10. Continuation of the uptrend in play short term. 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: Follow through on the¬†break above $45.10.
  • 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:¬†Confirm the move higher with eye on the July high as target near term.

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

Monday Trade Opportunities:
Trade Opportunities:
  1. UCO – entry $32.10. bottom reversal. looks ready to bounce for trade back to $34.30.
  2. 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. BAC – entry $16.30. breakout. Held the move higher and now looking for the follow through to $17.30 short term. Stop $15.65
  2. XLE – entry $98. consolidation pattern. Energy attempting to make move back to the upside. Positive break take position. Crude holding $92.70 support currently. Stop $96.70.
  3. 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.
  4. 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.
  5. 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)
  6. AGN – entry $163.50. Test lower and move through resistance. drug manufacturer. Stop $158.90.
  7. ERX – entry $118.90. wedge consolidation breakout. Setting up to move higher as trade. Back to the 50 DMA would be positive. Stop $116.
  8. 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
  9. YHOO – entry $36.50. trading range break. Internet sector moving higher. Stop $34.40
  10. NKE – entry $77.70. trading range break. Watch for move higher prior to earning on 9/22. Stop $76.
  11. CELG – entry $89. wedge breakout. healthcare leadership short term. Stop $89.
  12. 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
  13. RFMD – entry $11.50. pennant upside continuation. Need semiconductors to regain positive momentum if broad markets are to regain upside. Stop $11.
  14. 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.
  15. SSO – entry $113.50. Bottom reversal on test lower. Trade on the bounce only for now. $117 target on the trade. Stop $118
  16. SOCL – entry $20.15. Cup and Handle breakout. Upside back in play. Stop $19.80
  17. FDN – entry $59.85. trading range. Upside still in play. held up well in selling last week. Stop $59.
  18. VMW – entry $100.50. trading range breakout and test. Upside value along with EMC. Stop $97.80. Use some patience on upside move. HIT STOP
  19. 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
  • 8/26 – pushed back towards the previous high and looks ready to break higher from the consolidation. Watch for opportunity to add to positions short term.