Trading Notes for Today, August 28th

Notes to Note: 

Mixed day overall with lower volume. What else can we say about Wednesday? There are plenty of questions I would like to ask, but I have the feeling they would be rhetorical. We are two days from the summer coming to an official close and I expect to limp into the holiday weekend. True or not, the market is acting as through Wall Street already left for the Hampton’s to enjoy the last of the nice weather, or at least that is how it is told. With that in mind, we will watch, act and react accordingly. Adjust your stops to account for low volume volatility and keep looking forward. We will evaluate our positions over the next two days and cut what isn’t working heading into what could be an adjustment period for the markets September.

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. American Airlines cutting listing with Orbitz and pushed airlines lower overall? Still want to see the sector break higher if the broad markets are going to move. (Sector Rotation Model Watch List)

Yield on Treasury bonds continue to drop with the 30-year bond hitting 3.11% and the 10-year bond at 2.36%. As we have discussed this is a concern looking forward for stocks. TLT keeps rocking along on the upside. Watch for more upside should stocks start to fade.

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. Stock picker sector as well. Got the trade to clear the $88.69 resistance. TODAY: Follow through breakout and hold the move higher.

Stay disciplined and take what the market gives.

Model Position Notes: 

Below are some notes on positions in models and what we are watching looking forward:

  • The EAFE index (EFA) finally reversed the short term downtrend started 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) is 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 above the 200 DMA. (Sector Rotation Model)
  • Emerging Markets (EEM) added to position on upside move through $45.10. We are getting solid moves higher from the country ETFs and that is keeping the short term uptrend in play. EWZ & EWZS up more than 2% and breaking above resistance. ILF up 1.7% and breaking higher as well. Digging in to see what else is worth watching. PCY jumped as emerging market debt broke above resistance as well. (Sector Rotation Model)
  • Homebuilders (ITB) move through resistance and then checked lower on the new home sales for July. Still looking for the move above the $24.10 level as it is holding support for now. (ONE EGG Model) This is the Sector Rotation Model as well and that allows us to replace the EGG position if we turn up better opportunity while this plays out.
  • S&P 500 Index (SPY) accomplished no change on the day and a doji. We will see how that unfolds today? (S&P 500 Model)
  • 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 small test on Wednesday. (ONLY ETF Model – TNA)
  • China (YINN) moved lower today on the economic data and keeps it trading in the uptrending wedge pattern. I still like the outlook for the move higher. Like the US markets not logical based on data, but the money flow or belief in the investment is high. Managing the stop, but we will let it go for now. (ONLY ETF Model)
Watch List Opportunities:
  1. Sector Rotation Model – Updates to Watch List
  2. S&P 500 Model – Updates to Watch List

Pattern Trade Setups:

  1. Willing to be more patient heading into the long weekend. If something is positive we will trade it. Patience as this all unfolds and transitions.
  2. UCO – entry $32.10. bottom reversal. looks ready to bounce for trade back to $34.30.
  3. UNG – entry $22. double bottom. consolidating near the lows and looking for a move back to the upside with $24 target.

Pattern Trade Tracking:

  1. Looking at taking money off on positions that are not working our in the low volume environment. September is a transition month historically for the markets and it is prudent to evaluate the outlook and manage our risk accordingly.
  2. BAC – entry $16.30. breakout. Held the move higher and now looking for the follow through to $17.30 short term. Stop $15.65
  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. Stop $96.70.
  4. 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.
  5. 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.
  6. PCLN – entry $1275. descending triangle. good consolidation pattern set up to move higher again. Stop $1254. (Trade was the Jan 1270 calls @ $78.80 entry)
  7. AGN – entry $163.50. Test lower and move through resistance. drug manufacturer. Stop $158.90.
  8. ERX – entry $118.90. wedge consolidation breakout. Setting up to move higher as trade. Back to the 50 DMA would be positive. Stop $116.
  9. 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
  10. YHOO – entry $36.50. trading range break. Internet sector moving higher. Stop $34.40
  11. NKE – entry $77.70. trading range break. Watch for move higher prior to earning on 9/22. Stop $78.75.
  12. CELG – entry $89. wedge breakout. healthcare leadership short term. Stop $89.
  13. BTU – entry $16.05. double bottom reversal. Energy gained on news… got the follow through for entry in the trade. Stop $$15.60.
  14. RFMD – entry $11.50. pennant upside continuation. Need semiconductors to regain positive momentum if broad markets are to regain upside. Stop $11.
  15. 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.
  16. SSO – entry $113.50. Bottom reversal on test lower. Trade on the bounce only for now. $117 target on the trade. Stop $118
  17. SOCL – entry $20.15. Cup and Handle breakout. Upside back in play. Stop $20.10
  18. FDN – entry $59.85. trading range. Upside still in play. held up well in selling last week. Stop $61.25.
  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.