Trading Notes for Today, August 29th

Notes to Note: 

Thursday investors spent their time fighting of rumors of war in Ukraine. The cold war is on again and the challenges for the global economies are now in play. Europe (IEV) was hit by the news along with the emerging markets. The US markets moved back to neutral throughout the day and futures are higher overnight. The news events are always a challenge short term as the emotions run high and then settle. Today ends the month of August and that puts the economic data in the spotlight again next week. I expect a slow day volume and market wise overall.

Yield on Treasury bonds continue to drop with the 30-year bond hitting 3.07% and the 10-year bond at 2.33%. 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 reports continue with William Sonoma disappointing investors and dropping 11%. Some impact on the sector, but you can see the issues with the sector in parts. Trade the momentum, but be aware of the issues at hand. Stock picking sector as well. Cleared the $88.69 resistance and tested on Thursday. TODAY: Tighten stop on the trades today.

Stay disciplined and take what the market gives. Have a great Labor Day Weekend.

Model Position Notes: 

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

  • Volatility Index (VXX) took entry on the move in volatility. That faded on the day as the nerves calmed over Russia. Stops are tight and we will see how this unfolds today. I would like to have this play on to start the week as economic data is reported. (S&P 500 Model)
  • Crude Oil (UCO) added position in the commodity as it bounced on the worries in Russia and completed a bottom reversal pattern. It continued higher after hours and we will let this run if it continues to play out. (Sector Rotation Model)
  • 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: Watching how it responds to Russia going forward. Honor your stops.  (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. Digging in to see what country ETFs are worth watching. TODAY: Watch how the Russia issues impact the sector going forward and measure your stops. (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 Thursday. (ONLY ETF Model – TNA)
  • China (YINN) moved lower today on the economic data and hit the stop as result of the move. This is still a country ETF to watch short term as the upside is driven by money flow versus logic.
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. PBR – entry$18.50. Breakout test. Looking for a test of the break above $17.70. No test… not trade.
  3. NFLX – entry $477.50. Test of upside in play and holding $470 support.

Pattern Trade Tracking:

  1. UCO – entry $32.10. bottom reversal. looks ready to bounce for trade back to $34.30. Stop $31.25.
  2. UNG – entry $22. double bottom. consolidating near the lows and looking for a move back to the upside with $24 target. Stop $21.
  3. BAC – entry $16.30. breakout. Held the move higher and now looking for the follow through to $17.30 short term. Stop $15.65
  4. 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.
  5. 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.
  6. 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.
  7. 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) HIT STOP
  8. AGN – entry $163.50. Test lower and move through resistance. drug manufacturer. Stop $158.90.
  9. ERX – entry $118.90. wedge consolidation breakout. Setting up to move higher as trade. Back to the 50 DMA would be positive. Stop $116.
  10. 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 $27.75
  11. YHOO – entry $36.50. trading range break. Internet sector moving higher. Stop $34.40
  12. NKE – entry $77.70. trading range break. Watch for move higher prior to earning on 9/22. Stop $78.75.
  13. CELG – entry $89. wedge breakout. healthcare leadership short term. Stop $89.
  14. BTU – entry $16.05. double bottom reversal. Energy gained on news… got the follow through for entry in the trade. Stop $$15.60.
  15. RFMD – entry $11.50. pennant upside continuation. Need semiconductors to regain positive momentum if broad markets are to regain upside. Stop $11.
  16. 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.
  17. SSO – entry $113.50. Bottom reversal on test lower. Trade on the bounce only for now. $117 target on the trade. Stop $118
  18. SOCL – entry $20.15. Cup and Handle breakout. Upside back in play. Stop $20.10
  19. FDN – entry $59.85. trading range. Upside still in play. held up well in selling last week. Stop $61.25.
  20. 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.