Trading Notes for Today, August 2nd

The Watch List and Play List have been updated for today. Review and execute according to your risk and investment objectives. If you have specific questions on any posts please forward them directly to Jim@JimsNotes.com. Sectors to Watch:

  1. August starts positive with the broad indexes gaining more than 1% on the day. What is different today versus yesterday? ISM Manufacturing was better than expected, Fed was positive in comments, positive PMI in China and Europe, and jobless claims improved again. Bottom line… some positive data to put investors in a buying mood. Volume was on the light side along with breadth, but the upside held strong. Today is the jobs report and the expectations are for better than expected numbers. I don’t expect much to change for the trading day.
  2. Treasury yields moved higher again on Thursday to 3.77% on the 30 year bond. That pushed prices down more than 2% on the bonds. The move is a breakout from the consolidation and a new high. This is not good news for the interest sensitive assets. IYR was down again on the day. We are watching the move in yields short term and the potential impact on bonds.
  3. Healthcare was on our watch list for the week and has netted a gain on the week thus far. The pharma stocks (XPH) was up 2.7% the last two trading days, the providers (IHF) were up 1.1% and medical devices gained 2.3%. The upside remains in play and we will continue to watch for opportunities in the sector.
  4. Technology is on our watch list for the week as well and it has been equally up and down. SOXX gained 1.2% on Tuesday helping XLK clear the entry point at $31.75. The semi’s continued higher and gained 2.2% the last two days. The sector remains volatile, but we will manage the risk of the trade and watch for the upside catalyst from the sector. Banks (KBE) are holding the 10 day moving average and breaking higher. We are still looking forward on earnings, guidance and economic data to drive the sector higher.
  5. Oil jumped 2% on speculation of increase in demand…again on Wednesday. That was followed up on Thursday with a 3% gap higher. After falling back to $103 on Tuesday the price closed at $107.77 Thursday. Gold was off slightly on the day to $1311.
  6. The S&P 500 Model is updated for Friday’s trading. The stops on our positions are set and we are watching the extend move higher short term. One day at a time as we look at the exit points relative to the upside potential.
  7. The Sector Rotation Model is updated. The move on Thursday answered the testing or potential move lower as stock made move to new highs. Still scanning for reasonable opportunities short term. Added banks to the watch list as they are poised to make a move higher – the gap higher negated the entry on the trade and we will see how it plays going forward.
  8. The ONLY ETF Model continues to take on short term trades offering short term upside. Technology (XLK) was also added on the upside as an opportunity on the test lower from earnings. China is on the watch list as the upside is getting a boost from the government comments on stimulus.  Biotech (XBI) hit entry on Tuesday and continued higher Thursday.
  9. The ONE EGG Model scans came up with international ETFs this week along with the metals and mining ETFs. The momentum shift towards these sectors is interesting relative to the outlook near term. Australia (EWA) offered the best set up on the chart, not panning out as planned and we have been running new scans for the best opportunities.  TLT broke lower initially on Wednesday as investors continue to lack confidence in the Fed. I was looking for another leg lower in bond prices as yields rise? That question was answered on Thursday with the 30 year bond moving to 3.77%. looking at TBF as the Egg on this development… Cleared the $32.55 level and closed at new high. Watch for the potential play on test or continuation of the upside.
  10. As long at the trend higher continues maintain your positions and manage your stops.

Pattern Setups For Today:

  1. Jobs Friday – Watching to see how it unfolds on the day.
  2. Follow up on previous posts:
  3. GOOG – Test of uptrend line. If it holds the test of support and the 50 DMA look for upside trade. Entry $896 on bounce higher. Hit the entry at the open Thursday. Sept 900 Calls $22.05 entry (10 contracts).
  4. VMW – Flag gap higher. looking for a continuation of the move from the consolidation. Entry $84.10. No entry yet and continued to watch.
  5. QQQ – cup & handle. break to new high at $75.70 watch for entry on move if it develops. Entry $75.80. Opened higher (added trade), but struggled into the FOMC results. Got nice follow through on Thursday. Stop $75.50.
  6. PFE – double bottom. $29.70 entry on break higher. Testing lower with stop at 28.90.
  7. AAPL – Break downtrend line? Ready to move higher. The break of the downtrend is a positive on the upside and confirms the reversal off $385 support. $445 September call is the trade. Added 10 contracts at $16. Watch and place stop at break even on the follow through Tuesday. Testing the move higher, manage the downside.
  8. C – Testing $51.30 support. Watch for reversal and entry $52.25. took entry on Wednesday in positive early trading before the Fed release. Nice follow through. stop at $51.20.
  9. Refiners are consolidating in trading range patterns. Watch to see if they break higher as oil prices contract. VLO, TSO, WNR, PSX. Tuesday TSO put itself in position to break higher, $55.80 entry (added on Wednesday) nice follow through on the upside Thursday for TSO. Added PSX at $59.90 Wednesday as well. PSX tested lower on Thursday, watch with stop at $59.50.
  10. YUM – Weekly chart 16 month trading range breakout? Move above $74.10 looks interesting with a longer term outlook. Not making the move higher yet. Closed back at the high on Thursday.
  11. CLF – Bowl pattern breakout? $19.20 was the resistance level cleared. Watch for test of the move and opportunity to add a position in the stock. Target is $23.50. Early test on Monday and follow through higher with entry 19.50. $19 stop on play.
  12. CRM – Pennant upside. Nice move from consolidation at $39 and now digesting the move and looking to move higher short term. $42.75 entry and holding for now. Solid gain on Thursday, raise stop $43.50.
  13. XNPT. pennant – trend reversal and set up to break higher. $5.75 entry. Hit entry and watch for follow through on upside. Stop $5.30. Back a the bottom of the range.
  14. IHI – Breakout test. The break from the trading range tested and a follow through on the upside. The entry was $81. Moved higher with nice follow through. Move stop to $82.75.
  15. RAX – cup and handle. entry at $42.35. Could fill the gap back towards the $50 mark. Nice break higher and added play. Testing? Nice continuation move on upside. $44.50 stop. reversed Wednesday’s selling with gain of 1.8% on Thursday.
  16. GXC – China – bottom reversal. Resistance at $66.30 and added on the move through this level. Watch the volatility in the trade as China is dealing with slowing economic data. Stop 68. Finally a solid move higher for the trade up with some testing on Wednesday and continuation on Thursday. Manage your risk .
  17. GLD – double bottom – looking for break above the $124.50 mark. Moved through the entry added. Big move on Monday! Stop at $125.10. Resistance or profit taking? Either way manage the position. $137 target.

Facebook (FB) Update:

  • Facebook – The sentiment towards the stock has shifted as it found support at the $22.80 level and moved to the top of the trading range before breaking higher and adding positions. The move above $24.50 was entry for position.
  • Added position at $24.75 (1000 shares). Stop is $22.75 for now. A move back above the 200 day moving average and we will add to the position. (Added 1000 shares at $25.65 on break) Sentiment towards the stock short term is gaining. Consolidating at the current levels and holding. Still like the upside near term as it is gaining positive comments from analyst.
  • Earning beat expectations on Wednesday and the stock jumped 29%. Here is where greed versus objective comes into play. This is a long term play and if the gains hold up today in trading the upside gain on the position is tempting. We will now have to design a way of protecting or realizing part of the gain short term. Be patient with the position on the upside as you are on the downside.
  • Added big move higher on Tuesday and is getting overextended. Watching to see how this plays. We will look at a put option to protect the current gains. Tested on Wednesday with some profit taking down 2.1%

NOTE: The pattern trades above are setups that I see for a potential swing trade or 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. All investing comes with risk. Our job as investors is to manage the risk. Markets remain choppy and directionally challenged for now. Keep your focus and discipline in place.