Trading Notes for Today, August 30

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. The lack of activity with Syria invited buyers back to the table again Thursday. The greatest challenge was the inability to hold the gains into the close again. The NASDAQ held up better than the rest of the major indexes, but there is still plenty of worry on the mind of investors. A I outlined in the video update last night the shift is far from over on where to look for direction. To make money at this point you have to look at  the leaders and even that is a challenge based on the news driven momentum in play. Sometimes the best trade is no trade.
  2. The Parliament in the UK voted not to back any attack on Syria last night and that leaves President Obama pretty much on his own in this matter. Will he move forward or will he not? That is the big question facing investors today along with the cutting stimulus, jobs, the economy and many other issues.
  3. Q2 GDP gets a refresh to 2.5% from the 1.7% reported originally! Now that is a number only a government report could love. The revisions to the trade deficit accounted for most of the revision, which by the way, is not a good thing. The reductions in capital investments and consumption were another negative.  The US economy is not likely to improve much in the third quarter based on the current reports. I know that comes as a shock.
  4. Financials again attempted to bounce, but by the close it had given back almost all the gains again. They cannot get out from under the black cloud of lawsuits and image issues. We own SKF, but it hasn’t made any progress either the last two days. Watch to see if there is an opportunity to add to our short play or do we close the position and look for the bounce?
  5. Volatility spiked on the Syria news sending the VIX index to 16.8 on Tuesday, then fell to 16.4 on Wednesday, and back to 16.8 on Thursday. That explains why investors are confused relative to the outlook currently, uncertainty. The VXX trade held it’s ground, but still not accelerating higher at this point. If the volatility remains it will help the downside plays as well as the volatility index trade. Watch to see if the fear factor rises on the UK news relative to Syria today. Currently the futures are flat which could mean a quite day heading into the long weekend.
  6. Treasury yields fell on Wednesday to 3.70% on the 30 year bond, and 2.77% on the ten year bond. The worry over the Fed cutting stimulus in September has been causing challenges for bonds. Throw in the current unrest over Syria and the flight to quality is adding to the downside pressure on yields as money seeks safety. Oil was benefactor from the Syria news sending the price to $109.48, but stalled on Thursday with crude moving back to $108.80 and overnight down to $107.90.  OIL closed at $25.58 after  move back near $26 on Wednesday. Gold was down $6 at $1412. GLD hit the target of $137 Tuesday, but has moved back to $135.87 on Thursday. The pre-market price of gold is at $1398 currently down $14. Watch to see if the metal trades lower today. The dollar held support at $21.90 (UUP) and bounced on Thursday to $22.16. The dollar index is flat overnight.
  7. The global markets equally move to the downside as the EAFE index (EFA) closed flat, but remained lower on Thursday. Europe under pressure from oil prices moving higher which pushed Europe (IEV) down as well. China (GXC) was flat after an attempt to move higher and the emerging markets (EEM) were up, but not showing much in terms of momentum on the day. The global markets have reacted to the Fed stimulus cuts and fear of the impact on the emerging markets. Watching the downside risk in the global markets short term. Asia traded lower overnight as commodities continued to loose ground.
  8. The S&P 500 Model is updated. No changes, content to remain defensive for now. Watching to see if the trend confirms one direction or another.
  9. The Sector Rotation Model is updated. Still watching this mess unfold. Bias remains on the downside, but the leaders are tradable (my word). The pattern setups below are where I am posting, just because of the time frame of the trades which pushes the risk factor higher. This model is designed for longer term holding periods.
  10. The ONLY ETF Model updated. Manage the risk of the trades on the short side today. Still some trades on the watch list that could play out today.
  11. The ONE EGG Model is updated. Passed on the trade with the gap open. too much risk on the trade. Still looking for position to move higher if the overall direction doesn’t improve.
  12. The market is focused short term on the news. The lack of any new developments with Syria is pushing stocks higher for now, but the uncertainty remains which creates volatility. It’s Friday and we have a three day weekend? I don’t expect much in terms of opportunities today and based on the futures it may be time to head to play gold or have lunch with some friends. Have a peaceful weekend.

Pattern Setups For Today:

  1. Futures are heading nowhere. Still watching the leaders and looking for trades that are set up based on the short term events taking place.
  2. GLL – bottom reversal. Look for entry no higher than $80, with target at $85. Stop is $78.
  3. Follow up on previous trades or posts:
  4. AAPL – The buyers are still in play. bounce off the $485 level is of interest short term. Looking at the $495 Oct Call on reversal and move higher. Move above $493 would be the entry point. No entry today as the gap open left no room and then it faded the rest of the day. Rest and watch today.
  5. CLDX – Breakout Test – $21.70 support tested on Wednesday and looking for a bounce back to the $24 high. $22 entry. Added the play on Thursday. Stop at $21.50.
  6. SBUX – Test of support $70. Tested and bounced. Looking for a move above $71.30 for the entry. Added trade $71.30.
  7. AFOP – Breakout Test – solid move higher from the trading range at $34.50. If holds support and resumes upside advance, look for trade up to the previous high near $40. added $35. stop $34. Nice gain stop to break even.
  8. DDD – Test of breakout from trading range. $40.40 is level to hold and then look for entry. $50 max entry on the trade. Target is $54. added at $49.70. stop $50.90 – nice move on Thursday.
  9. FST – Cup & handle breakout. Entry is $5.60. Natural gas stock, sector reversing on rise in commodity price. Hit entry and faded back with the broad market reactions. Stop $5.30. held up well.
  10. GMCR – break from top of trading range. The stock has been added to the NASDAQ 100 index and should get a boost on the upside enough to break higher. Entry $82.15. Stop $82.75. Nice follow through. Held above the stop. If test holds above the stop gives an opportunity to add to the position. added $8425 additional to original trade. same stop

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. Interesting link on earnings for facebook
  • 8/13 – The stock broke lower from the pennant. Watch and manage your risk. As stated yesterday we are going to establish a hedge to protect the downside risk. Add a December $37 Put on FB @ $3.35. In addition sell a December $37 Put on FB @ $3.35.  If the stock falls we can put our stock to someone at $37 prior to expiration in December.
  • 8/30 – Nice bounce to $41.34 and new high. Tuesday reversed the move higher as markets react to speculation. Watching for any trading opportunities off the pullback test and then a move higher. Test of $39.30 level is the key to hold. If reverses back to the upside looking to buy 1000 shares as trade back to $42. 8/28 – Added 1000 shares at $39.95 for trade. Stop on that trade is $39.95 or break even now. If we hit the target at $42 sell half of the 1000 shares.

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. Keep your focus and discipline in place.