Trading Notes for Today, August 5th

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 started positive with the broad indexes gaining more than 1% on the week. As we start this week of trading the momentum is on the buyers side and we have to determine what is working. If you have not reviewed the weekend update and video below is the abbreviated version for trading today.
  2. Treasury yields moved higher again to 3.68% on the 30 year bond for the week. The move is a breakout from the consolidation and a new high. This is not good news for the interest sensitive assets.
  3. The global markets are of interest with Europe and China the two countries I am willing to put money to work in with a longer term outlook. Europe (IEV) moved above the $42.15 entry point for the ETF. Watch for a test to start the week and add a position. EUFN and FEZ are options as well. CS and JPM are two stocks with exposure in Europe worth watching as well. China (GXC or FXI) are breaking higher also and offer some upside opportunities. The internet stocks in China have done well (BIDU) and continue be the sector to watch.
  4. Financials are the sector that continues to push higher and lead the broad indexes higher. XLF is pushing towards the previous high and ready to break higher. Banks (KBE and KRE) are pushing to new highs as well. Brokers (IAI) broke to a new high last week. Insurance (KIE) hit new high also.
  5. The S&P 500 Model is updated for Monday’s trading. The stops on our positions have been adjusted to start the week and we are watching the extend move higher short term. I want to add to positions if we continue higher and clear resistance. Review the Watch List Table for the Model. One day at a time as we look at the exit points relative to the upside potential.
  6. The Sector Rotation Model is updated. Banks remain one of the key sectors to own and I added it to the model watch list again.  YUM hit the entry point late on Friday and I was willing to wait until today to add the position if we hold above the entry price. EEM is also close to the entry point on the list.
  7. The ONLY ETF Model continues to take on short term trades offering short term upside. Technology (XLK) was also added on the upside and we added SMH as the leader in the sector.  Added Mexico to the watch list as well with the global market picking up momentum.
  8. The ONE EGG Model scans came up with the global markets EAFE index or EFA. The other positions were deemed to be to high of risk relative to the current environment. Japan surfaced again after the bounce back from selling last week and the NASDAQ 100 index was in the top part of the scan as well.
  9. As long at the trend higher continues maintain your positions and manage your stops. Put money to work where the momentum is and avoid the laggards as they are not rising with the rest of the market.

Pattern Setups For Today:

  1. GBX – Double bottom. Entry $23.35 breakout. Rails are transporting more oil in place of coal and outlook is positive for the sector overall. Moved through entry today.
  2. F – Consolidation breakout at $17.25. Test of the move would give the better entry near the $17.30 mark. Got early test and hold. Entry $17.38.
  3. JPM – Break cup & handle. $56.70 – positive global outlook for the bank.
  4. ED – Consolidation breakout at $60.50. Watch for upside to continue as utilities rebound from interest rate hikes impacting the stocks.
  5. Follow up on previous posts:
  6. 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).
  7. VMW – Flag gap higher. looking for a continuation of the move from the consolidation. Entry $84.10. No entry yet and continued to watch.
  8. 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.
  9. PFE – double bottom. $29.70 entry on break higher. Testing lower with stop at 28.90.
  10. 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.
  11. 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.
  12. YUM – Weekly chart 16 month trading range breakout? Move above $74.10 looks interesting with a longer term outlook. Made move on Friday for entry.
  13. 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. $19.50 stop on play.
  14. 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 last week, raise stop $44.
  15. 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.
  16. 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.
  17. 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. Currently testing watch downside.
  18. 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 .
  19. 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. Still trading near the high after some testing.

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.