Trading Notes for Today, August 6th

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 week starts off mixed despite a positive ISM Services report of 56% versus 53.1% expected. The economic data continued to show modest improvement overall.  Unfortunately Fisher got more attention for his comments on explaining why the Fed must start tapering the QE money dump. Thus, the major indexes were slightly lower on the day and telecom was up 1.1%. There was little to cheer about as stocks remained choppy throughout the day.
  2. Treasury yields moved higher again to 3.72% on the 30 year bond on Monday. Oil was down 0.5% to $106.44. Gold was down $9 to $1303 and again testing support on the downside. Dollar was lower on the day and we added the short dollar/long euro play to the two egg model.
  3. The global markets traded lower, but manage to fight their way back. Europe (IEV) held the move above $42 and China attempted to hold the break above $34.70 in a challenging day for the country ETF. The internet stocks in China have done well, but BIDU dropped 4.1% on Monday to lead the sector lower. Both remain in play for now, but we will have to manage the risk.
  4. Financials are the primary leader for the broad markets and we continue to look for the opportunities within the sector. We added KBE on Monday. Watch KRE, KIE, XLF, etc. for further upside.
  5. The S&P 500 Model is updated for Tuesday’s trading. The stops on our positions are set and we are watching the extend move higher short term. I want to add to positions if we continue higher and clear resistance and we added to XLK on Monday. The other positions are still close to the entry point and you can review the Watch List Table for the Model.
  6. The Sector Rotation Model is updated. Banks were added to the model on Monday on the initial move higher.  YUM hit the entry as well to follow up on Friday’s break. EEM is still on the watch list. HPQ I am still looking for a test of the move higher.
  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 added the EAFE index or EFA on the test Monday. We will manage this accordingly.
  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. CLDX – Flag – $21.50 breakout. Watch for the follow through to Monday’s attempted move higher.
  2. TQNT – Gap Test – break higher from the consolidation is testing. Looking for an upside continuation. Entry $8.05. Strong sector.
  3. Follow up on previous posts:
  4. 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.
  5. F – Consolidation breakout at $17.25. Test of the move would give the better entry near the $17.30 mark. Got early test and continued lower. Watch today for the bounce and entry at $17.25.
  6. JPM – Break cup & handle. $56.70 – positive global outlook for the bank. Sold lower on Monday… watch.
  7. ED – Consolidation breakout at $60.50. Watch for upside to continue as utilities rebound from interest rate hikes impacting the stocks. Tested lower on day.
  8. 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). Test lower on Monday… watch and manage your exit.
  9. VMW – Flag gap higher. looking for a continuation of the move from the consolidation. Entry $84.10. No entry yet and continued to watch.
  10. QQQ – cup & handle. break to new high at $75.70 watch for entry on move if it develops. Entry $75.80. Stop $75.80. Continues to move higher.
  11. PFE – double bottom. $29.70 entry on break higher. Testing lower with stop at 28.90.
  12. 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 $25. Solid move higher on Friday and Monday, but need to manage the gain.
  13. 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.
  14. YUM – Weekly chart 16 month trading range breakout? Move above $74.10 looks interesting with a longer term outlook. Took entry at $74 Monday. Stop is $72.75.
  15. 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. Entry 19.50. $19.50 stop on play.
  16. 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 making the move higher. Solid gain last week, raise stop $44.
  17. 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.
  18. 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. Need move through the $47 resistance.
  19. GXC – China – bottom reversal. Resistance at $66.30 and added ($66.50 entry) on the move through this level. Watch the volatility in the trade as China is dealing with slowing economic data. Stop 68. Attempting to make a move higher, but challenged. Manage your risk .
  20. 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.
  • The stock hasn’t looked back since gapping higher on earnings. Watch and manage your upside risk.

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.