Trading Notes for Today, August 7th

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. Monday Dallas Fed President Fisher spoke and spooked the market about curbing the stimulus from QE. Tuesday Chicago Fed President Evans spoke about a stronger economy going forward and the need to curb the bond buying. The markets reacted again with more selling than Monday. This is not really news, but the reality of the situation continues to rock markets when it is talked about. There is plenty more coming the balance of the week and it could produce more of the same short term response from investors. The more the media and analyst dwell on the downside the more likely it will take place.
  2. Treasury yields were flat at 3.73% on the 30 year bond on Tuesday. Oil was down 1.2% to $105.30. Gold was down $19 to $1283 and broke support on the downside hitting exits on trades in GLD. Dollar was lower on the day breaking support at $22.10. and we added the short dollar/long euro play to the two egg model on Tuesday.
  3. The global markets traded lower, but manage to fight their way back again. Europe (IEV) held the move above $42 and China attempted to hold the break above $34.20 in a challenging day for the country ETF. 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. The challenge on Tuesday came in the form of a lawsuit filed by the US Justice Department again Bank of America for fraud on Mortgaged backed bonds. That rippled through the sector and put the downside on alert short term.
  5. The S&P 500 Model is updated for Wednesday’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 for the entry point and you can review the Watch List Table for the Model. I added a trade on the Volatility Index to the model as well.
  6. The Sector Rotation Model is updated. Banks sold lower not helping the new position, watch take exit if the selling continues. YUM held up well after breaking higher on Monday. HPQ still attempting to move higher. Balance treading water as the market gets choppy.
  7. The ONLY ETF Model continues to take on short term trades offering short term upside. No additions on Tuesday and adding VXX to the watch list today. The volatility index moved off the lows on Tuesday with the early selling and it may well be the beginning of a jump higher if the concerns rise relative to direction short term.
  8. The ONE EGG Model added the EAFE index or EFA on the test Monday. Held up well on Tuesday and closed positive to the position entry. We will manage this accordingly.
  9. Watching Wednesday’s activity for clarity on direction. If we follow through on a move lower we have some positions to consider taking profits and exits from. This is setting up to be a self-fulfilling prophecy on the downside with all the talk about the Fed and overvalued stocks. Manage your risk.

Pattern Setups For Today:

  1. The positions below are are going to be challenged by the comments relative to valuations and the Fed cutting stimulus. Tighten you stops and protect against a short term reversal. There will be plenty of opportunities as we move forward and gain more clarity on the micro trend.
  2. GLL – break of trend reversal. Broke support and in position to retest the lows. $96.90 entry.
  3. COG – Pennant. Entry $77.80 with continuation of the uptrend breakout.
  4. VLO – Reversal off low. We were watch this and it failed to follow through on move above $36. Nice move higher on Tuesday. Watch for upside continuation and entry of $36.75.
  5. COH – Short play on gap lower pennant. Short entry at $53.
  6. Follow up on previous posts:
  7. CLDX – Flag – $21.50 breakout. Watch for the follow through to Monday’s attempted move higher. Tested lower with the broad indexes.
  8. TQNT – Gap Test – break higher from the consolidation is testing. Looking for an upside continuation. Entry $8.05. Strong sector. tight consolidation on Tuesday.
  9. 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. Stop $22.50
  10. F – Consolidation breakout at $17.25. Test of the move would give the better entry and we tested today back near the $17 mark. Still looking for support and bounce with entry at $17.25.
  11. JPM – Break cup & handle. $56.70 – positive global outlook for the bank. Sold lower on Monday & Tuesday… watch.
  12. 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.
  13. 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 last week. Sept 900 Calls $22.05 entry (10 contracts). Test lower on Tuesday… watch and manage your exit. $880 stop.
  14. VMW – Flag gap higher. looking for a continuation of the move from the consolidation. Entry $84.10. No entry yet and continued to watch.
  15. 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, but tested on Tuesday as broad index moved lower.
  16. PFE – double bottom. $29.70 entry on break higher. Testing lower with stop at 28.90.
  17. 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. HIT STOP @ $25 on Tuesday.
  18. C – Testing $51.30 support. Entry $52.25. Stop at $51.20. Big test lower on Tuesday as the banks struggle on lawsuit from the government against BAC. Be patient here as this plays out.
  19. 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. Tested move higher on Tuesday.
  20. 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. $19.80 stop on play.
  21. 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 $44.45.
  22. 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.
  23. 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.
  24. 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.

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
  • 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.