Trading Notes for Today, August 9th

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. Positive close for the broad market indexes after three days of losses. The reality is not much changed this week. We continue to tread water looking for the catalyst up or down. The Fed Presidents banging the stimulus cutting drum failed to impact the buyers on Thursday and it was business as usual. Same store sales were in line, jobless claims were as expected and it was another boring move to the upside. XLB was the leader gaining 1.5% for the day and bouncing back from the move lower.
  2. Treasury yields were flat at 3.67% on the 30 year bond. Oil was down 1% to $103.40 and testing the July low as support. Gold gained 2.2% to $1309 after selling on Tuesday. Dollar was lower again after the break below support and testing the June low of $21.82. That is helping the short dollar/long euro play to the two egg model from Tuesday, and it move up again on Thursday.
  3. The global markets traded higher as Europe (IEV) gains strength. It held the move above $42 and was up 1% on Thursday. China broke below $34.20, but managed to regain its upside mojo on positive economic data. GXC was up 1.5%. The emerging markets reversed as well on the day gaining 1.9%. This sector is gaining momentum with countries gaining some traction on positive economic data… finally. Australia (EWA) was up 2.8% on the day as well.
  4. Financials were the primary leader for the broad markets, but XLF tested support at the $20.45 level and netted a small advance on Thursday. There still hesitancy towards the sector as the governement continues to attact the banks and brokers. Bank of America lawsuit, JP Morgan and the SEC over the Whale Trade… and the hits just keep coming. Watch for the sector to maintain it’s upside momentum and volatility. Regional Banks (KRE) still look attractive going forward.
  5. The S&P 500 Model is updated. 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. The test lower pushed the entry points further away and nothing changed on the move higher today. The trade on the Volatility Index (VXX) reversed on Thursday with the rally, respect the direction of the trend and if we get a positive open today look to exit the trade on VXX. Watch the early trading as the futures are up slightly.
  6. The Sector Rotation Model is updated. Banks bounce, but still look cautious. YUM didn’t bounce back well from the volatility on Wednesday, but the upside is still in play. HPQ still attempting to move higher on test of the breakout. This is still a choppy market and one to respect short term.
  7. The ONLY ETF Model is dealing with the VXX trade and giving it room to handle the swings in price. We hit stops on Biotech (XBI), small cap (IWM) and China (FXI) and the position in VXX isn’t looking good. We are scanning and looking for the best opportunities in a sideways moving market. Time is on our side.
  8. The ONE EGG Model added the EAFE index or EFA on the test Monday. Nice bounce back on Thursday and the outlook is still positive for Europe adding to the upside opportunity. Australia moved up 3% and Asia was better with China on the upside. Take what the market gives for now and manage your risk going forward.
  9. Thursday’s activity gave some clarity on direction… sideways. If we follow through on a move lower we have some positions to consider taking profits and exits from. Today ends the trading week and it has been like a washing machine and hopefully we will come out clean and ready to go.

Pattern Setups For Today:

  1. WFM – Consolidation, double bottom. 56.20 entry on breakout higher.
  2. MSFT – gap lower flag. Broke higher on Thursday above $32.20. Look for test and move higher. 32.65 entry on test of the move.
  3. Follow up on previous posts:
  4. COG – Pennant. Entry $77.80 with continuation of the uptrend breakout.
  5. 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. Hit early and moved up slightly.
  6. COH – Short play on gap lower pennant. Short entry at $53. Good sales data, but the negative bias from earnings remains. The downside play is worth watching.
  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. Hit entry Thursday.
  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 last week. Sept 900 Calls $22.05 entry (10 contracts). Test lower, watch and manage your exit. $880 stop.
  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. Modest upside on Thursday.
  10. PFE – double bottom. $29.70 entry on break higher. Testing lower with stop at 28.90.
  11. 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.
  12. 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. Gained 8.9% on Thursday! Watch and manage the profit on the trade.
  13. 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. Stop $44.
  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.

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. Testing the new high with the current trading environment. Looking at how to hedge the play.

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.