Trading Notes for Today, December 17th

The bounce was delayed a day, but it showed up prior to the FOMC meeting to keep the uptrend in play. This now puts the FOMC meeting as the catalyst for the broad markets if the downside is to accelerate. As I stated last night the cuts are more likely to take place after the first of the year, based on the consensus. Anything is possible, but the focus remains on what actions if any the Fed will take on Wednesday. My focus remains to take it one day at a time. We will focus on the short term trend and take what the market gives. If you have specific questions on any posts please forward them directly to Jim@JimsNotes.com.

Sectors to Watch:

  1. S&P 500 index held support at 1775 mark for now and we watch to see how it manages the bounce and the meeting tomorrow. The fear factor is in play and will determine the near term outcome along with the Fed’s decision on Wednesday. I hate decision points that are over watched, they never work out well in the end. The good currently is the market has not priced a one direction or another at this point. Patience is the key.
  2. NASDAQ remains in the uptrend, nice gain to 4029 on Monday to keep the upside in play. This remains the stronger of the major indexes thus far. Patience is the key in making any decision up or down.
  3. Small Caps (IWM) was sitting on the 50 DMA and testing the $109 support level. The bounce on Monday was the leading move among the major sectors with a gain of 1.1% and a move back to 1120. The uptrend remains in play following the test. Watch to see how the sector reacts to the FOMC announcement.
  4. Financials (XLF) moved held the $21.1o support Monday. The regional banks (KRE) and brokers (IAI) are leading the sector and keeping the uptrend in play currently.  Watch to see how this trade sector sets up.
  5. Energy bounced off the lows led by the oil services (IEZ) sector on Monday. A move above the $64 mark would be of interest for a reversal trade off the recent low. With crude holding near resistance at the $98.50 level worth watching on the upside as well. A positive Fed move would act as a catalyst for the sector.
  6. Technology was up 0.9% on Monday and led by the semiconductor sector (SOXX). The move back above $69.60 was a positive to watch as well on the upside as it was leading prior to the worries over the FOMC meeting. Networking (IGN) produced a nice reversal off the low from Friday. Still watching to see how the meeting unfolds tomorrow.
  7. As we start the trading week the noise around the FOMC meeting is drowning out the rest of the data. The economic news on Monday helped the broad markets bounce off support and hold the uptrend for now. When investors and traders get fixated on an event the best course of action is to be patient, play some golf, go Christmas shopping, anything other than making yourself crazy attempting to predict the outcome. Be patient and let this unfold, tomorrow afternoon all will be a little clearer short term.

The models are updated and with our short term view dominating the process currently. This week continues to focus on the FOMC meeting. The news has put stocks in a tug-o-war of the cut versus no cuts in stimulus crowds. My focus remains to let this unfold and then take what the market offers. The bounce off support was helpful to calm the nerves for the announcement tomorrow. Nothing changed, but breathing room relative to the support levels. The pattern list is where we are posting most trades short term as a result of the current market environment. Technical trades and avoidance of speculation on news. Manage the risk on trades more aggressively and monitor your longer term holdings with trailing stops to account for any rise in volatility.

Pattern Setups For Today:

  1. KEG – support reversal. Entry $7.68. Energy stocks bounced on Monday? Watch
  2. GLW – Trading range. Entry $17.28. Upside if momentum returns to technology.
  3. VMW – Flag. Entry $87.45. Looking for continuation of the upside.
  4. Follow up on previous trades or posts:
  5. STX – Entry $50.25. Continuation within the range. Setting up to continue higher. Got the move. Stop $50.50
  6. DOG – Entry $27.45. Bottom reversal. The Dow is leading the selling short term and the trade set up is in play. Stop $27.20. Manage the risk of the trade. Gap open and let it play through out the day with the first hour low ($27.18) as the exit point. never hit still in with same stop today.
  7. SDS – Bottom reversal. The downside trade setup for the S&P 500 index is worth watching here. Entry $32.20. Stop $31.90. Manage the risk of the trade. Same as DOG, first hour low ($31.67) was the exit point and same today.
  8. BRCM – Breakout from Trading Range. Entry$28.20 on test of the move. Watch for the test and follow through. Be patient. Got the entry on the breakout test Thursday. Stop $27.50.
  9. LNKD – breaking from the trading range. Entry $235.10. The trade is on the move back to the previous high. Regaining some momentum. Stop $226.90. HIT STOP.
  10. FB – Trend reversal test. Entry $48.70. Follow through on the reversal and move above $47.40. Stop $52.13. Nice move higher on trade of being added to the S&P 500 index.
  11. HBAN – Breakout from trading range. Entry $9.13. Not much test, but steady trading. If no test, max entry is 9.20. Be patient with the upside as this the stock has a pattern of breaking higher, run and then consolidate. Stop $9.15.
  12. TSRO – Trading range break. Entry $38.40. Biotech sector moving higher short term. Technical trade entry. Stop 37.50. Watch for some resistance at $40.70. HIT STOP.
  13. LINE – entry $29.40. Test of the break higher. Holding support at the breakout $28.80. If we hit the entry looking f or at trade back to the 200 DMA. Stop $29.40. HIT STOP.
  14. PSX – 65.70 entry. Flag breakout. Consolidation after break higher. Refiners are leading in energy sector. Lower oil prices help margins, etc. Patience and expect volatility. Stop $69.50 Nice break higher as gasoline prices start to rise. Allow for some volatility with price moving.

NOTE: The pattern trades above are setups that I see for a potential swing trade or short term 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. The best way to treat these as a learning tool is to assume a $100,000 portfolio and each positions receives a 5% allocation. If we state to take a 1/2 position as an example you would only allocate 2.5% to that position. I would use a downside risk of $500 per trade as a maximum loss. That will help  you learn position sizing and risk management. All investing comes with risk. Our job as investors is to manage the risk. Keep your focus and discipline in place.

Facebook (FB) Update:

  • 11/25 – Still sitting on support and we remain in the same strategy as above. We will decide in the next two weeks how to treat our options based on the movement. Patience for now.
  • 11/27 – With the break of support on Monday we will look to exercise our options on the stock we currently hold in December and that will give us zero shares and a nice profit in the position. The initial break lower on Tuesday was interesting, but some buying followed to push back above the support at$45.50. Micro downtrend still in play without some buying to reverse.
  • 12/2 – Got a reversal and looking to exit the put contracts and hold the stock. Sold @ $6 on stop.
  • 12/5 – Watching to see how the stock follows through on the rumor mill of being added to the S&P 500 index. Expect a test or pullback after the news settles. I am looking at the put contracts out to the March/April timeline  again if we don’t hold support.
  • 12/9 – Mixed trading day on Friday that ended lower. The reversal is being driven by the sector and the S&P 500 addition. Looking for a potential move back to the previous high.  Added position (See Above Pattern Trades) and we will manage it accordingly. This is a trade position only.
  • 12/13 – nice follow through on upside… watch as this is news drive move. Raise your stops accordingly. See Above in the pattern trades for details. STOP @ $52.13.