Trading Notes for Today, February 27th

Jim’s Market Notes:

NASDAQ shows some signs of life as the large cap stocks make move higher. Semiconductors and biotech were the leading sector for the index. The drift on the upside is still in place for the balance of the markets as the news front remains quiet and investors remain content. Take what the market gives and remain focused on the objective.

NOTES OF INTEREST:

Bonds reversed the¬†rally on the Fed Chair’s comments. It was an interesting response to someone stating they were going to raise interest rates as I stated when rates fell and bonds rose on the news. The ten-year bond moved back to the 2% level again. As stated in the notes… in fact, this bounce has me interested in TBT as it unfolds…¬†It gave and entry point at 43.15 on Thursday. Watch how this plays out going forward.

Crude oil worries about supply resurfaced on Thursday after a day to contemplate the facts falling 5.6%. It is up 2.2% off the lows in the pre-market, but the uncertainty is alive and well. It has seen seven weeks in a row with rising supplies. Gasoline and heating oil held steady as the refinery strikes weigh on thinking and cold hit supply.

The pullback in crude prices closed at $48.17 Thursday. XLE fell below the $80.50 mark to return to the previous basing or bottoming pattern, IEZ moved below the 50 DMA, XOP is consolidating near the recent highs, FCG is testing the $11.35 support level falling 4% and refineries have hit new highs. Watching to see how this unfold looking forward and what opportunities arise next as the volatility in price returns.

Apple sold to a low of $126.60 early, but rallied to close at $130.41. The chatter about valuations pushed the stock lower on the test, but showed stamina as the buyers stepped back in. Still worth watching how it plays out.

Facebook is moving back near the December highs and the top of the current trading range. A break higher would be a positive for our current position.

News is driving, but there is a lack of market moving news the last few days and the markets is showing a drift higher. Be on your guard as we proceed and don’t let the lack activity lull you into thinking everything is good. Regardless of my beliefs I continue to follow the trends and for now they are pointing higher.

Action Taken: “Vision without action is a daydream… Action without vision is a nightmare.” Japanese Proverb.

Adjusted stops on positions in play as we head to the new week of trading. I am expecting the upside to remain in play, but we have to plan for the unexpected should our beliefs not play out as expected.

Added Facebook to Trading Pattern strategy below.

Sectors-to-Watch:

Patience remains the name of the game for now.

Energy (XLE) fell below the $80.50 mark and watching how it responds to crude oil prices.

Natural Gas (UNG) so much for the rally or speculation move on demand rising. Supply data hits the commodity dropping it 6% on Thrusday. DGAZ jumped on the move.

Crude Oil (OIL) fell 5% on Thursday and DTO attempted to break out on the decline. Trading oil is like trying to pick up a fish on the dock. The best course of action is to pass, but if you must pick a direction and time horizon and hold it… trading will make you crazy in the current volatility of news and rumors.

Europe (IEV) moved higher and $45.35 is level to add to positions if you are willing to accept the risk. EWG cleared $29.25 entry point. EWK cleared the $17.10 entry point. EIRL is moving vertical. EWH in position to break above the $22 mark. EEM near $41 entry mark and EFA hit the $64.60 entry. Drifting sideways in unison with the US for now.

Russia (RBL) testing the move higher as rumors swirl around the Ukraine lack of peace agreement. The downgrade to debt by Moody’s and speculation overall is challenging the move higher watch how it unfolds.

Healthcare (XLV) break above the $71.20 resistance on Friday was positive for the sector. It had been lagging on concerns over the Affordable Healthcare Act challenges.¬†I like the parts and the whole as they were outlined on Monday’s blog post.

Treasury Bonds (TLT) fell on the bump higher in rates after the brief rally on Yellen’s comments. TBT hit entry point on Thursday’s move at $43.15.

Money Management Strategies Links:

  1. S&P 500 Strategy
  2. Sector Rotation Strategy
  3. ONLY ETF Strategy
  4. ONE EGG Strategy
  5. Pattern Trading Strategy – Below
  6. Long Term Strategy – Below

Pattern Trade Setups:

  1. Broke to new highs with a gradual drift higher. Question is will the upside continue? The sentiment is positive, the money flow is positive and outlook is neutral. I take this to be a news driven trading environment and nothing more. Fundamentals are not in line with the move. Trade the move.
  2. EDC – entry $25.40. break from consolidation range. picking ups some momentum in the sector and we will have to manage the risk of the trade. Stop 24.10. Target $28.
  3. JD – entry $28.25. Cup pattern. break higher for the sector and the stock has been one of the methodical leaders the last two months. Stop $27. Target $33.
  4. TSEM – entry $16.50. Weekly chart breakout of bowl pattern and 2012 high. Semi’s taking on leadership role in NASDAQ. Stop $15.35. Target $19.50
  5. ATHM – entry $39.90. Trading range bottom breakout. Move above the 200 DMA would be a positive on the move from the trading range. Internet space is leading currently in technology sector. Stop $38. Target $44.

Pattern Trade Tracking:

  1. FB – entry $80.25. pennant break upside. in mid consolidation phase. looking for upside trade on move. Stop $77.
  2. NKE – entry $95.50. trendline break upside. Retail remains a leader and the resumption in momentum for Nike is a trade. Stop $94.25. Target 99.40.
  3. SUNE – entry $22.55. triangle on weekly chart. Resumption of the longer term uptrend potential. Stop $21.40. Target $25. ADDED to TRADE Below.
  4. AMBA – entry $55.25. micro trend reversal. Tested support at $50 and looking for reversal and longer term uptrend to resume. Stop $54. Target $60.20.
  5. FAS – entry $126.70. resistance break. continuation of the double bottom reversal following test. if upside continues financials join the party. Stop $124. Target $133.
  6. GMCR – entry $122.80. bottom reversal. Move to the 200 DMA and then look for break of trendline higher. Stop $119.50. Target 139.60.
  7. UNG – entry $14.40. bottom reversal. energy sector gaining some momentum. Weather related move for this trade. Stop $14.30 HIT STOP
  8. CIEN – entry $20.25. consolidation range. biotech making move higher to resume uptrend. Leading sector again? Stop $19.60
  9. INFI – entry $15.15. wedge consolidation breakout. biotech has been struggling of late, but looking for upside to resume. Stop $14.75
  10. SUNE – entry $21.20. trading range breakout. Semi’s are moving higher and regaining leadership role. Target $23. Stop $21.20
  11. SVXY – entry $57. Downtrend line break. Broke the uptrend line on VIX. The short trade as the momentum shifts is the trade currently. target $61.50. Stop $61.20 – raised stop and managing the risk, hit the target.
  12. C Рentry $49.80. break from double bottom base. Upside momentum in the sector short term. $52.50 target on move. Stop $49.15
  13. BAC – entry $16.50. test of double bottom breakout. banks getting momentum from the potential rate hikes. $17.50 target on move. Stop $16
  14. AKAM – entry $64.50. double bottom breakout. Looking for move back to the previous high if technology resumes leadership role. Took position on opening strength today. Against my emotions, but I like the earnings. Stop $67.50. Manage the stop and let this unfold on direction.
  15. NXPI – entry $82.30. trading range breakout. The earnings report helped the upside and looking for the follow through short term. Semiconductor sector. Target $88. Stop $82.30
  16. F Рentry 16.12. trend reversal and break above 200 DMA. upside momentum from sales and target of $17.25 in play. Stop $15.80
  17. AMD – entry $3.07. trading range breakout test. Broke higher and testing the move in pennant pattern. Upside trade on the confirmation. Stop $2.93.
  18. NFLX – entry $460. trading range or flag breakout. Confirmation of the upside move from earnings in the consolidation. $485 target short term. Stop $460.
  19. IJH – entry $147.25. Breakout from range. The move would put the sector at a new high and the leadership role. Stop $147.25
  20. IWM – entry $119.50. break in range. The move through this level puts the upside back in play and expect leadership from the sector going forward. Stop $118.50
  21. SPY – entry $204.80. Range trade. Looking for move back to the previous highs on the positive sentiment. Stop $206.50
  22. FSLR Рentry $45.50. Bottom range breakout. Alternative energy sector bouncing with oil. Look for trade to $52 if momentum follows through. Stop $52. Gapped higher and adjusting the stops.
  23. WFM – entry $48. Flag. Longer term outlook very positive off earnings. Look to hold this position going forward. May add to our long term strategy below. Stop $52.50
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.
Long Term Opportunities: 
Long term positions take time to manage and patience to let them unfold. The short term can be managed with hedging or trading off the longer term positions. The goal is to build the position and manage the risk. Sometimes the short term news and events cause anxiety… the goal is to mitigate the risk and protect the downside as we allow the stock time and room to grow. If you don’t like long term holdings don’t read the data below.
  • Facebook (FB) – $73.15 entry (10/16/14) added 1000 shares back relative to the long term outlook following the choppy drop in markets. Earning remain¬†good, but the outlook showed higher costs and has kept pressure on the shares to stay in the current trading range. >¬†Added to position: 500 @ $77.50 – 1/8< ¬†TODAY:¬†¬†Holding above support and finally made move on the upside breaking above $80.50. Patience as this unfolds. It remains a work in progress.
  • Twitter (TWTR) – ¬†(1) Added 500 shares at $42.80 (10/28/14). (2)¬†Added 500 shares at $39.20¬†on¬†1/9/15. ¬†(3)¬†Added 500 shares at $40.25 for short term trade to $42.25. Stop for added shares raised to¬†$46.25. This is a long term holding, but we will trade on short term technical data if warranted. Gapped higher on earnings and so far holding the move.¬†TODAY:¬†Flag pattern of consolidation on the gap higher in play and willing to let this unfold short term. Raised stop on the traded shares above (#3).
  • Bank of America (BAC)¬†(1) Added Jan 2016 $17 Calls at $1.15 (avg price)/300 contracts. (2) Added 2500 shares at the $16.35 mark ¬†on 10/21/14. Banks are¬†gaining some ground on the proposed hike in interest rates and I still like our position going forward as we practice patience. TODAY:¬†Broke¬†support again along with¬†investor resolve. More issues with lawsuit settlements sends people to the exits.
  • Whole Foods Market (WFM)¬†(1) Added 1000 Shares @$48 11/20/14 starting position. The outlook has improved after making changes to the stores and adding new stores. The earning validated what I have been following for the last year and the company should be at the front side of a long term upside based on fundamental growth. So far so good on the sequential earnings period. TODAY:¬†Upside remains in play following earnings and looking for this to hold the course on a steady climb.