Trading Notes for Today, February 28th

Market Outlook:
The S&P 500 index makes the move above 1850… barely and volume was a yawn sort of like the trading day. Telecom was the leader along with technology, but not enough to strike up the band for a party. That said, we have to respect the trend and the move on the upside. We continue to hold our positions and manage the risk. Relative to new positions we have to maintain our focus on the risk/reward of the trade as well as the emotions in terms of putting new money to work.

Volume was on the light side for the break high and that is of interest as we end the week today. The SOX index did not participate in the move higher and the rolling top remains on my watch list. Internet (FDN) is still leading the way for technology and picking up the slack for the SOX for now. Networking (IGN) and Software (IGV) are still looking solid as well. Leadership is key if the new highs are to stick going forward.

Consumer (XLY) sector took on a leadership role this week and it is one to watch as we start a new month. Financials (XLF) still lagging, but maybe money will find its way into the sector to boost the upside for the major index.

One day at a time. Be aware of the heightened chatter about a test, correction or pullback (you chose the adjective) they tend to gain momentum and become self-fulfilling.

Sectors to Watch:
  1. S&P 500 index made the break above 1850 finally. Now comes the challenge… holding it and moving on from here. Watch how the index responds today to the new found level. Support remains 1810 and for now.
  2. The NASDAQ gained 26 points and continues to hold the trend of moving modestly higher. 4225 is the level of interest for support short term to hold the move above the January high. Watch for technology to lead the sector as XLK and IGV made solid moves on Thursday.
  3. Dow gained 74 points on Thursday and looking to clear the 16,300 level. Still lagging the other indexes, but maybe… it plays catch up now? For now patience as this plays out.
  4. Russell 2000 Small Cap index added 6 points to close at 1187 and a new high for the index. For now we will hold our positions and adjust our stops on the move higher.
  5. Europe (IEV) is trading in unison with the US markets and held above the $47.70 mark Wednesday and added some upside on Thursday. Adjust your stops according to risk currently.
  6. Transports (IYT) made the move above $131.20 Monday, but failed to hold the move. It is back at that level again, but not very convincing at this point relative to the upside. Still in the trading range and holding the 50 DMA. Patience is key.
  7. Consumer Services (XLY) pushing through resistance with entry at $65.50. Held the move on Wednesday as the retail sector leads the way. Nice upside follow through so far.
  8. EAFE index (EFA) made a break to new high and has traded either side of that move the last few days. Still looking for the upside follow through on the break. Entry to add was $67.30 and holding that as well.
  9. Financials (XLF) need some upside leadership from the sector short term. Made move above the entry at $21.65 level, but failed to follow through again thus far. Manage your risk short term.
  10. Real Estate (IYR) has continued to add to the upside and we are at the next entry level if the upside continues. Made the move above $68 again only to give it up again? Watching.
  11. Review the Weekend Update.

The models can be linked to below and each has been updated for the current outlook:

Sector Rotation Model (updated – 2/26/14)

ONLY ETF Model (updated – 2/26/14)

S&P 500 Index Model (Updated – 2/26/14)

ONE EGG Model (updated – 2/26/14) NEW EGG POSTED

Pattern Trading Setup:

Today’s opportunities:

  1. The stall in advance of the major indexes is worthy of note. This puts some worry back in the VIX and me on alert. Looking to take some profit and raise some cash as this plays out. Geopolitical issues in Russia and the Ukraine are a concern over the weekend.
  2. RVBD entry $21.15. Trading range. Technology. Tested back on Thursday, watch to see today.

Pattern Trade Tracking & Follow Up:

  1. PFE entry $32.05. Ascending triangle. Pharma. Positive analyst reports on stock of late. Stop $31.70
  2. RF entry $10.50. Breaking from consolidation. Financials. Confirmed on the upside. Stop $10.20.
  3. JBL entry $18.80. Trading range consolidation. Technology sector. Stop $18.40
  4. LINE entry $33.50. Consolidation breakout. Energy sector.  Stop $32.50 Hit STOP.
  5. LEN entry $42. Consolidation breakout. Homebuilders. Stop $43.
  6. PXLW entry $5.25. Reversal top and test of support. Held the support at $4.80 and now positioned to reverse direction back toward upside. Software sector. Stop $5.
  7. AEIS entry $27.85. Triangle consolidation breakout. Energy sector. Passed on entry with volatile open. Watching today for the trade with positive day. (2/18 post) Stop $27.50.
  8. TQNT entry 9.37. Flag on break higher. Looking for continuation of the upside move. Semiconductor. Stop $11.50. Gap higher and still moving higher, adjust your stop.
  9. FTK entry $24.75. Flag continuation of uptrend. Energy sector moving higher. Stop $24.25. Nice move higher on Monday to break to new high.
  10. VIPS entry $106.50. Break higher from consolidation wedge pattern. Stop $113.25.
  11. EEM entry $38.75. Bottom reversal and continuation higher. Stop $38.50. Willing to add if clears the $39.90 mark today.
  12. EFA entry $65.25. Bottom reversal and continuation higher. Stop $66.25.
  13. SPY entry $178. Bottom reversal. Broad market index in position to bounce. Stop $183.90.
  14. FANG entry $54. Ascending triangle breakout. Test and move higher. Energy sector. Stop $62.10.
  15. QQQ entry $85.10. Move through resistance and follow through on bounce off support. Stop $88.80.
  16. BHI entry $57.15. consolidation breakout. Oil Equipment sector. Stop $60.30. Nice break higher and expect a test of the move as follow through.
  17. GLD – Entry $121. Bottom reversal. Trade back to the $125 level. Took entry on move higher. Stop $127. Momentum remains positive short term and watching to see how it responds to the move.

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: (see Facebook research page for archive of posts)

  • 2/18 – Raise stop to $58.95 currently and manage the move to the new high according to your risk. With the price moving through the top of the Bollinger bands some downside activity may be on the horizon or a continuation of the top consolidation.
  • 2/19 – $16-19 billion acquisition of WhatApp pushed the stock down 2.5% after the announcement in after-hours trading. Watching to see how investors react in trading today.
  • 2/24 – Continuation of the upside momentum. Plenty of news and comments on the stock, but the buyers remain confident short term. Looking at adding a trade on the stock with options. Watch to see how it trades today.