Trading Notes for Today, January 10th

The markets were challenged early as the sellers took their shot at pushing stocks lower. We started with better than expected jobless claim hitting a five week low at 330,000. However, overnight the Fed minutes came back to haunt that now the speculation is the Fed will cut faster than originally expected. I love it when the analyst swing from tree to tree pounding their chest yelling warnings on things they have no clue of how they will play out. The worries subsided as the day progressed on hopes the jobs report would be better than expected on Friday. Earnings are back on the top of the worry list as Alcoa missed expectations after-hours and was trading down 4.1%. Sears was down 13% on warnings about same store sales. The fun is about to begin and we all need to be prepared for some disappointment and the prices of stocks will be adjusted for missed earnings. We will continue to take this one day at a time. If you have specific questions on any posts please forward them directly to Jim@JimsNotes.com.

Sectors to Watch:

  1. S&P 500 index was flat closing at 1838 on Thursday. The uptrend remains in play with the 50 DMA the level to hold moving forward. Worries about earnings are rising in the headlines following the miss from Alcoa and warning from Sears and that could upset the apple cart short term. Raised our stops on positions in the index and watching how it progresses. Upside remains in play and we will be patient to see how it plays from here.
  2. NASDAQ remains in the uptrend and has struggled to make much progress this week. Worries and data points are keeping the broad market in check currently. The index is back near the high closing at 4156. Respect the trend and let this play out going forward. If we hold and move above 4168 look for the opportunity to add to QQQ. Otherwise we are watching QID for a potential short trade.
  3. Small Caps (IWM) the Russell 2000 index closed at 1158 and moving sideways consolidating the uptrend near term. The downside risk of the sector is still a possibility and we will watch to see how it unfolds going forward. Watch and take what the sector gives, but don’t assume anything at this point. Let the trend determine the direction from a micro timeline.
  4. Financials (XLF) moved above the top of the trading range and has held up nicely all week. The sector along with healthcare have been the only two defined leaders to hold up in this weeks trading. The banks (KBE) broke to a new high on Thursday and remains positive short term. The regional banks (KRE) are consolidating near the previous high and content to hold for now. The brokers (IAI) remain in a steady uptrend helping the broader index maintain the upside. Digging into each ETF will provide the leaders and candidates for trading. Patience is the key with the sector going forward.
  5. Healthcare (XLV) continued to move higher with a move above the previous high of $55.65 and a follow through on Thursday. A break above this level hit the entry to add to the position in XLV.  The consolidation in the sector goes back to the November high. Watch look for the sector to continue the trend.  Medical devices (IHI), healthcare providers (IHF), pharma (XPH) and biotech (IBB) are all helping lead the sector higher.
  6. Telecom (IYZ) was looking for a break higher and continuation of the upside with a move above the $29.75 level. This is a sector that comes with volatility and Thursday it was in action with the selling of stocks erasing 1.6% of the gains. Today we watch to see how this plays out and if the selling was fear driven. Manage your exit points based on the volatility going into the trading day.
  7. Energy (XLE) is now sitting on the 50 DMA and threatening the to move lower and test the trendline. We raised the stop on the positions as the weakness may be building in the sector short term.  The refiners remain the strongest sub-sector currently. OIH is testing support at $46.75, IEO is trading sideways and attempting to find buyers, and the refiners (VLO, TSO, and PSX) are still providing the upside leadership in the sector near term.
  8. Technology (XLK) is testing lower and in position to test the last entry point at $34.95. The semiconductors were providing the upside, but have met with a bout of volatility this week. Watch and see how this plays out and look for the opportunities in the uptrend. IGN broke to new high, IGV broke to a new high as well, and FDN is testing the previous highs. If the upside resumes we will add to positions.
  9. Crude oil fell below support level and is now  is a position to test lower. OIL below $21.60 is s a short signal, but hard to trade the move with the drop of better than 10% already behind us. Look for a test of this level today and see how it unfolds from here.  Natural gas, gasoline and heating oil are all in the same downward trek.

The models are updated and our short term view continues to dominate the process currently. The minutes from the Fed FOMC meeting created some clarity on Wednesday, but upon further review anxiety on Thursday relative to the pace of the stimulus cuts. Earnings start with dud in Alcoa’s miss. The fear factor is still looming in reference to earnings and we will have to be patient as it all plays out. The buyers seem willing to put money to work despite the worries relative to an overbought market technically. The minor selling has been efficient and the outlook remains positive, but questionable. I am not changing my focus from the current events as they unfold and the opportunities they give as a result. The pattern list (below) is where we are posting most trades short term as a result of the current market environment. Manage the risk on trades more aggressively and monitor your longer term holdings with trailing stops to account for any rise in volatility.

  1. QCOM – Entry $$74. Trading range breakout. Telecom pulled back looking for a continuation of the upside move.
  2. RSOL – Entry $4.15. Break to new high, double bottom weekly chart. Solar still moving higher and merger pushed the stock higher on Thursday.
  3. CIEN – Entry $24.25. Double bottom with test. Telecom sector moving higher.
  4. MS – ascending triangle. Entry $31.80. IAI ETF leader.
  5. Follow up on previous trades or posts:
  6. EEV – break from trading range. EEM broke support and short side is in play. Entry $22.25. Stop $21.50
  7. ATNI – Entry $57.50. trading range breakout. Telecom sector remains a leaders. Stop $56.50
  8. FHN – rounded bottom breakout. Entry $11.85. KRE ETF leader. Nice upside breakout. Stop $11.60
  9. PJC – trading range breakout. Entry $39.90. IAI ETF leader. Stop $38.95. Watch the reversal on Wednesday.
  10. INFN – Entry $9.50. Consolidation breakout. Sector is breaking higher. Stop $9.50. HIT STOP
  11. SKUL – Reversal follow through resistance. Entry $6.09. Sector bouncing back. Gapped open with Entry at $6.30 and stop $7.40.
  12. ITB – Ascending Triangle breakout. Entry 23.60. Trade on the break higher. Patience with entry. Stop $24.
  13. XLE – Trading Range bounce. Entry $86.15. Watch for test and then entry. Early test and entry at $86.30. Stop $86.30. Hit Stop.
  14. XLK – Test of low and bounce. Entry $34.75. Watch for test and then entry. Small early test for the market. Stop $34.75.
  15. GLW – Trading range. Entry $17.28. Upside if momentum returns to technology. Stop $17.68.
  16. VMW – Flag. Entry $87.45. Looking for continuation of the upside. Stop $90.90
  17. STX – Entry $50.25. Continuation within the range. Setting up to continue higher. Got the move. Stop $57.10.
  18. 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 $9.50.
  19. 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 $76. 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:

  • 12/30 – Hit stop on position added and managing our positions of 2000 shares long term.
  • 1/2 – Watch the test of support at $53.40. could offer another trading opportunity.
  • 1/5 – Short setup on the current activity could be the trade. Need to be patient to see how this will unfold.
  • 1/6 – big reversal on Monday to close up 4.8%. Watching to see how that holds near term.
  • 1/8 – Testing the previous high after test lower. Break and we will add a position on the move higher. Retest lower and we look at the downside in relationship to the broad markets. Entry $58.50 add 500 shares.