Trading Notes for Today, January 15th

So much for the sellers taking control… the buyers were back on Tuesday and essentially erased the selling and it is business as usual? Retail sales were better than expected and business inventories rose to set buyers in a good mood from the open. Import prices didn’t increase at all helping the inflation picture. Overall positive economic data set the tone for the day… the opposite of Monday. More rattling about the stimulus cuts as Fisher stated he wanted $20 billion in cuts as the first efforts are made to reduce the Fed involvement. However, that news didn’t impact stocks on Tuesday as traders were more interested in the positive economic data. Short term the market is on an emotional roller-coaster or daily volatility and that generally leads to change. We will continue to take this one day at a time.

Sectors to Watch:

  1. Our short trade on the NASDAQ (QID – Egg Model) hit the stop on Tuesday resulting in a loss for the trade. That is the type of activity that makes me crazy, but you have to go with the discipline or else you make bigger mistakes. Still watching how the downside plays out short term.
  2. S&P 500 index was down 1.2% on Monday and up 1% on Tuesday… love this type of trading! The index bounced off the 20 DMA and back to the upside. The sideways action continues with 1810 the level of support to watch short term. The uptrend remains in play and we must be patient to see how it plays from here. Strong volume on the selling was not equaled by the buy volume and is another warning sign moving forward. HIT STOP on SPY and now watch to see what the next course of action will be. QQQ Entry $87.90 if the upside continue to break to new high.
  3. NASDAQ reversed the selling from Monday as well leaving us at 4182 and still moving sideways. As stated above with the S&P 500 index… watch and see how this plays out. Break to a new high may offer an opportunity to add back our position in the index. Patience.
  4. Small Caps (IWM) the Russell 2000 index equally regained the losses from Monday and closed at 1163 and moving sideways, but back at the top of the range. The downside risk of the sector was discussed as a possibility with support at $113.70 on IWM. The uptrend remains in play, but technically the index is in a narrow trading range. Watch and set your stops accordingly, but don’t assume anything at this point.
  5. Financials (XLF) tested back to $21.60 and bounced 1% on Tuesday with BAC leading the upside. Earning report from WFC and JPM were not stellar, but held their own, the pressure is on for the banks to find a way to push higher. Regional banks KRE are dragging on the index currently. Brokers (IAI) and insurance (KIE) were the weak links on Monday, but added to the upside on Tuesday… patience as this unfolds. Watch the earnings and look for the opportunity. Manage the stop on both KBE and XLF in portfolio.
  6. Healthcare (XLV) set the pace on the upside last week and is attempting to lead again this week with the biotech stocks leading the way. IHI, XPH and IHF are all adding to the upside as well. Analyst warnings about the benefits of the AHA being priced in already and the downside risk rising. Watch and monitor your stops.
  7. Telecom (IYZ) was in position to break higher, but reversed and is trading sideways short term. This is turning more to a stock picking sector versus the sector overall. Scanning to find the part we like and will post.
  8. Technology (XLK) gets the prize for the first to hit support and bounce gaining 1.7% on Tuesday. The sector started testing lower last week and closed at the $34.95 support Monday. This is one of the leaders and the bounce helps the broader indexes. Networking, Software and Internet all bounce to lead the sector higher. The SOXX index bounced on the upgrade to the PC stocks on high demand going forward. That is a good boost for the sector as the leadership is needed.
  9. China (FXI) Entry $36.55 if it can clear the 200 DMA and bounce off the recent support for a micro trend reversal trade. (Sector Rotation Model).
  10. Amazon (AMZN) is the clear winner in the retail sales report released on Tuesday. The online retailers are impacting the brick-and-mortar business. Looking for a break from the trading and continuation on the upside. Be patient with the entry point.

The models are updated and our short term view continues to dominate the process currently. The economic data on Tuesday trumps the worries about the Fed on Monday. There is plenty to watch, like, worry over and contemplate as we move forward. Earnings weren’t much better as the banks show lower mortgage origination hurting revenue. The fear factor is still looming in reference to earnings and we will have to be patient as it all plays out. The sellers took control for one day, but the buyers were back on Tuesday. We will see how much conviction they have and if there is any follow through comes from either side today. Looking to take some profit if earnings and worries continue to disrupt the short term outlook. We hit some stops in the S&P 500 model, but attempting to manage the risk on the balance. 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.

Pattern Trading Setup and Tracking:

  1. HPQ – Entry $28.85. Ascending triangle. Upgrade to PCs with stock in position to break higher.
  2. CBB – Entry $3.65. Trading range breakout. Telecom sector is stock picking sector for now.
  3. NVDA – Entry $15.90. Trading range breakout. Semiconductors upgraded and moving higher.
  4. GILD – Entry $75.50. Break through resistance, triangle. Biotech is still leading sector.
  5. PIN – Entry $17.60. Ascending triangle. Country ETF wants to break higher short term.
  6. V –  Entry $223. Consolidation top. Financials working higher as sector.
  7. Follow up on previous trades or posts:
  8. GLD – Entry $121. Bottom reversal. Trade back to the $125 level. Took entry on move higher Stop $119. OR (GDX – $22.25 – Stop$22)
  9. RSOL – Entry $4.15. Break to new high, double bottom weekly chart. Solar still moving higher and merger pushed the stock higher on Thursday. Stop $3.75.
  10. QCOM – Entry $74. Trading range breakout. Telecom pulled back looking for a continuation of the upside move. Stop $72.50 (1/14 – took off stop at open on gap lower? no reason for the move).
  11. ATNI – Entry $57.50. trading range breakout. Telecom sector remains a leaders. Stop $56.50
  12. FHN – rounded bottom breakout. Entry $11.85. Nice upside breakout. Stop $11.85
  13. PJC – trading range breakout. Entry $39.90. Stop $38.95.
  14. SKUL – Reversal follow through resistance. Entry $6.09. Sector bouncing back. Gapped open with Entry at $6.30 and stop $7.40.
  15. ITB – Ascending Triangle breakout. Entry 23.60. Trade on the break higher. Patience with entry. Stop $24.
  16. XLK – Test of low and bounce. Entry $34.75. Watch for test and then entry. Stop $34.75.
  17. GLW – Trading range. Entry $17.28. Upside if momentum returns to technology. Stop $17.80.
  18. VMW – Flag. Entry $87.45. Looking for continuation of the upside. Stop $92.
  19. STX – Entry $50.25. Continuation within the range. Setting up to continue higher. Got the move. Stop $57.10.
  20. 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 $9.60.

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.
  • 1/14 – Testing the move lower again – double top? Watch the downside risk short term. Short live as it bounced with stocks on the day.