Trading Notes for Today, January 17th

The broad market indexes moved lower with the Dow leading the downside thanks to United Healthcare and WalMart. On the upside Alcoa and Hewlett Packard led the way.  The Dow was off 0.4%, S&P 500 index down 0.15%, Russell 2000 index up 0.12% and the NASDAQ was up 0.07% or 3 points. Couldn’t gain any traction on the upside as Best Buy (down 28.6%), Goldman Sachs (down 1.8%) and Citigroup (down 4.3%) controlled the sentiment in trading on Thursday. The fun continued after hours with American Express and Intel trading lower on earning reports. Today ends the trading week with more financials (STI, BK, FHN, MS and GE) reporting prior to the open. Should be good times — the futures are pointing lower, and the earnings results could add to that if the news is not better. We will continue to take this one day at a time.

Watch for test of the move higher to continue today as investors continue to be subject to the news daily. I would not be surprised to see some short term profit taking. Know your time horizon and manage your risk accordingly.

Sectors to Watch:

  1. Apple struggled to break above resistance. Earnings will be announced next week, and the earning reports have not been overly impressive or disappointing for stocks in general, but still looking for Apple to break through the resistance at $560 on a good report.
  2. Trade for the EGG setup Thursday: URE – Real Estate breaking from a cup pattern with $71.40 entry. A stall in interest rates is helping the sector short term.
  3. GDX – Gold Miners breaking from cup pattern at $22.50 entry. Added Thursday with the follow through move. Manage your risk as the move lacks much in terms of momentum. (Pattern List Below)
  4. PALL – Palladium breaking from downtrend trading range at $72.50 entry. Hit the entry point and added on Thursday. Manage the risk of the metals short term relative to the volatility. (Pattern List Below)
  5. FDN – Internet breaking out to new high at $60.75 entry. Added position on Thursday. (Sector Rotation Model)
  6. S&P 500 index still struggling to push through to new high as earnings stall the move higher and closed at 1845. The sideways action continues and we are content to watch and see how it unfolds. Watch the impact of earnings and economic outlook on the index.
  7. NASDAQ leads the way with the index closing positive and at 4218 holding the new high. If the upside tests back to 4180 and holds, looking to add the position in QQQ we gapped above on Wednesday. Patience.
  8. Small Caps (IWM) the Russell 2000 index moved to a new high as well closing at 1173. Take it for what it is at this point and use the 30 DMA as a stop or exit point on short term trades.
  9. Financials (XLF) struggled as Citi and Goldman Sachs earnings disappoint. After BAC on Wednesday reported positive earnings. KBE moved lower and tested as well as the regional banks (KRE), added to watch list for Sector Rotation Model. The insurance companies (KIE) attempted to join the upside run, but stalled as well. I still like the fundamentals of the sector and would look for the opportunities in the sector going forward.
  10. Healthcare (XLV) set the pace on the upside again this week. 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 as this unfolds.
  11. Telecom (XTL) made a solid move higher gaining 1.6% on Wednesday and held the gains Thursday. The hope is this will follow through on the upside. I still like the individual plays better than the overall sector. The Apple deal with China Mobile helped the sector regain some upside momentum, but the individual stocks are still the clearest winners/leaders.
  12. Technology (XLK) held the new high posted on Wednesday, but watching the SOXX after the INTC news was disappointing. Internet, Networking and Software are still on the upside short term.
  13. 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). Faded on Thursday, but still looking for a upside follow through from the bottoming consolidation pattern.
  14. Oil is rising off the low on speculation of demand rising again globally as the economies recover in Europe. The is a trade set up willing to take the trade if the test of the bounce follows through. (Sector Rotation Model)
  15. Updated ONLY ETF Model watch list.

The models are updated and our short term view continues to dominate the process currently. The economic data has remained positive enough to keep the buyers engaged. There is plenty to watch, like, worry over and contemplate as we move forward. Earnings showed some positives with Bank of America beating expectations, but it has also showed some negatives with Best Buys miss and decline of 28%. 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, with the buyers still willing to engage it has not amounted to much on the downside this week. 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. TQNT – Entry $8.50. follow through on break from trading range at $8.40. Semi’s still moving higher.
  2. JBL – Entry 17.50 test. Broke above resistance $17.48 and testing. If holds look for entry with max entry at $17.65.
  3. WEN – Entry 9.12. Break from trading range. Fundamentally performing well in tough sector.
  4. Follow up on previous trades or posts:
  5. GILD – Entry $75.50. Break through resistance, triangle. Biotech is still leading sector. Stop $73.
  6. GDX – Entry $22.50. Break from bottom consolidation. Gold is attempting to bounce as well. Stop $22.
  7. PALL – Entry $72.55. Bottom reversal at resistance. intermediate term downtrend line. Metals are gaining momentum short term. Stop $$71.50.
  8. V –  Entry $223. Consolidation top. Financials working higher as sector. Stop $218.
  9. PIN – Entry $17.60. Ascending triangle. Country ETF wants to break higher short term. Stop $17.40
  10. NVDA – Entry $15.90. Trading range breakout. Semiconductors upgraded and moving higher. Stop $15.70.
  11. CBB – Entry $3.65. Trading range breakout. Telecom sector is stock picking sector for now. Stop $3.58.
  12. HPQ – Entry $28.85. Ascending triangle. Upgrade to PCs with stock in position to break higher. Stop $$27.95.
  13. GLD – Entry $121. Bottom reversal. Trade back to the $125 level. Took entry on move higher Stop $119. OR (GDX – $22.25 – Stop$22)
  14. 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.
  15. 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).
  16. ATNI – Entry $57.50. trading range breakout. Telecom sector remains a leaders. Stop $56.50
  17. FHN – rounded bottom breakout. Entry $11.85. Nice upside breakout. Stop $11.85
  18. PJC – trading range breakout. Entry $39.90. Stop $38.95.
  19. SKUL – Reversal follow through resistance. Entry $6.09. Sector bouncing back. Gapped open with Entry at $6.30 and stop $7.40.
  20. ITB – Ascending Triangle breakout. Entry 23.60. Trade on the break higher. Patience with entry. Stop $24.
  21. XLK – Test of low and bounce. Entry $34.75. Watch for test and then entry. Stop $34.75.
  22. GLW – Trading range. Entry $17.28. Upside if momentum returns to technology. Stop $17.80.
  23. VMW – Flag. Entry $87.45. Looking for continuation of the upside. Stop $92.
  24. STX – Entry $50.25. Continuation within the range. Setting up to continue higher. Got the move. Stop $57.10.
  25. 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.
  • 1/17 – Tight trading range. Interested in adding position still if we breakout to new high. Downside risk still in play.