Trading Notes for Today, January 22nd

The market was up modestly on the day… at least the NASDAQ (+0.6%) and the S&P 500 Index (+0.2%) were up. The Dow managed to close lower as Verizon, General Electric, Travelers and Johnson & Johnson led the way down. Alcoa was up 6.7% with the stock going vertical over the last week, but didn’t change the complexion of the index on the day. All of that said, and the headlines remain on the negative side. The concerns about a correction continue to surface and the drums are getting louder in reference to the downside. One challenge has been the inability of the S&P 500 index to break above the 1850 and close with some momentum. We will continue to take this one day at a time.
One thing of interest for me is the activity between interest rates, the dollar and precious metals? Gold held support above the 30 DMA, but can’t break above the $1258 resistance. The dollar is still in an uptrend off the October low, but can’t break through the resistance at $21.85 (UUP). Interest rates… they keep declining? Go figure, is there any wander the markets can’t decide to break higher from the current levels? Patience as this all plays out short term.

Sectors to Watch:

  1. Natural Gas (UNG) was on the move again Tuesday gaining 3.6%. The upside remain in play after catching support at the 50 DMA. FCG cleared $19.38 and attempting to reverse the trend back to the upside.
  2. Biotech (IBB) continues to lead the way higher.
  3. Energy (XLE) held uptrend with bounce last week and nice follow Tuesday. Need to clear the 50 DMA again on upside. XOP cleared $68.90 and looking for confirmation on reversal. OIH similar with move above $47.35.
  4. Retail (XRT) is putting pressure on the downside of the index. Broke support at $83.25 Friday and failed to hold the bounce on Tuesday. Downside is in play.
  5. S&P 500 index is still struggling to push through to a new high as earnings stall the move closing at 1843. This is the level to break is we are going to get the upside follow through. SPY $184.75 entry point? Watch.
  6. NASDAQ leads the way with the index closing at 4225 and hitting another new high. Watch and enjoy the move.
  7. Small Caps (IWM) the Russell 2000 index moved to new high at 1175. Take it for what it is at this point and use the 30 DMA as a stop or exit point on short term trades.
  8. Financials (XLF) struggled as earnings disappoint on some and better on others. Up a couple of pennies on the day, but still keeping the uptrend in play.
  9. Regional Banks (KRE) made solid jump higher today hitting our entry point on the short term trade and added to the Sector Rotation Model. Upside back in play short term, manage your stops.
  10. Healthcare (XLV) made the move back above $57.11. biotech (IBB) helping along with pharm (XPH).
  11. Telecom (XTL) holding the move higher and keeping the trend in play. IYZ attempting to break above the $29.80 level as well. I still like the individual plays better than the overall sector. The Apple deal with China Mobile helped the sector regain some upside momentum.
  12. Technology (XLK) held the new high posted last week and looking or some help on the upside. Networking (IGN) doing its part on the upside.
  13. Semiconductors (SOXX) still holding the uptrend among all the news and earnings. $42.65 level to clear to regain the upside momentum in the sector.
  14. 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). Not getting anywhere currently. FXP entry hit on the ONLY ETF Model.
  15. Oil is rising off the low on speculation of demand rising again globally as the economies “recover” in Europe. Took the entry on Friday and got some more upside on Tuesday. Manage your stop. (Sector Rotation Model)
  16. Gold miners (GDX) broke out on Friday as posted on the pattern trade list.  Nice follow through on Tuesday with the sector gaining 1.6% despite the decline in gold. Watch the upside move with a target at the $25 level on the ETF. Scanning the ETF is worth the time to find the leaders. SLW, MUX, NGD, and PAAS are a few that stand out currently.
  17. Bonds have rotated to favor on the stability in interest rates. Worth trading to obtain a risk free dividend.
  18. REITs (IYR) continued higher today confirming the short term upside. Cleared $64.75 resistance.

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, to like,  to worry over and to contemplate as we move forward. Earnings showed some positives, but it has also showed some negatives keeping the fear factor looming in reference to earnings. No reason to panic and no reason not to add to positions. We have added to the models as well at the pattern list (below) for short term trades breaking higher. As shown above the sectors are overall positive and providing trading opportunities short term. The key is to 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. FB – Entry $58.70. Trading range breakout. Buyer interest returning? Watch upside trade.
  2. EGN – Entry $70.80. Energy sector bouncing back to life. double bottom breakout.
  3. SLW – Entry $22.75. Complete the cup breakout and move through the 200 DMA.
  4. WEN – Entry 9.12. Break from trading range. Fundamentally performing well in tough sector.
  5. Follow up on previous trades or posts:
  6. QLD – Entry $100. Continuation of new high on test. Watch and be patient.
  7. FXP – Entry $17.50. Continuation of uptrend if breaks two week consolidation.
  8. CURE – Entry $75.30. Continuation of uptrend in healthcare sector.
  9. JBL – Entry 17.60 test. Broke above resistance $17.48 and testing. Stop $17.30.
  10. TQNT – Entry $8.50. follow through on break from trading range at $8.40. Semi’s still moving higher. Stop $8.10.
  11. GILD – Entry $75.50. Break through resistance, triangle. Biotech is still leading sector. Stop $75.50.
  12. GDX – Entry $22.50. Break from bottom consolidation. Gold is attempting to bounce as well. Stop $22.
  13. PALL – Entry $72.55. Bottom reversal at resistance. intermediate term downtrend line. Metals are gaining momentum short term. Stop $$71.50.
  14. V –  Entry $223. Consolidation top. Financials working higher as sector. Stop $223. Big move Friday.
  15. NVDA – Entry $15.90. Trading range breakout. Semiconductors upgraded and moving higher. Stop $15.70.
  16. CBB – Entry $3.65. Trading range breakout. Telecom sector is stock picking sector for now. Stop $3.58.
  17. HPQ – Entry $28.85. Ascending triangle. Upgrade to PCs with stock in position to break higher. Stop $$28.50.
  18. GLD – Entry $121. Bottom reversal. Trade back to the $125 level. Took entry on move higher Stop $119.
  19. 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 $4.
  20. 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).
  21. ATNI – Entry $57.50. trading range breakout. Telecom sector remains a leaders. Stop $57.50
  22. FHN – rounded bottom breakout. Entry $11.85. Nice upside breakout. Stop $11.85
  23. PJC – trading range breakout. Entry $39.90. Stop $38.95.
  24. SKUL – Reversal follow through resistance. Entry $6.09. Sector bouncing back. Gapped open with Entry at $6.30 and stop $7.40.
  25. XLK – Test of low and bounce. Entry $34.75. Watch for test and then entry. Stop $35.50.
  26. GLW – Trading range. Entry $17.28. Upside if momentum returns to technology. Stop $17.80.
  27. VMW – Flag. Entry $87.45. Looking for continuation of the upside. Stop $95.
  28. STX – Entry $50.25. Continuation within the range. Setting up to continue higher. Got the move. Stop $59.

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.
  • 1/21 – Added 500 shares at $58.50. Will add another 500 on confirmation of the move.