Trading Notes for Today, January 23rd

Unfortunately I was unable to record the update last night do to some surgery on my mouth. NO JOKES please, laughing only makes it hurt worse.
Why the selling on Thursday? Our dear friend worry is still in play. The worry? nothing more than China’s economy still slowing and continued worries about the banking systems solvency. Sounds familiar, but they say don’t worry they have it under control. Heard that one before too. Needless to say it was enough to shake the global markets and put investors on edge. Simple put, the bids dried up and that gave the sellers more leverage. There was some late day buying that helped curb the losses, but today will be the key on how this proceeds. Will the downside follow through or do the buyers step back in on the dip?
I am still on the downside and it may be this time the buyers wait and see. If that belief is true, some short opportunities as trades will emerge. As for the long holdings we will adjust our stops accordingly and take what the market gives on short term trading positions. It remains one day at a time and focused discipline.
Sectors to Watch:
  1. Natural Gas (UNG) up 9.3% this week… welcome to the winter impact on the commodity. The upside remained in play after catching support at the 50 DMA. FCG equally responded, but with the broad market worries tested back to the $20 breakout level. Worth watching this morning as an opportunity to entry the trade that ran away from us. The trade opportunity is $23.70 as a reasonable target over the next 12 months.
  2. Biotech (IBB) continues to lead the way higher, very modest selling on Thursday. Positive sector.
  3. Energy (XLE) tested again on the global worries. This remains a news driven sector, but for the patient offers upside going forward. XOP and OIH reacted the same way, but still like the short term upside if the worries subside.
  4. Retail (XRT) is putting pressure on the downside of the index. Broke support at $83.25 and looking for some level of support. Earnings are keeping the sector down and the outlook isn’t improving. Downside trade, but watch for a short term bounce first.
  5. S&P 500 index has been lagging along with the Dow and both took one in the gut on Thursday. Above average volume on the selling, broke immediate support and it testing the 1810 level we discussed on the downside as the stop or exit point from the index.The 1850 level proved to be more of a challenge and we never broke above that level and now we have to deal with the downside outlook. Futures are lower as I post this, but we will be interested in the open and first hour to see how the tone plays out.
  6. NASDAQ leads the way, and the selling tested back to the first level of support at 4185, but closed at 4218 in the late day bounce. Watching this morning as it is trading down 14 points early. Watch the support on the downside, if breaks short opportunity as trade.
  7. Dow testing the 50 DMA has my attention as the leading index on the downside. 16,125 level to watch if it breaks lower it could get ugly. DXD is the short ETF trade with $28.55 level of entry to watch (closed at $28.60).
  8. Small Caps (IWM) the Russell 2000 index tested the 1165 support level. Watching how it plays out today as it has been one of the stronger indexes along with the NASDAQ.
  9. Financials (XLF) closed below $21.65 level of support. Tested the 50 DMA and could stand up to the banking worries in China. That alone is putting more pressure on this sector than others. Watch for bounce today or we take the exits set.
  10. Healthcare (XLV) small test lower and held up well overall. biotech (IBB) helping along with pharm (XPH). Looking extended and may see test of the move higher.
  11. Telecom (XTL) holding the move higher and tested lower on Thursday, but still in good shape technically. IYZ attempting to break above the $29.80 level as well tested, but held up. I still like the individual plays better than the overall sector.
  12. Technology (XLK) held up during the selling, and continued the consolidating the last five days of trading. Networking (IGN) doing its part on the upside with modest test on Thursday.
  13. Semiconductors (SOXX) still holding the uptrend among all the news and earnings. Holding the uptrend and watching today for insight going forward as a leading sector.
  14. China (FXI) Where all the problems are… banking, lending, economy, etc. Enough to go around and if the worries continue to rock global markets it could get interesting moving forward. Watch and adjust accordingly.
  15. Crude oil is still rising and $23.25 is the target for the ETF.
  16. Gold miners (GDX) broke out on Friday as posted on the pattern trade list.  Nice follow through on on upside, but seeing some consolidation. Gold prices moved higher among the worries in China and helped on the upside. 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. REITs (IYR) Held among the selling and confirming the short term upside. Watch and manage the position in the face of the news.

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, but the introduction of worries relative to China again are a concern. We have adjusted stops and will manage through this risk. There is plenty to watch, to like,  to worry over and to contemplate as we move forward. Earnings loom as an issue until they are done. No reason to panic and no reason not to add to positions if the opportunity arises. 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. FSLW – Entry $22.75. Complete the cup breakout and move through the 200 DMA.
  2. Follow up on previous trades or posts:
  3. FIO – Entry 9.45. Double bottom. technology sector still leading. Stop $9.18.
  4. WEN – Entry 9.12. Break from trading range. Fundamentally performing well in tough sector. Stop $8.95.
  5. EGN – Entry $70.80. Energy sector bouncing back to life. double bottom breakout. Stop $69.90
  6. QLD – Entry $100. Continuation of new high on test. Watch and be patient. Stop $98.85
  7. CURE – Entry $75.30. Continuation of uptrend in healthcare sector. Stop $73.
  8. JBL – Entry 17.60 test. Broke above resistance $17.48 and testing. Stop $17.50.
  9. TQNT – Entry $8.50. follow through on break from trading range at $8.50. Semi’s still moving higher. Stop $8.50.
  10. GILD – Entry $75.50. Break through resistance, triangle. Biotech is still leading sector. Stop $79.
  11. GDX – Entry $22.50. Break from bottom consolidation. Gold is attempting to bounce as well. Stop $22.40.
  12. PALL – Entry $72.55. Bottom reversal at resistance. intermediate term downtrend line. Metals are gaining momentum short term. Stop $$71.50.
  13. V –  Entry $223. Consolidation top. Financials working higher as sector. Stop $226.
  14. NVDA – Entry $15.90. Trading range breakout. Semiconductors upgraded and moving higher. Stop $15.70.
  15. CBB – Entry $3.65. Trading range breakout. Telecom sector is stock picking sector for now. Stop $3.60.
  16. HPQ – Entry $28.85. Ascending triangle. Upgrade to PCs with stock in position to break higher. Stop $$28.50.
  17. GLD – Entry $121. Bottom reversal. Trade back to the $125 level. Took entry on move higher Stop $119.
  18. 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.
  19. 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).
  20. ATNI – Entry $57.50. trading range breakout. Telecom sector remains a leaders. Stop $57.50
  21. FHN – rounded bottom breakout. Entry $11.85. Nice upside breakout. Stop $11.85
  22. PJC – trading range breakout. Entry $39.90. Stop $39.25.
  23. XLK – Test of low and bounce. Entry $34.75. Watch for test and then entry. Stop $35.50.
  24. GLW – Trading range. Entry $17.28. Upside if momentum returns to technology. Stop $17.80.
  25. VMW – Flag. Entry $87.45. Looking for continuation of the upside. Stop $95.
  26. 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.
  • 1/17 – 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. Stop $55.50. Giving room in the established range to move. Break lower take the exit.
  • 1/23 – testing lower end of the trading range and if a bounce materializes we will add 500 shares to the trade position at $57.15. Otherwise honor the stop.