Trading Notes for Today, January 9th

The ADP report for private sector jobs showed improvement again in December. 238,000 vs 215,000 expected was a good sign for the jobs data due on Friday from the government. The markets reaction was positive, but most eyes were on the Fed minutes released in the afternoon. Those left most traders without much to argue, cry or sell stocks over. The belief is the benefits were eroding with time and that led to the decision to cut the stimulus starting this month. The projections are for stimulus to be done sometime in the second half of the year. There was some selling following the release and the Dow showing the most weakness on Wednesday down triple digits at one point and off 0.5% for the day. Plenty of anxiety and interest for everyone as the data continues to roll out for December. 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 flat closing at 1837 on Wednesday. The uptrend remains in play with the 50 DMA the level to hold moving forward. Worries about earnings are rising in the headlines 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 this week.
  2. NASDAQ remains in the uptrend and has moved higher the last two trading days after testing lower on Monday. The index is back near the high at 4165. Respect the trend and let this play out going forward. If we hold and move above 4168 on the week look for the opportunity to add to QQQ.
  3. Small Caps (IWM) the Russell 2000 index held the 1145 support on Tuesday, but still is trading sideways for now. The downside risk of the sector is still in play and we will watch to see how it unfolds going forward. The test lower could move back towards the 1123 breakout level as the test. Watch and take what the market gives, but don’t assume anything at this point. TZA is the leverage short trade if the selling accelerates.
  4. Financials (XLF) moved above the top of the trading range and resistance last week and has held so far this week. Lawsuit settlement by JP Morgan on Tuesday hurt the stock and sector as well. This is worth breaking down into the banks (KBE), regional banks (KRE) and the brokers (IAI) currently. Digging into each ETF will provide the leaders and candidates for trading. Patience is the key with the sector going forward and we will look for the opportunity in any downside move. See below for some scan opportunities on the pattern list. S&P 500 model watch for entry.
  5. Healthcare (XLV) continued to move higher with a move above the previous high of $55.65. 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) and biotech (IBB) are leading the sector higher with pharma stocks joined the upside on Wednesday.
  6. Telecom (IYZ) made move higher after testing support short term. Watching 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, but also offers some individual opportunities worth scanning the sector looking forward. EGHT is is position to break above $10.50 and complete a break to the upside from the trading range. TDS is completing a trend reversal and establishing a new uptrend. USM and TWTC have both bounced off the support lows as well. CBB, TMUS, LVLT and CNSL are in steady uptrends.
  7. Energy (XLE) bounced off support of $84.80 and moved to the previous hight at $88.20 only to test again as oil moves below the $93 support level short term. The sector has been mixed of late and the trading range remains in play. I 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 moving lower and in position to test the break above the resistance at $34.95. The sector has experienced selling and testing back near the breakout point. The semiconductors were providing the upside, but stalled only to resume the upside on Wednesday gaining 1.5%. Watch and see how this plays out and look for the opportunities in the uptrend. SOXX moved to previous high on Wednesday. IGN broke to new high, IGV broke to a new high as well, and FDN is testing the previous highs. If the upside continues 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 more clarity and we should see the direction firm into earnings. The fear factor is still looming in reference to earnings and we will have to be patient as it all plays out. The buyers were willing to put money to work despite the worries relative to an overbought market technically. The minor selling was sufficient for some versus the data and outlook. 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. CIEN – Entry $24.25. Double bottom with test. Telecom sector moving higher.
  2. ATNI – Entry $57.50. trading range breakout. Telecom sector remains a leaders.
  3. JDSU – Entry $13.20. Cup and bottom reversal. Telecom sector equip. Looking for reversal to follow through.
  4. MS – ascending triangle. Entry $31.80. IAI ETF leader.
  5. EEV – break from trading range. EEM broke support and short side is in play. Entry $22.25.
  6. AAPL – Entry $551. Reversal on test of support.
  7. Follow up on previous trades or posts:
  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. T –¬†Entry $34.80. bottom reversal. Telecom gaining momentum on wireless mergers. Stop $34.45. HIT STOP
  11. INFN – Entry $9.50. Consolidation breakout. Sector is breaking higher. Stop $9.28.
  12. SKUL – Reversal follow through resistance. Entry $6.09. Sector bouncing back. Gapped open with Entry at $6.30 and stop now at the same level with a no risk trade.
  13. ITB – Ascending Triangle breakout. Entry 23.60. Trade on the break higher. Patience with entry. Stop $24.
  14. XLE – Trading Range bounce. Entry $86.15. Watch for test and then entry. Early test and entry at $86.30. Stop $86.30.
  15. XLK – Test of low and bounce. Entry $34.75. Watch for test and then entry. Small early test for the market. Stop $34.75.
  16. GLW – Trading range. Entry $17.28. Upside if momentum returns to technology. Stop $17.30.
  17. VMW – Flag. Entry $87.45. Looking for continuation of the upside. Stop $87.45
  18. STX – Entry $50.25. Continuation within the range. Setting up to continue higher. Got the move. Stop $54.
  19. 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 $9.20.
  20. 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 $75. Nice break higher as gasoline prices start to rise. 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.