Trading Notes for Today, July 12th

I am posting this tonight as a result of travel issues in Thursday and Friday. There will be no video update tonight either as a result of the travel issues. I am updating today and tomorrow in this post for trading. The weekend update will be up on Saturday for next week. West coast travel makes things challenging, thank you for your understanding.

The Watch List and Play List have been updated for today. Review and execute according to your risk and investment objectives. If you have specific questions on any posts please forward them directly to Jim@JimsNotes.com.

General Comments for Thursday: The broad indexes were higher on the comments from Bernanke. However, they did create some concerns in the banking  and bond sector. As a result banks (KBE) fell nearly 1% on the day, regional banks (KRE) fell 1.6% on the day. Tomorrow we get earnings from JP Morgan and Wells Fargo. Watch to see how investors react to the news in the stocks and the sector overall. This was one of the key leaders for the broad markets and the shift in sentiment is a concern short term. Likewise, bonds rallied as yields moved lower on the Bernanke comments. Both IEF and TLT posted gainse of better than 1% on the day. Look for a small rally in bonds in the coming days as investors look to shift money to gain from the comments from Bernanke. Interest sensitive assets will move higher as well. Utilities, REITs, Dividend stocks, high yield bonds,  etc. will all do better without the fear of the Fed hanging overhead.

Friday promises to be interesting with the earnings from banks kicking off. The one sector that suffered on Thursday will be in the spot light. the challenge will be more sentiment than fundamental. Due to the comments from Bernanke we could see banks move lower short term regardless of the earnings picture. Stay focused and let the market tell you what it believes about the near term direction.

I am traveling home on Friday from the West Coast and the updates will be posted on Saturday for next week. See you then!

Sectors to Watch:

  1. The Fed minutes was the buzz of the day on Wednesday and after hours Mr. Bernanke made comments that sent the market higher on Thursday. What could he say that would make that much of a difference? That the Fed is not going to be aggressive in their cuts relative the easing and QE infinity. That sent the indexes higher on Thursday and made most feel more comfortable relative to the Fed. However, tomorrow, Friday, we have earnings to deal with from the banks and they will set the tone for the end of the week and going forward. I am of the opinion they will be better than expected, but we will see in the morning for sure. Looking for more upside to play out short term.
  2. The S&P 500 Model is updated and I have raised the stops to account for the move on Thursday. You could have added to the XLF position today at the $20.12 level after the early morning test. The concern is on earnings and interest rates raising and impacting earnings going forward. Still like the outlook for banks. SPY gapped open and not willing to chase to add to the position. We took out the 1655 resistance for the index and moved to a new high at 1675! Onward and upward for the index is the motto for now. The volatility index dipped below 14 on the day and added to the upside in SVXY. Manage your stops and let it run for now.
  3. The Sector Rotation Model is updated. The upside continues for the plays and  we adjusted some stops tonight. Watch to see how and what presents itself moving forward. The utilities have moved up nicely, semi’s have recovered and we are watching to see where the opportunity is next. Still look for a test of the move higher.
  4. The ONLY ETF Model continues to take on short term trades and has done well with them to this point. We added new trades last week and we continue to manage the risk of those trades this week by adjusting stops. UCO (crude oil trade) pulled back below the entry we posted and now the provided the entry. Good moves on Thursday and I adjusted the stops accordingly. Manage your risk in these positions. Watch and see how it plays out going forward on the buck.
  5. The ONE EGG Model took the position in the small cap ETF on Friday. We need to manage the position, but I want to give some room for volatility depending on how the upside and earnings mix. Nice move on Thursday and raised the stop.
  6. We still have to manage our risk in the current trading environment. If we continue above the current resistance levels maintain your positions.

Pattern Setups For Today:

  1. No new additions for today as I would like to look closer at where we stand relative to risk and the move higher. Look for further posts on Saturday for next week.
  2. Follow up on previous posts:
  3. HPQ – breaking above $25.50 consolidation trading range. $26 entry on Thursday.
  4. C – V bottom break above resistance at $50.50. Watch for confirmation on Friday.
  5. KMI – break above resistance at $38.90 (V bottom reversal). Closed at $38.97 and added the short term trade Tuesday on the follow through upside. Test in play on Wednesday as the Bernanke factor steps in again. Watch. Got the move higher on Thursday. too play at $39.50.
  6. ABBV – triangle consolidation. Break above the $44 level positive upside. Still testing to break above resistance.
  7. IHF – Trading range near the high. Broke above $85.15 on Tuesday. This is the healthcare providers ETF. The sub-sector is leading the healthcare sector currently. Holding the gains for now. Nice move higher on Thursday.
  8. COST – Reverse head & shoulder pattern. Break above $112.50 entry. Hit entry on Monday. Nice follow through and raise the stop to breakeven. big move on Thursday, raise stop to $114.50.
  9. IAI – Break above $31.50 new high. Tested lower and ready to break higher. Hit entry on Monday. Continued higher.
  10. URBN – V bottom. Break above resistance at $40.53 and target of $42.65. Made move and followed through nicely. Stop up to $41. Added upside on Wednesday. Tried to break higher on Thursday, but gave up the gains.
  11. TJX – downtrending channel. $50.80 breakout and resistance break. Moving higher. Stop $50.50. Solid move on Thursday to the confirm the upside.
  12. SJT – $16.10 break from trading range. hit entry. $15.90 stop.
  13. RF – Consolidation breakout test. $9.36 break point. Still moving higher stop $9.85. (HIT STOP Thursday)
  14. AAPL – bounce off support – resistance $403. Clears on volume look for upside trade. $405 August call option taken on Monday $16.50. Failed to break above $420 and tested lower. We took take half the trade off (Wed) and let it play out. The test bounced and closed above $20 Tuesday.  Stop is still at the $410 level on the second half. Could add on break above resistance at $420? Added the play today ($422)… nice move to the upside.
  15. PMCS – Trading range breakout. $6.25 is the top end of the range to break above which closed higher on Thursday. $6.35 Entry $6.45. Set stop at $6.25. Big Test Monday, but working its way higher again. Solid gain on Thursday.
  16. KRE – Triangle pattern. $32.90 entry on the move higher. Hit the entry. Use $35 as the stop on the trade. Achieved the target — raise stop and manage the trade. (HIT STOP Thursday $35.70)
  17. AMZN – Breakout test. $270 was the break from the consolidation range. Took the trade entry $273. (hit entry). Stop $284 raised. Still moving higher? Yes, is the answer with solid gains on Thursday.
  18. KBE – Triangle pattern. Break to the upside trade at $28.50 entry. Watch the downside. Hit new high and stop at $29.70. Some selling on the Bernanke news. Watch this morning and honor your stops here.

Facebook (FB) Update:

  • Facebook – The sentiment towards the stock has shifted as it found support at the $22.80 level and is in the process of moving to the top of the trading range. Move above $24.75 and added position.
  • Added position at $24.75 (1000 shares). Stop is $22.75 for now. A move back above the 200 day moving average and we will add to the position. (Added 1000 shares today at $25.65) Nice break through the upper side of resistance at $25.15 and now the 200 day moving average. Sentiment towards the stock short term is gaining. Tested on Thursday, but closed even on the day. Still like the upside.

NOTE: The pattern trades above are setups that I see for a potential swing trade or 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.

All investing comes with risk. Our job as investors is to manage the risk. Markets remain choppy and directionally challenged for now. Keep your focus and discipline in place.