Trading Notes for Today, July 17th

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.

Sectors to Watch:

  1. The market spent the day digesting and treading water. We have discussed the potential of a test short term on the move higher and it could play out to be that, but don’t assume anything, just let it unfold. Earnings from KO were lower than expected, YHOO missed revenue after hours, and those missed stories will have an impact on investor psyche going forward. Prepare for the worst and hope for the best is the old saying.
  2. On the economic front CPI was in line with expectations up 0.2% on the core and 0.5% overall. Inflation is starting to rise due to oil prices and this is something to watch along with the rise in interest rates. Industrial production was up 0.3% and better than expected. Homebuilders index rose to 57 well ahead of expectations and positive for the housing sector. XHB was still down 0.8% on the day and still in a downtrend off the May high. The economic outlook is still on the weak side, but investors are still anticipating improvement in the second half of the year.
  3. The S&P 500 Model is updated for Tuesday’s trading. We have adjusted stops on our positions and hanging on for the ride currently. XLE is attempting to break above resistance at the $82 level and we were considering adding to the position on a move higher. The sector fell along with oil, but I still like the outlook going forward for the sector. Telecom was up slightly as the Leap Wireless acquisition is still helping the upside overall.  The volatility index moved back above 14 and hit the stop on SVXY today.  This has VXX near the entry posted on Monday. Watch to see if the volatility does pick up short term for the index. Basic Materials, Energy and Healthcare were the biggest losers on the day. None change enough to run from any positions, but they did get investors attention in the near term. Don’t be greedy at this point just take what the market gives and manage your stops.
  4. The Sector Rotation Model is updated. The upside continues for the plays and  we continue to scan for low risk entries. I added DBC to the watch list as commodities are finding some footing and moving higher short term. This offers less volatility on the upside than GLD or OIL at this point. Opened higher, but trailed off throughout the day. Waited to see if we get a confirmation on the upside today.The utilities have moved up nicely off the lows, semi’s have recovered and TBF  hit the stop today as the yields start to stabilize and decline from the Fed comments last week.
  5. The ONLY ETF Model continues to take on short term trades and has done well with them to this point. We added URE as real estate builds a base and looks to move higher. UCO (crude oil trade) has moved higher with crude and a small check today on the downside. Manage the risk of the markets going into the trading day and stay focused. Good moves higher and I adjusted the stops accordingly.
  6. The ONE EGG Model had a position in the small cap ETF and Tuesday we raised the stop on the downside and hit the stop. We hit the target and decided to manage the position more aggressively to protect the gains.
  7. Financials are one sector I continue to watch, despite the positive earnings from sector thus far, we continue to test the run higher. The Bernanke comments have put pressure on the sector and we could see a further test as the Chairman speaks to the Senate on Wednesday. Both KRE and KBE both tested lower, but are holding the positive trend. This is setting up an opportunity to add positions, if the upside follows through. KIE is also in an uptrend for the sector.
  8. Gold move through the 1270 resistance and is now struggling with 1300, but the move is setting up for a potential run back towards 1400. Short interest is high and any momentum could spark some short covering. Watch for the upside opportunity in the metal as a trade. The miners moved as well the last couple of days with GDX breaking above resistance at $25.15. The ETF was up 5.6% on Tuesday.
  9. We still have to manage our risk in the current trading environment. As long at the trend higher continues maintain your positions and manage your stops.

Pattern Setups For Today:

  1. T – AT&T is in a trading range again. $36 would clear the resistance and the 50 DMA. Watch to see if it can again momentum on the upside.
  2. IHI – Breakout test. The break from the trading range tested on Tuesday ans sets up a follow through on the upside. The entry is at $81.
  3. RAX – cup and handle. entry at 42.35. Could fill the gap back towards the $50 mark.
  4. Follow up on previous posts:
  5. GXC – China – bottom reversal. Resistance at $66.30 and willing to add on the move through this level. Watch the volatility in the trade as China is dealing with slowing economic data.
  6. KBE – flag on test of the break higher and Bernanke. Looking for the continuation of the upside following the test. $30.40 entry point. Tested lower again today… flag is still in play.
  7. GLD – double bottom – looking for break above the $124.50 mark. Moved through the entry on Tuesday. Looking for move to $130. Stop at $122.40
  8. YHOO – Break above trading range. 27.30 level. cleared and testing added small position. Tested support at $26.70 Earnings issues after hours… watch the open.
  9. AMGN – Break from trading range. confirmation and follow through $103 test and move. Got the $103 test early Monday and added the position. Stop $102
  10. HPQ – breaking above $25.50 consolidation trading range. $26 entry on Thursday. Forming flag opportunity to add on upside if you choose. consolidating at the high… look for follow through on upside and set stop at $25.40.
  11. C – V bottom break above resistance at $50.50. Added on Friday. Nice move on earnings. Held the move higher.
  12. KMI – break above resistance at $38.90 (V bottom reversal). added on the follow through upside. Stop now $39.
  13. ABBV – triangle consolidation. Break above the $44 level positive upside. Got entry on Friday breakout. Tested move on Monday. Tested lower on Tuesday and keeping the stop at $43.50.
  14. IHF – Trading range near the high. Broke above $85.15. This is the healthcare providers ETF. The sub-sector is leading the healthcare sector currently. Holding the gains for now. Move stop to $85.75.
  15. COST – Reverse head & shoulder pattern. Break above $112.50 entry. Hit entry. Nice upside follow through and raised stop to $114.50.
  16. URBN – V bottom. Break above resistance at $40.53 and target of $42.65 (HIT stop at target and took exit on Tuesday).
  17. TJX – downtrending channel. $50.80 breakout above resistance. Moving higher. Stop $51.50. Digesting the move.
  18. SJT – $16.10 break from trading range. hit entry. $15.90 stop. trading sideways still – dividend play.
  19. AAPL – bounce off support – resistance $403. Clears on volume look for upside trade. $405 August call option taken $16.50 (Stop $27). We sold half  of the trade to lock in gains and let the balance play out. The test bounced and closed above $420 and we added to the play ($422)… nice move to the upside ($420 August Calls at $15.10, stop $17). A move back below the $422 level is exit on all positions.
  20. PMCS – Trading range breakout. $6.25 is the top end of the range to break above. Added position. Entry $6.45. Set stop at $6.52. Held move higher, watch and manage the stop.
  21. AMZN – Breakout test. $270 was the break from the consolidation range. Took entry $273. Stop raised to $298. Big move on the upside and need to protect the gains. Willing to sell half if there is a test back.

Facebook (FB) Update:

  • Facebook – The sentiment towards the stock has shifted as it found support at the $22.80 level and moved to the top of the trading range before breaking higher and adding positions. The move above $24.50 was entry for 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 at $25.65 on break) Sentiment towards the stock short term is gaining. Consolidating at the current levels and holding. Still like the upside near term as it is gaining positive comments from analyst.

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.