Trading Notes for Today, July 18th

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. Positive boost from Bernanke comments again for the broad markets on Wednesday. However, that is not a sustainable event relative to the longer term view. It did push bond yields lower again as the ten year dropped 4 basis points to 2.49%. The upside in bonds is still limited, but the calming of interest rates is a positive. As we have stated if yields stabilize it will be positive for stocks.
  2. On the economic front housing starts were not impressive at all and mortgage applications fell again for the second month. Credit for this is being given to the hike in interest rates. Time will tell what the exact cause is overall. Beige book showed modest growth across most sectors with none really standing out on the positive side. Data on the economy remains modest and not helping the outlook overall. I am enjoying using the term modest growth for 1% GDP. That is slow growth and on the verge of no growth!
  3. Earnings miss on the top line again this quarter as KO, YHOO, PEP, MOS, SCHW, INTC, IBM, EBAY and AXP all miss revenue numbers. Growing revenue in a slow to no growth economy is a challenge and the revisions for a lower GDP in Q2 are showing in the data. The reaction by investors has been more on the patient side than sell the stocks. What used to bother investors is accepted as normal now?
  4. The S&P 500 Model is updated for Wednesday’s trading. We have adjusted stops on our positions and hanging on for the ride currently. XLE made a move back to the upside after the drift lower on Tuesday. Telecom was up and the Leap Wireless acquisition is still helping the upside overall.  Added the position in Treasury bonds on Tuesday, Real Estate and Consumer Staples were added on Wednesday. The balance of the sectors managed to close higher on the day. No change overall and we continue to add to positions offering some upside. Don’t be greedy at this point just take what the market gives and manage your stops. The model is now 77% invested and we have to manage the near term risk.
  5. The Sector Rotation Model is updated. The upside remains in play for positions and  we continue to scan for low risk entries. DBC remains on the watch list, but the commodities are not cooperating. Oil was moving higher and has stalled. Gold was up modestly, but sold on Bernanke comments, and global markets are holding steady. The advantage is the home team (US Stocks). Watching for a test relative to the data flow and height of the move. Short Small Caps is on my watch list… we will see how it unfolds going forward.
  6. 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 test today on the downside before bouncing back. Manage the risk of the markets going into the trading day and stay focused. We adjusted stops on a number of positions, but the upside remains firmly in play.
  7. The ONE EGG Model is looking at a short play potential. SDD or short small caps could develop.
  8. Financials gained 0.4% on Wednesday and continue to inch higher despite the comments about forward earnings. The Bernanke comments have put pressure on the sector and the Chairman spoke to Congress on Wednesday giving an overall boost to stocks. Both KRE and KBE both tested lower, but are holding the positive trend and bull flag patterns. This is setting up an opportunity to add positions, if the upside follows through. KIE is also in an uptrend for the sector.
  9. Gold reversed the upside move with some selling on the Bernanke comments down 1.2% on Wednesday.
  10. 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. MCP – Cup & Handle – $7.25 entry on break higher.
  2. Follow up on previous posts:
  3. T – AT&T is in a trading range again. $36 would clear the resistance and the 50 DMA. Watch to see if it can gain momentum on the upside. Nice move higher early, but closed on the entry point of $36, added position.
  4. 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. Hit entry and moved higher on Wednesday.
  5. RAX – cup and handle. entry at $42.35. Could fill the gap back towards the $50 mark. Nice break higher on Wednesday and added play. $42 stop.
  6. 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. Added trade on Wednesday.
  7. 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.
  8. 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 – Sold off 1.2% — watch closely today.
  9. 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. Great upside follow through on Wednesday.
  10. 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
  11. 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.
  12. C – V bottom break above resistance at $50.50. Added on Friday. Nice move on earnings. Held the move higher.
  13. KMI – break above resistance at $38.90 (V bottom reversal). added on the follow through upside. Stop now $39.
  14. 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.
  15. 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.
  16. COST – Reverse head & shoulder pattern. Break above $112.50 entry. Hit entry. Nice upside follow through and raised stop to $114.50.
  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.