Trading Notes for Today, July 19th

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 Thursday. What did we learn from Mr. Bernanke? The Fed still intends to stem the buying of bonds starting this fall. The message is sinking in and investors are moving forward and accepting the fact. They equally understand that it will not happen overnight and the purchases will be phased out over time based on their/Fed’s own schedule.
  2. On the economic front jobless claims decline again to 334,000 and better than expected. Add to that the Philly Fed Index at 19.8 and nearly double the expectations and the markets liked what they heard. However, the one disturbing piece of data was the Leading Indicators were at 0% growth rate versus the 0.3% expected. Not good news for the second half of the year. The lack of future growth remains a primary concern for the US economy.
  3. Earnings continue with some positive responses today to IBM. However, Microsoft fell short on the earnings report and fell more than 5% after-hours. That could weigh on stocks today. The PC market was part of the problem, but that doesn’t change the view of the report by investors. Google will add to the selling pressure after missing earnings and was down nearly 5% as well. Watch the NASDAQ 100 to suffer from the reports. Chipotle rose nearly 5% on better than expected earnings, but not likely enough to offset the impact of the others. This could lead to the pullback expected after the near term run higher.
  4. News of interest is the city of Detroit filing for bankruptcy protection and becoming the largest municipal default ever. $20 billion in debt defaults possible. The ripple effect in the muni bond sector is worth attention as well.
  5. The S&P 500 Model is updated for Thursday’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. XLF was up 1.3% to lead the index higher. XLI gained 1% as well on the day. Utilities and REITs continue to climb out of a hole after selling on interest rates rising. We continue to add to positions as they clear resistance and give upside opportunity. No change overall and we continue to stay focused and taking it one day at a time. Don’t be greedy at this point just take what the market gives and manage your stops. The model is now 82% invested and we have to manage the near term risk.
  6. The Sector Rotation Model is updated. The upside remains in play for positions and  we continue to scan for low risk entries. DBC moved through the entry point Thursday with the climb in oil prices and we took the entry. Gold was up modestly on Bernanke comments, and global markets are holding steady. The advantage is the home team (US Stocks) is leading the way. Watching for a test relative to the data flow and height of the move. The downside may pick up on the earnings news from Thursday night, thus VXX is back on the table as a trade opportunity.
  7. The ONLY ETF Model continues to take on short term trades offering short term upside. We added URE as real estate builds a base and followed through on the move higher. UCO (crude oil trade) has moved higher with crude. Manage the risk of the markets going into the trading day and stay focused. If the NASDAQ 100 trades lower on earnings we will look to take some profit on the QLD trade. We adjusted stops on a number of positions, but the upside remains firmly in play.
  8. The ONE EGG Model is looking at a short play potential. SDD or short small caps could develop. QID may be the trade to follow up on the earnings from Thursday. We will watch into the open today and act accordingly. QID entry at $21.75 is attractive, but it is Friday and that leaves the weekend gap to deal with on the trade in a positive market environment. At most take half a position.
  9. Financials gained 0.4% on Wednesday and 1.3% on Thursday and the upside resumes the upside despite the comments about forward earnings. The Bernanke comments had put pressure on the sector and the Chairman spoke to Congress on Wednesday-Thursday giving an overall boost to stocks. Both KRE and KBE both tested lower, but are holding the positive trend and bull flag patterns that broke higher on Thursday. This gave an opportunity to add positions, on the upside follow through. KIE is also in an uptrend for the sector.
  10. Crude oil jumped 1.7% on Thrusday to put oil above $108 per barrel. This is pushing closer to the target of $120 and not good news for the consumer going forward. UCO doing well in the OnlyETF model.
  11. 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. Watching to see how the earnings impact the sentiment and enjoying a relaxing Friday.
  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. Stop is $35.40 for now.
  4. IHI – Breakout test. The break from the trading range tested on Tuesday and sets up a follow through on the upside. The entry is at $81. Hit entry and moved higher on Wednesday and nice follow through on Thursday.
  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. Stop 65.60.
  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. Made move through the entry point on Thursday. Set stop at $29.90 for now.
  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 – regained half of the loss from Wednesday.
  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. Take 1/2 off on Friday and raise stop to 28.70 on balance.
  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. Stop to breakeven at $50.50 and watch.
  13. KMI – break above resistance at $38.90 (V bottom reversal). added on the follow through upside. Stop now $39 or breakeven.
  14. ABBV – triangle consolidation. Break above the $44 level positive upside. Got entry on breakout at $44. Tested lower on Tuesday and keeping the stop at $43.50.
  15. IHF – Trading range near the high. Broke above $85.15 ($85.25 entry). This is the healthcare providers ETF. The sub-sector is leading the healthcare sector currently. Holding the gains for now. Move stop to $86.50.
  16. COST – Reverse head & shoulder pattern. Break above $112.50 entry. Hit entry. Nice upside follow through and raised stop to $115.
  17. TJX – downtrending channel. $50.80 breakout above resistance ($50.90 entry). Moving higher. Stop $52. Digesting the move.
  18. SJT – $16.10 break from trading range. hit entry. $15.70 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. Held move higher, watch and manage the stop. Nice gain on  Thursday and raising stop to $6.67.
  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. Watch for exit on Friday if the selling gains speed.

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.