Trading Notes for Today, July 26th

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. Earnings helped push Facebook higher and in turn keep technology stocks in the green. Today may be the opposite with Amazon missed earnings report last night. The sector has struggled as the reports have been hit and miss. XLK is holding above the 50 DMA for now, but could test the 200 DMA if the broader markets test the current move higher. Definitely something to watch going forward.
  2. Some positive economic data with the durable goods orders gaining 4.2% versus the 2.3% expected. Jobless claims were in line with expectations rising 7,000 claims to 432,000. I commented on the housing sector not holding up well on Wednesday versus the report for new home sales… PHM and DHI both dropped significantly on Thursday as earnings fell short of expectations, but still weren’t bad. This is a sector in retreat and the break lower may test support at $28 on XHB.
  3. Bond yields on the 30 year is back near the current highs of 3.65% and acting as if they want to move higher again. This would be a negative as well for the housing sector, but also for the consumer financing any large purchases. The move has put pressure on the utilities, REITs and other interest sensitive assets. We will be watching how this unfolds moving into next week.
  4. The Volatility index retreated again on Thursday to 13 and the small move higher on Wednesday and Thursday didn’t pan out to be anything of significance. The buyers remain in control at this point.
  5. The S&P 500 Model is updated for Friday’s trading. The stops on our positions have been adjusted and we are watching the extend move higher. We are more than 90% invested and we will look at taking profit if the trend higher starts to test. XLB and XLU both bounced back from selling on Wednesday with solid gains. Energy was up again, with the balance of the sectors reflecting the broader index. SH remains on the watch list as the downside could be a short term trade and hedge. No change overall to our outlook and we continue to stay focused. Take it one day at a time. Don’t be greedy at this point just take what the market gives and manage your stops.
  6. The Sector Rotation Model is updated. Looking for opportunities that make sense relative to the objective of the model, but the valuation don’t match the outlook, be patient and don’t trade everything, just for activity sake. The outlook is still positive as buyers are willing to step in and own stocks. The downside wants to step in, but the sellers have not been willing to take on the fight yet. It’s Friday and I don’t expect much in either direction today.
  7. The ONLY ETF Model continues to take on short term trades offering short term upside. Gold is looking ready to trend higher short term, but as has been the case of late it stalls and then moves. We have hit stops on Oil, Financials and Semiconductors the last couple of days as the sectors have tested lower. Still looking for the best trades, but we have to be patient as the overbought technical data is worth be cautious. We continue to adjust stops and to manage the risk of the market short term.
  8. The ONE EGG Model has been looking to play on the downside of the NASDAQ 100, but the earnings news the last couple of days has kept the sellers from gaining control. The 10 DMA is acting as resistance, but it is earnings driving the moves day to day. We will watch today to see if the sellers reassert themselves or not as Amazon missed earnings. I am watching risk/reward here as it is extended on the upside and I don’t want to take on unnecessary risk.
  9. As long at the trend higher continues maintain your positions and manage your stops.

Pattern Setups For Today:

  1. Markets are getting extended. Manage the risk of these trades. No new posts today as it is Friday and we will watch to see how things play out short term. Besides, today is my birthday and I am going to enjoy the day with family and friends… Happy trading.
  2. Follow up on previous posts:
  3. CRM – Pennant upside. Nice move from consolidation at $39 and now digesting the move and looking to move higher short term. Gap open turned to selling most of the day. Watch today for upside to resume. $42.75 entry and nice move.
  4. HBAN – Pennant – breakout test $8.55 entry. Regional banks are doing well (KRE). Hit entry and watching upside.
  5. NG – double bottom breakout. Looking for the upside in gold to continue. This is a trade on the miners. GDX broke higher as well. $2.47 entry. Hit stop on Thursday’s test lower. Still like the upside here, stop was too tight for the volatility in the stock short term.
  6. NIHD – flag – trend reversal in play and a break from the pattern higher would confirm the reversal. Watch for entry at $8.10. Moved through the entry and reversed to close lower on the day. $7.40 stop.
  7. XNPT. pennant – trend reversal and set up to break higher. $5.75 entry. Hit entry and watch for follow through on upside. Stop $5.30.
  8. IHI – Breakout test. The break from the trading range tested and a follow through on the upside. The entry was $81. Moved higher with nice follow through. Move stop to $81.50.
  9. RAX – cup and handle. entry at $42.35. Could fill the gap back towards the $50 mark. Nice break higher and added play. Testing? Nice continuation move on upside. $43.50 stop.
  10. GXC – China – bottom reversal. Resistance at $66.30 and added on the move through this level. Watch the volatility in the trade as China is dealing with slowing economic data. Stop 66.50. Finally a solid move higher for the trade up with some testing on Wednesday. Manage your risk .
  11. KBE – flag on test of the break higher and Bernanke. Looking for the continuation of the upside following the test. $30.40 entry point. Set stop at $31 . Getting extended on the upside manage the risk.
  12. GLD – double bottom – looking for break above the $124.50 mark. Moved through the entry added. Looking for move to $130. Big move on Monday! Stop at $125.10. Resistance or profit taking? Either way manage the position. $137 target.
  13. C – V bottom break above resistance at $50.50. Added. Nice move on earnings. Held the move higher. Stop at $52. Moved through stop (hit and sold) and then recovered? Watch and see how it plays going forward.
  14. 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 $87.50.
  15. COST – Reverse head & shoulder pattern. Break above $112.50 entry. Hit entry. Nice upside follow through and raised stop to $117. HIT STOP on Thursday.
  16. SJT – $16.10 break from trading range. hit entry. $16.10 stop. trading sideways still – dividend play. Finally a follow through on the upside and now consolidating again. Watch the risk as markets shift on interest rates. adjust stop to $16.25.
  17. 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 and raising stop to $6.85.
  18. 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 if the selling gains momentum. Close to stop…HIT STOP ON trading intraday Thursday.

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.
  • Earning beat expectations on Wednesday and the stock jumped 29%. Here is where greed versus objective comes into play. This is a long term play and if the gains hold up today in trading the upside gain on the position is tempting. We will now have to design a way of protecting or realizing part of the gain short term. Be patient with the position on the upside as you are on the downside.

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.