Trading Notes for Today, July 31st

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. Today ends the month of July and the reports will begin. Today we get the FOMC meeting results and no real surprises are expected. Throw in the GDP Q2 report to start the day and it promises to be interesting for investors. Will the data be the catalyst everyone is looking for or does it inspire the sellers to push markets lower? Not long to find out, be patient and act according to your objectives and risk tolerance.
  2. Healthcare was on our watch list for the week and the Providers (IHF) pulled back 1% on Tuesday let by HMA on the downside. CYH and MGLN added to the downside pressure for the providers. Watch to see how they follow up today. The balance of the sector is holding up for now, and we continue to watch the biotech and medical devices.
  3. Technology is on our watch list for the week and as we stated in the weekend update the semiconductors would hold the key. SOXX gained 1.2% on Tuesday helping XLK clear the entry point at $31.75. The sector remains volatile, but we will manage the risk of the trade and watch for the upside catalyst from the sector. Banks (KBE) are holding the 10 day moving average and have not tested the $30.30 level currently and they are key to the upside for the broad index.
  4. Oil is still moving lower and broke below the 20 DMA. Watching for a test of the $23.25 support on OIL. The dollar is holding at the $22.10 mark (UUP) or does it continue to trek lower on the Bernanke and Fed actions? Gold is still out of favor as it consolidates on low volume trading near the $1340 level.
  5. The S&P 500 Model is updated for Wednesday’s trading. The stops on our positions are set and we are watching the extend move higher for weakness. We continue to look for opportunities, but content with the portfolio currently. Take it one day at a time. Volatility disappeared as quickly as it came on Tuesday with VXX hitting a new low.
  6. The Sector Rotation Model is updated. Managing he watch list as they test or topping continues. Still scanning for reasonable opportunities short term, but for now content to see how the short term unfolds.
  7. The ONLY ETF Model continues to take on short term trades offering short term upside. Technology (XLK) was also added on the upside as an opportunity on the test lower from earnings. China is on the watch list as the upside is getting a boost from the government comments on stimulus.  Biotech (XBI) remains on the list from last week and is in position to move higher as well. Be patient with your entries on all trades.
  8. The ONE EGG Model scans are coming up with international ETFs this week along with the metals and mining ETFs. The momentum shift towards these sectors is interesting relative to the outlook near term. Australia (EWA) offers the best set up on the chart and isn’t currently overextended. The combination of the move higher in the two sectors also is attractive considering the number one export in Australia is commodities. Second day of a pullback in the country ETF, not much has changed relative to the outlook short term, we will watch to see how it plays again today.
  9. As long at the trend higher continues maintain your positions and manage your stops.

Pattern Setups For Today:

  1. QQQ – cup & handle. break to new high at $75.70 watch for entry on move if it develops.
  2. IAG – flag pattern. Look for the upside to continue if gold breaks higher. $5.40 entry.
  3. PFE – double bottom. $29.70 entry on break higher.
  4. Follow up on previous posts:
  5. AAPL – Break downtrend line? Ready to move higher. The break of the downtrend is a positive on the upside and confirms the reversal off $385 support. $445 September calls is the trade. Added 10 contracts at $16 on Tuesday. Watch and place stop at break even on the follow through Tuesday.
  6. C – Testing $51.30 support. Watch for reversal and entry $52.25. Small bounce… no entry.
  7. Refiners are consolidating in trading range patterns. Watch to see if they break higher as oil prices contract. VLO, TSO, WNR, PSX. Tuesday TSO put itself in position to break higher, $55.80 entry.
  8. YUM – Weekly chart 16 month trading range breakout? Move above $74.10 looks interesting with a longer term outlook.
  9. CLF – Bowl pattern breakout? $19.20 was the resistance level cleared. Watch for test of the move and opportunity to add a position in the stock. Target is $23.50. Early test on Monday and follow through higher with entry 19.50.
  10. 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.
  11. 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.
  12. 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.
  13. 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.
  14. 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 .
  15. 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. HIT STOP.
  16. 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.
  17. 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. HIT STOP!
  18. 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. HIT STOP

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.
  • Added big move higher on Tuesday and is getting overextended. Watching to see how this plays. We will look at a put option to protect the current gains.

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.