Trading Notes for Today, July 5th

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 broad market indexes remained at resistance of 1620-1630. Direction or conviction on a direction remains a challenge for investors. Do we move higher or test lower again? Following Wednesday’s trading day we are watching the same issues as we close out the trading week. Despite sound reasons for a move lower the markets continue to find reasons to bounce. A move through the current resistance levels is the goal. Egypt is still in the news as the military takes control of the country. China’s economic data remains on the weak side. Portugal is a train wreck facing the EU. Greece is on the clock… again. Global issues are in the headlines, but the EU stated they would maintain low rates as a stimulus on Thursday and the futures are up. And US investors are willing to buy stocks at least up to the jobs report. The report will still set the tone for the day at 8:30 am. The volume will still be on the light side today.
  2. The S&P 500 Model is updated relative to our outlook. The test of the low has not materialized and optimism towards stocks is still gaining favor. The Watch List still has the downside plays we have been tracking, but we are adding some upside opportunities to the list if they move through resistance. Both XLU and IYR sold lower as interest sensitive assets continue to come into question short term. SVXY has moved higher as the volatility has moved lower on the bounce off the lows. One day at a time. The jobs report today could give us the follow through catalyst for direction depending on the outcome. The bad news is good news mentality is where the mindset is currently on the belief the bad news will keep the Fed engaged in stimulus. Thus, if we have good jobs report, we may get a negative reaction?  Watch to see how it unfolds this morning at 8:30 am.
  3. The Sector Rotation Model is updated to address this weeks trading plan. The short term scans show only 3 ETFs with negative momentum and 14 ETFs with positive momentum. The lack of numbers on either side shows a lack of clarity short term. We are adding some trades with the upside in mind. Be patient on Friday as volume is going to be on the light side.
  4. The ONLY ETF Model continues to take on the higher risk trades that we are finding and has done well with them to this point. We added the trade in Japan (EWJ) and Short China (FXP) on Tuesday. Treasury bonds are attempting a bounce and I added the leveraged ETF TMF Monday to the model. I also added IWM as small caps continue to look positive. Raised the stop on QLD to protect against any reversal short term and we adjusted other stops in the model. Still managing the risk of the short yen trade as well.
  5. The ONE EGG Model has been set on the short play of the NASDAQ, but that has not materialized. Looking at the upside play in the small caps today. It has been the leadership of the broad markets the last two weeks off the lows. Watch if it gaps open and play accordingly.
  6. We still have to manage our risk in the shortened trading week. Our bias has been to the downside and the news should be pushing the markets in that direction temporarily, but nothing has evolved.  All trends need a catalyst and the EU news is acting as a catalyst on the break higher, if the jobs number falls in line with expectations. Be patient and don’t speculate, follow the trend.

Pattern Setups For Today:

  1. No New Posts into the shortened holiday period. Watch the gap open on Friday if it plays out. It will offer some breakout opportunities, but you don’t want to chase. Let the open settle and then look for the entry points that work for your risk tolerance.
  2. Follow up on previous posts:
  3. URBN – V bottom. Break above resistance at $40.53 and target of $42.65. Made move Tuesday and held for entry.
  4. IEF – bear flag. The downside play for the bond is set up short term. PST is the inverse fund with the same setup (bull flag). 29.75 entry.
  5. FXE – bottom reversal. $129.50 trade. Reversed and closed lower
  6. FB – ascending triangle. $24.90 entry on breakout. Still testing the move higher? Watch
  7. TJX – downtrending channel. $50.80 breakout and resistance break.
  8. SJT – $16.10 break from trading range.
  9. RF – Consolidation breakout test. $9.36 breakpoint and test. gapped higher on Monday.
  10. AAPL – bounce off support – resistance $403. Clears on volume look for upside trade. $405 August call option taken on Monday $16.50. Failed to break above $420, willing to take half the trade off here.
  11. PMCS – Trading range breakout. $6.25 is the top end of the range to break above which closed higher on Thursday. $6.35 Entry if the move holds (Friday entry). Set stop at $6.14.
  12. UNG – support break $19.90 short set up if stays below this level. The set up for downside entry play followed. $19.70 entry was hit. $19.15 stop on UNG or KOLD $84 entry and $86 stop.
  13. KRE – Triangle pattern. $32.90 entry on the move higher. Hit the entry. Use $34 as the stop on the trade. Achieved the target — raise stop and manage the trade.
  14. AMZN – Breakout test. $270 was the break from the consolidation range. Took the trade entry $273. (hit entry). Stop $273.
  15. KBE – Triangle pattern. Break to the upside trade at $28.50 entry. Watch the downside. Hit new high and stop at $28.75.

Facebook (FB) Update:

  • Facebook – The sentiment towards the stock has been shifting as seen in the found support at the $22.80 level and is in the process of moving to the top of the trading range. Move above $24.75 look to add as small position.
  • Added position at $24.75 Friday (1000 shares). Stop is $22.75 for now. A move back above the 200 day moving average we will add to the position.

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.