Trading Notes for Today, July 8th

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 closed at the top of resistance at 1620-1630. Direction attempted to build some conviction on the jobs report Friday. How much? That is the million dollar question going forward. The old adage is not to fight the trend and the trend is attempting to make a short term shift in direction. The downtrend in play off the May 21st high is where we closed on Friday. A follow through on the upside would be a positive to change course. We did manage to close above the 50 DMA on the S&P 500 index, but there is still plenty of work to do going forward. As I stated on Friday, Egypt is still in the news as the military takes control of the country and oil prices jump well above the $103 mark. 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 and, last but not least, earnings start this week. Plenty to digest as we start a new trading week.
  2. The S&P 500 Model is updated relative to our outlook. The test of the low did not materialized and the optimism towards stock buying remains in favor. The Watch List shifted on Friday to owning long positions on a break through resistance. We added position on Friday and we are willing to increase our allocation if the upside continues today.  One day at a time remains the theme as investors look cautiously at the future for growth. The jobs report on Friday provided a follow through catalyst for direction and this week we are looking for the confirmation as earnings begin.  The Fed and the stimulus cuts remain a key concern for many investors and that created some hesitancy on Friday to buy on the good news. In the end stocks did move higher and now comes the proof as we start the next leg of trading today.
  3. The Sector Rotation Model is updated to address this weeks trading plan. The trades are set up as a continuation of the break higher on Friday. There is still a lack of definitive direction for the markets, but the momentum is shift to the upside enough to capture some trades.
  4. The ONLY ETF Model continues to take on short term trades we are finding and has done well with them to this point. We added plenty of trades last week and we continue to manage the risk of those trades this week. Adding some new positions if the move continues higher.
  5. The ONE EGG Model took the position in the small cap ETF on Friday. We are going to manage the position, but I want to give some room for volatility depending on how the upside and earnings mix.
  6. We still have to manage our risk in the current trading environment. Futures are up slightly as I post this update showing a positive carry over from Friday. Watch the break above the trendline and resistance. There needs to be some conviction on the move, i.e. volume. Sellers are not out of the picture, but it looks as if they are willing to relinquish control for now.

Pattern Setups For Today:

  1. COST – Reverse head & shoulder pattern. Break above $112.50 entry.
  2. IAI – Break above $31.50 new high. Tested lower and ready to break higher.
  3. Follow up on previous posts:
  4. URBN – V bottom. Break above resistance at $40.53 and target of $42.65. Made move Tuesday and held for entry.
  5. 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. Gap up passed on trade.
  6. FXE – bottom reversal. $129.50 trade. Reversed and closed lower, entry Wednesday. Solid follow through on Friday.
  7. FB – ascending triangle. $24.90 entry on breakout. Still testing the move higher? Watch
  8. TJX – downtrending channel. $50.80 breakout and resistance break. Moving higher.
  9. SJT – $16.10 break from trading range. hit entry.
  10. RF – Consolidation breakout test. $9.36 breakpoint and test. gapped higher on Monday and continuing to run.
  11. 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. Watch the test and raise your exit point to $410 on the second half.
  12. 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. Moving higher again.
  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 $278 raised following Friday.
  15. KBE – Triangle pattern. Break to the upside trade at $28.50 entry. Watch the downside. Hit new high and stop at $30.10.

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 (1000 shares). Stop is $22.75 for now. A move back above the 200 day moving average and 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.