Trading Notes for Today, July 9th

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 held the move above resistance and the downtrend line from May 21st. If the directional change is supposed to build conviction on the move… where is the volume? The action on Monday was boring following a gap we managed to close where we opened the day, 1640 on the S&P 500 Index. Thus, the move leaves a question mark for me as to a test of the move higher near term. The futures are positive this morning and we will watch closely how the trading unfolds today.
  2. The great rotation talk is still rattling around the media of money shifting from bonds to stocks. The value of bonds have declined more than 10% this year eroding wealth from ownership of bonds, but the mass selling of bonds to buy stocks? Still not seeing the great transition or rotation. If there has been a great rotation it has been from REITs to stocks. Scanning the holdings of IYR is very revealing relative to ownership of the sector. Both sectors have my attention the  buy side, but the bottom will have to form first.
  3. Alcoa starts off earnings season beating expectations. The stock was up 1.8% after-hours. Revenue was in line with expectations and set a positive tone for the start of earnings. Banks will kick things off on Friday for the key financial sector. Expectations are for improved balance sheets and revenue. KRE and KBE have moved up in anticipation and puts some pressure on the results. We recommend tightening stops or even taking some profits prior to the announcements as the targets have been hit on both.
  4. The S&P 500 Model is updated and we did not add any new positions on Monday. Both the additions posted for XLF and SPY gapped higher and didn’t leave  enough room to add to the positions relative to the short term targets. I am still interested in adding to these positions, but we are starting to see some potential signs of a test relative to the recent move higher. 1645 is resistance for the index and 1625 support near term.
  5. The Sector Rotation Model is updated. We added IAI on the break higher for the sector. SMH broke higher and then reversed on downgrades relative to Intel. Our stops are nearby and we will take the exits if the selling continues today. IJR has moved too far for the entry on Friday and Monday. If the pullback materializes we will get another opportunity. Utilities were up 1.4% on the day as interest rate fears calm some and this is still a position I would like to own with a longer term time horizon.
  6. The ONLY ETF Model continues to take on short term trades and has done well with them to this point. We added new trades last week and we continue to manage the risk of those trades this week. Watch UCO (crude oil trade) as it has pulled back below the entry we posted and now a bounce will provide the entry. Don’t get anxious let the trade develop.
  7. The ONE EGG Model took the position in the small cap ETF on Friday. We need manage the position, but I want to give some room for volatility depending on how the upside and earnings mix.
  8. We still have to manage our risk in the current trading environment. The futures are still pointing higher, but a test lower isn’t out of the question. Manage your money relative to the objective and know where your exit points are.

Pattern Setups For Today:

  1. UNH, WMT, BAC – all broke higher from consolidation patterns on Monday. Watch to see if they test the moves and provide a follow through trade on the upside. A test is nothing more than a move back near the breakout point and then a continuation of the upside. I am looking for the same type of move from the S&P 500 index. $66.15 is the break point for UNH and a test back near $66.50 would be the entry.
  2. KMI – break above resistance at $38.90 (V bottom reversal). Closed at $38.97 and if it hold into trading today add a short term trade.
  3. ABBV – triangle consolidation. Break above the $44 level positive upside.
  4. IHF – Trading range near the high. Break above $85.15. This is the healthcare providers ETF. The sub-sector is leading the healthcare sector currently.
  5. Follow up on previous posts:
  6. COST – Reverse head & shoulder pattern. Break above $112.50 entry. Hit entry on Monday.
  7. IAI – Break above $31.50 new high. Tested lower and ready to break higher. Hit entry on Monday.
  8. URBN – V bottom. Break above resistance at $40.53 and target of $42.65. Made move and followed through nicely on Monday. Stop up to $41.
  9. TJX – downtrending channel. $50.80 breakout and resistance break. Moving higher. Stop $50.50
  10. SJT – $16.10 break from trading range. hit entry.
  11. RF – Consolidation breakout test. $9.36 break point. Still moving higher stop $9.85.
  12. 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 (Wed). Watch the test and raise your exit point to $410 on the second half. Testing support on Monday?
  13. 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 $6.25. Big Test Monday.
  14. KRE – Triangle pattern. $32.90 entry on the move higher. Hit the entry. Use $35 as the stop on the trade. Achieved the target — raise stop and manage the trade. Reversal on Monday’s move higher.
  15. AMZN – Breakout test. $270 was the break from the consolidation range. Took the trade entry $273. (hit entry). Stop $284 raised. Nice gain on Monday.
  16. KBE – Triangle pattern. Break to the upside trade at $28.50 entry. Watch the downside. Hit new high and stop at $29.30

Facebook (FB) Update:

  • Facebook – The sentiment towards the stock has been shifting as it 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. Still needs to break through the upper side of resistance at $25.15.

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.