Trading Notes for Today, June 13th

What to watch today and some pattern ideas are below. The Watch List and Play List have been updated for today. Review and exercise 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 S&P 500 index tumbled again closing at 1612. This is the 50 DMA and the uptrend line off the November low (current trend). A break lower is a negative for the broad index and opens the way for a further push lower short term. Added SH in trading on Wednesday. NASDAQ closed at support as well at the 3400 mark. Downside could accelerate as well, we added PSQ as well on Wednesday. Dow is near the 14.963 support short term. The 50 DMA is in play along with the uptrend line off the November low. Downside in play for now… watch and manage your risk accordingly.
  2. Treasury bond yields are the other primary concern for investors. The move to 3.37% for the 30 year and 2.23% on the 10 year, both higher on Wednesday, shows the current volatility in the bond prices. Downside still in play, We added both TBF and TBT to the models. Playing the downside for now and we will manage the process looking forward.
  3. Japan (EWJ) still dealing with the disappointment of the Bank of Japan not putting more money up to stabilize bonds, i.e. stimulus. I remain a fan of the longer term outlook for Japan and I am willing to build a position as this calms and add to it going forward. This will be a volatile ride as the media is on the story and creating anxiety as seen again overnight with the Nikkei falling 6.3%. Watch how this plays out today and then we will make our decision on entry points.
  4. Manage your short plays in FXP (down 3% overnight) and EEV (following rest lower). That also leads us to Europe (IEV) chart which looks similar to the NASDAQ and S&P 500 Index (flag pattern). The 50 DMA is in play as support and a break lower would open the short opportunity in EPV with an entry at $22.40. Added to ONLY ETF Model.
  5. Watch the defensive sectors to see if they join the downside or see some money rotation. If they get a positive sentiment relative to money flow that would be a plus versus seeing a broad across the board sell off. A broad sell off would create a sharp turn lower for the broad markets similar to what we are seeing in Japan. I prefer a more methodical sell off currently that would build if things get more negative across the markets overall. Allows us more time to build positions on the downside versus the high emotion downturns.
  6. Futures are set up lower as you can see. The acceleration to the downside is starting to take hold. VXX was a pattern setup from yesterday and will follow through on the anxiety building today. Adding to the position up to $21.60 is worth exploring at the open today. Adding to short play in SH and PSQ is an objective as well depending on the open. If we gap higher let is settle in and then add to the positions. Be patient on the short side as buyers will attempt to step in and test. That is where we will get opportunities as well to add to positions. Remember the cause of this move lower is stimulus withdrawal, all other news is just adding wood to the fire. Until that uncertainty is dealt with by the Fed directly or indirectly the sellers have gained control for now.
  7. Start tracking and keeping a list of the leaders that hold up during this selling phase. They will be the long plays when the reversal takes place off the newly established lows. 1597 is the key level to watch on the S&P 500 index.
  8. Facebook – No positions currently. The sentiment towards the stock remains negative, but an attitude adjustment from the upgrade to a buy on Monday is in play. Found some support at the $22.80 level and bounced back above the $24 level and holding for now. Thus, the reversal we discussed is now in play short term. If you took on the risk of the 23 September puts, the party isn’t over yet. Plenty of resistance in the $24.75-25 range.

Pattern Setups For Today:

  1. C – Head & Shoulder pattern breaking down. Short at $49
  2. AMD – extended flag consolidation. If negative sentiment in tech continues will break lower as short trade.
  3. Follow up on previous posts:
  4. VXX – cup & handle break above $20.25 trade on upside. capture some profit today on move.
  5. MM – cup & handle break above $8.55 upside in play.
  6. ITC – descending wedge, play entry at $89.20. Small Cap Utility stock. Still worth watching for now. If pulls back to the bottom of the range the bounce off the low would be the play. At bottom of range on Wednesday?
  7. BONT – Pennant – break above $22 entry.
  8. ANAD – Trading range with break above the $2.11 entry point. Manage your trade on the test.
  9. KOLD – Cleared $18.35 ($73.40 reverse split 1 for 4), cleared the next level at $19.45 ($77.80) and is still running. Stops at $78 and watch.
  10. PCLN – Pennant upside break at $810. Nice bounce and follow through on the upside, but testing.
  11. PACB – Break above the top the trading range. $2.65 – still climbing slowly.
  12. CRAY – Cup breakout at $18.05, initial target $18.85 and then 20.20. Still moving in a positive direction.
  • 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.