Trading Notes for Today, June 14th

What I am watching 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

Sectors to Watch:

  1. The S&P 500 index rallied again closing at 1636. The bounce at the 50 DMA and the uptrend line off the November low (current trend) was like magic. Following the move lower on Wednesday investors liked the retail sales data and the jobless claims and were set to buy almost from the start. Throw in some rumors the Fed is not going to abandon the bond buying and interest rate controls completely and it was off to the races. The Fed wants everyone to know they are still in the game. That was enough to reverse all the negative talk. Watching to see if the markets follow through on the positive move or we start to establish a trading range as we discussed last night.
  2. Treasury bond yields were the other primary concern for investors. The rumor leaked by the Fed on not abandoning the bond buying from QE was enough to move the needle on interest rates. The 30 year bond dropped back to  3.32% and the 10 year fell to 2.7%, both lower on Thursday, showing the current volatility in the bond prices. That impacted our plays in TBF and TBT on the day. The question is will the Fed talk down rates enough to matter near term? TLT is down 9% from the high and a move back to $118.25 would help calm some of the anxiety in bonds.
  3. Japan (EWJ) started Thursday with a 6.4% decline on the Nikkei. Friday the index climbed back 2% as fears calmed relative to the yen and the dollar. The disappointment relative to the Bank of Japan not putting more money up to stabilize bonds, i.e. stimulus is still a concern. 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 the last two weeks in the chart of EWJ. Just shy of the entry posted and looking to add today on a follow through bounce.
  4. Manage your short plays in FXP and EEV as the rally in Japan is impacting the global markets following the rally in the US. Raised stops and we will need to manage in gap open accordingly. US futures will play into the open as well. Currently they are flat, thus watch and deal with the exit if the stop is hit.
  5. IF, and that is a BIG IF… interest rates move lower as a result of Bernanke’s attempt to sooth the markets worries short term, interest sensitive assets will bounce the most. TLT, XLU, HYG, LQD, XLP, IYZ, etc. will be the best bounce trades as they have sold the most on the May 21st high. I covered this in the video update last night and I am looking for it to play out going forward. Thus, watch the yields on Treasury bonds as an indicator and then make the trades according to the level of belief in the markets. If would also contribute to a bounce overall for the broad market indexes.
  6. Futures are flat to up slightly. I expect they will climb higher as we approach the open. The news and market action overnight in Asia was positive and Europe is following suit with a positive open. So much for all the downside talk… again. Some short covering action on Thursday helped the rally off support. Be patient today and let this all play out. We have raised the stops on the short plays and willing to take some gains. The plays in SH ($29 stop) and PSQ ($22.40 stop) could hit exit points today. Manage your trades and let this play out. Still looking at the possibility of a trading range over next couple of weeks.
  7. 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.  Held the $23.25 support line on Thursday and bounced back to close flat on the day. We are in the process of establishing a new low and trade setup. Plenty of resistance in the $24.75-25 range on the upside.

Pattern Setups For Today:

  1. TJX – broke from the flag pattern at $50.75 entry. Watch for a test of the $50.75 level and move higher
  2. LEN – bottom reversal in a rolling range. Move above the 200 DMA entry and target at $44.
  3. XHB – bounce double bottom. $31 entry range.
  4. Follow up on previous posts:
  5. AMD – extended flag consolidation. If negative sentiment in tech continues will break lower as short trade.
  6. MM – cup & handle break above $8.55 upside in play.
  7. 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? Added trade on Thursday (stop $86).
  8. BONT – Pennant – break above $22 entry.
  9. ANAD – Trading range with break above the $2.11 entry point. Manage your trade on the test. Held the test…
  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.