Trading Notes for Today, June 20th

What I am watching today and some pattern ideas are below. 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 chart below says more than I can about the markets response to the comment from Bernanke on cutting stimulus. The bigger question is what happens going forward. Today we will take another step towards that being decided by investors. Asia was lower overnight by more than 3%, Europe is heading lower and the futures are down 0.6% currently in the US. It appears the negative reaction continues today.
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  3. The biggest negative is coming from the interest sensitive assets. Bond and dividend stocks are selling the hardest in response. Commodities and mining stocks fell in Australia and Europe in response as well. Gold was off 4%, oil is down nearly 2% and bond yields are rising. The follow through response overnight didn’t improve from yesterday’s initial reaction. Watch the downside and protect your assets.
  4. The S&P 500 index retreated as seen above after clearing the 1648 level on Tuesday. Thus my comment from yesterday, “How it follows through this week in reaction to the FOMC meeting will be key to the future direction of the market overall.”  1625 now become the level to watch as well as the trendline from the November low and the 50 DMA. The VIX index will give some insight as well on direction short term.
  5. Treasury bond yields, as stated yesterday, “are still a concern to the markets as they have jump too high too soon.” They followed that path again with a spike higher following the FOMC meeting on Wednesday. The brief stall in the rise is now over. TBF and TBT remain in play for now. Watch today to see if this calms at all. The more rates rise the move fear steps into stocks.
  6. Crude oil closed at $98.24 on Wednesday, but overnight has dropped to $96.15 down more than 2%. This will hit the stop on UCO and I will take the exit at the open. The speculation priced into oil from Syria is questionable and we had raised our stop as the target was hit on UCO. No need to stick this out currently.
  7. Japan (EWJ) bounced following all the negative sentiment as a result of the Bank of Japan cutting stimulus. Bond yields have risen and in turn, spooked stocks. As things settle stocks should resume their move to the upside. They did retreat some on the Fed comments, and we raised the stop to protect against further downside risk. If it is hit at the open take the exit. The yen has gained as well against the dollar. If the nerves continue to calm a short play on the yen would be in order (YCS). That was hit on Wednesday as well adding the position to the ONLY ETF Model.
  8. We manage our short plays in FXP and EEV with the bounce in Asia the last few days impacting the positions. Adjust your stops accordingly, but the news from China remains weak and I would give them some volatility room short term. They were flat into the FOMC announcement then both gained more than 5% into the close on Wednesday. Watch and manage as news is driving them both lower again.
  9. The dividend assets were doing well as utilities (XLU) and dividend stocks (DVY) both managed to bounce of the lows. That shifted on Wednesday with the response to the Fed. We will exit these position today.
  10. Facebook – No positions currently. The sentiment towards the stock has been negative, but an attitude adjustment from the upgrade to a ‘buy’ last week is in play. Found some support at the $22.80 level and bounced.  Pushed against the resistance at $24.60 on Tuesday. Was heading higher until the Fed stalled the move. I still am looking for this to create a potential upside play at the $24.75 level on some volume.

Pattern Setups For Today:

  1. Nothing worked on Fed day. Still watching these to bounce off support. If downside continues today none of these are likely to play out. Protect your downside in any trades and set your stops accordingly. Downside pattern setups are numerous today, but the risk is high and we will evaluate based on how the day play out.
  2. MCHP – inverse head and shoulder pattern with break above $38.
  3. NU – double bottom break above $42.55.
  4. PMCS – uptrending trading range. break above $6.27.
  5. Follow up on previous posts:
  6. PCG – double bottom break above $45.40. Made the move stick Tuesday. with entry at $45.50. Hit exit on the selling following the Fed news.
  7. ETR – wedge breakout at $69.90.
  8. WPX – flag breakout at $19.75. Nice follow through and entry at $19.80 on Tuesday. (Stop $19.60)
  9. RVBD – cup and handle base. Break above $16.40. Made the move on Tuesday. (Stop $16)
  10. LEN – bottom reversal in a rolling range. Move above the 200 DMA entry and target at $44.
  11. XHB – bounce double bottom. $31 entry. target $32.50 (stop $30.60)
  12. AMD – extended flag consolidation. If negative sentiment in tech continues will break lower as short trade.
  13. 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). Target $90.
  14. CRAY – Cup breakout at $18.05, initial target $18.85 and then 20.20. Still moving in a positive direction. Nice pop on Monday, took half off on Tuesday at $20.70 and raise stop to $20.
  • 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.