Trading Notes for Today, June 24th

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 NASDAQ filled the gap left in early May on the gap higher. It also tested the next level of support at the $70.15 level (high from April) and bounced. Thus, is there an upside bounce play in QQQ? Maybe back to the first resistance level at $71.92 or $1.50 from the Friday close. Risk/reward too high, but the trade setup is there. QLD would allow you to leverage the 2% gain to a potential 4% gain however, the risk is still high. If you like the trade it is setting up.
  2. China is in trouble, at least that is the rumor. The economic situation continues to slow and the rumor/fact that the  PBOC needed to put money into the banks to keep them solvent has rattled investors. In Monday trading China was down 5.3% in Shanghai. FXI tested the support at $31.77 from last summer. The bounce on Friday was just that, a bounce. The break above $24.20 resistance (FXP) was the tested on Friday and it held on the close. The short play is still going and we will look at how to manage that trade through the week. Adding to the position on the test is a possibility.
  3. The 30 year Treasury bond broke below the March 2012 low. TLT shows the drop very clearly and the break opens the way for a further drop to $106.50 level. Thus, we will hold our TBT and TBF trades. Yes, they are oversold technically, but without the Fed offering any clarity near term the downside is still in play. If there is a bounce in TLT back towards the $113 level it would offer a opportunity to add to our short positions.
  4. Crude oil fell back to $93.20 support. The downside came into play off the news in China more than the FOMC meeting. If China is having challenges with banks and the economy, they are not likely to continue buying up the excess surplus of crude. That would weaken demand and prices would decline further. Speculation? Absolutely… watch the charts for confirmation and any short trade setup. $38.75 set up on SCO short oil ETF.
  5. Gold gapped lower on Thursday and then nothing on Friday. A look at the weekly charts shows the test of the next level of support in play at the $123.60 mark. Watching GLL for a downside trade setup. Unless someone breathes life into the price of gold, not much upside to like. A bounce to fill the gap is not out of the question, but that would only be a trade. The downside play remains the opportunity.
  6. The S&P 500 index moved lower after a close below 1597, break of the November uptrend line and a move below the 50 day moving average.  If we bounce today, I still believe the market moves lower moving forward, until the Fed gives clarity of direction. Can you trade the bounce? Absolutely, but you need to understand the risk of the trade, just like the NASDAQ trade above. I would look for the bounce to add to the short plays on the index.
  7. Japan (EWJ) joined the downside closing lower by 4.2% on Thursday, but then a bounce of 3.6% on Friday. I still like the upside trade in EWJ if you are willing to hold through the volatility as it plays out. The downside in the yen will drive stock prices higher short term. YCS is the trade on the yen we took last week and looking to add to my EWJ position as well this week.
  8. Futures are showing weakness as a result of China and Asia this morning. How much that plays out today will be the big question mark. Do we get a intraday reversal and the bounce? Or, do we continue to accelerate to the downside? Watch, be judicious with your actions and let this all play out. Don’t chase trades.
  9. 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 last week. Was heading higher until the Fed stalled the move. Let the trading range settle in and we will determine our entry point going forward. The broad market sentiment is weighing on the stock for now and the upside should resume. Patience for now.

Pattern Setups For Today:

  1. AMZN – Breakout test. $270 was the break from the consolidation range. We are testing that level with the current negative sentiment in the broad markets. If it holds take the upside trade.
  2. KBE – Triangle pattern. Break to the upside trade at $28.50 entry.
  3. VRX – Flag. $86 entry point on the move higher.
  4. ASH – Head & Shoulder pattern. neckline break lower short at $84.
  5. Follow up on previous posts:
  6. None currently following the selling last week.
  • 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.