Trading Notes for Today, June 26th

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 100 put the 2810 support level in play on Monday and bounced. The follow through on Tuesday puts the bounce trade in play as we discussed in the weekend update. QQQ is the easiest way to trade the bounce with the close above the resistance at $70.20 we look for a follow through today. The initial target would be $72.23 and/or the 50 DMA. QLD would allow you to leverage the trade,  however, the risk is obviously higher. Need some positive news and continued pandering by the Fed Presidents and Bernanke may just cause a bounce along with some positive economic data. ONLY ETF Model.
  2. 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.  The break of support intraday at 1570 and bounce may well be the bottom short term (Monday’s Statement). For now it proved to be true with the bounce continuing higher on Tuesday. 1610 target on the upside or the 50 DMA. From there I would still believe the market moves lower going forward, until the Fed gives clarity of direction. Can you trade the bounce? Absolutely, but you need to understand the risk of the trade near term.
  3. China’s troubles continue, but the PBOC came out in defense of their actions today and helped to calm the markets? That is what the headlines want us to believe. The downside risk is not abated at this point and we will look for a short term bounce and then if things are not improved the selling will continue. FXI tested lower again at $31.50 and is holding. We could see a bounce back to the $33.50 mark and then the selling resume. This is not a good situation fundamentally and the short play looks positive to re-enter on the test. ONLY ETF Model.
  4. The 30 year Treasury bond broke below the March 2012 low. TLT sold off again as investors still believe the Fed is going to slow stimulus and bond yields continue to rise. The bump of 5 basis point on Tuesday in the yield pushed TLT back to support at $107.80. A move lower opens the way for a further drop to $106.50 level. We did see an attempt at a bounce on Monday to $108.85, but that reversed today back to the $107.88 mark. If there is a bounce in TLT back towards the $113 level it would offer a opportunity to add to the short play at resistance, and a possible trade on the upside on a bounce off the low. ONLY ETF Model upside trade added for bounce.
  5. Crude oil fell back to $93.20 support on Friday and bounced back to $95 on Monday. The downside is not playing out as traders believe that China will be okay from the banking issues and the US market is going to do fine, etc. etc. I still like the downside play here for all the same reasons. This $96 resistance on Tuesday and closed at $95.25. Watch to see how it plays going forward. If downside shows up the entry is posted to the ONLY ETF Watch List.
  6. Gold gapped lower last week and now we are looking to see if support can hold?  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 short term trade. The downside play remains the opportunity. Closed on support last night and is trading down $42 per ounce this morning. Yes, the downside play is continuing.
  7. Japan (EWJ) joined the downside selling last week and remains a volatile mess, but 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 another positive day in the making as Europe is trading higher today and China fell in Shanghai, but Hong Kong and Australia were higher. Still looking for the continuation of the bounce play today, but the downside is still in control. The bounce will have to clear resistance and gain overall momentum to shift the micro trend in play. The trading range I was looking for last week may still be the near term outcome.

Pattern Setups For Today:

  1. GLD – Gap lower and support break for further decline. $123.50 entry.
  2. UNG – support break $19.90 short set up if stays below this level.
  3. Follow up on previous posts:
  4. KRE – Triangle pattern. 32.90 entry on the move higher. Hit the entry on Tuesday. Use $32.70 as the stop on the trade.
  5. Bottom reversals were the trades on Tuesday. Monday hit new lows on the selling, but reversed late in the trading day. A follow through on the upside Tuesday gave plenty of trades to oversold stocks, ETFs and bonds. QQQ is a good example with the intraday low hitting the trendline as support and then a bounce back to $69.73 on the close. If it hits $70.20 Tuesday it would provide an upside trade on the bounce (1-5 days) the target is $71.80 on the bounce trade (hit and stop is $68.70). QLD setup the same way with the leveraged ETF. $63.15 entry and $66.55 target, $62.60 stop.
  6. 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 entry $272-274. (hit entry on Tuesday)
  7. KBE – Triangle pattern. Break to the upside trade at $28.50 entry.
  8. VRX – Flag. $86 entry point on the move higher.
  9. ASH – Head & Shoulder pattern. neckline break lower short at $84. Followed through on Monday. $83 stop

Facebook (FB) Update:

  • 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 is in the process of developing a trading range. 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. Move above $24.75 look to add as small position.

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.