Trading Notes for Today, June 27th

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 the bounce trade cleared $70.20 and is moving towards the initial target of $72.23.  The stop would be the entry point and watch as it plays out the next couple of days. If the upside is to make it past the resistance points we need some positive news and continued pandering by the Fed Presidents and Bernanke and some positive economic data.
  2. The S&P 500 index bounced for the second day and closed slightly over the 1600 mark. 1610-1620 is the target on the bounce off the recent lows. From there the downside test is what I am looking for. The Fed has done nothing to convince investors they are not going to cut stimulus. Thus, the downside will remain the objective for our short term trades. Below we described the bounce trade for the index if you want to trade the move. However, risk/reward is high. We will put the entry points out for any short trade developments as we approach the target.
  3. China’s troubles are far from over, but enough was said to convince buyers to put money to work on the recent low and oversold conditions. We started the trading day on Wednesday looking for a bounce and that is what materialized with a 1.7% gain. The downside risk is far from over and any upside will offer a better entry point to re-establish or short play in the country. We could see a bounce back to the $33.50 mark and then the selling resume.
  4. The 30 year Treasury bond broke below the March 2012 low. TLT is building a short term bottom and could be setting up for a bounce off the new minted lows. If we put together a short term bounce it is not likely to last, unless the Fed intervention is bigger than believed currently. We did see an attempt at a bounce on Monday to $108.85, but that reversed back to the $107.88 on Tuesday and then back to $108.58 on Wednesday. I am still looking for a bounce back to the $113 level if the markets sell off and the Fed offers unexpected stimulus short term.
  5. Crude oil is holding near the $95 level. The issues are demand and a stronger dollar. The demand side has been weak for some time, but has not produced any major selling. The stronger dollar could create a delayed reaction from the market  or the belief it will stay strong has to be validated to play in to the price near term. 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 again today and didn’t allow for the entry as it was not worth chasing. As we stated in yesterday’s notes, unless someone breathes life into the price of gold, not much upside to like and the downside may accelerate. The gap lower is keeping the downside play going. Based on the morning activity is setting up for a small bounce, we will have to see it amounts to anything more.
  7. Futures are showing a slightly positive open today. We are entering the test zone for the bounce. The 50 DMA and the previous uptrend line are just ahead. This is where we are looking to build short positions again it the bounce fails to advance. It isn’t all going to unfold today, but the process is moving forward. Remember this is a belief not a fact, the market has to validate the belief going forward. Promises to be an interesting day.

Pattern Setups For Today:

  1. PAYX – double bottom pattern and breakout at $37.90. Watch for upside follow through.
  2. Plenty on reversal plays, but risk is too high relative to the current environment.
  3. Follow up on previous posts:
  4. UNG – support break $19.90 short set up if stays below this level. Tested the move lower today and is set up for downside entry play. $19.70 entry.
  5. KRE – Triangle pattern. 32.90 entry on the move higher. Hit the entry on Tuesday. Use $32.70 as the stop on the trade. Watch the give back on the trade higher on Wednesday as a warning sign.
  6. 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. Trading both entries and looking to tighten stops or take profit if hit today.
  7. 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) Nice follow through on Wednesday.
  8. KBE – Triangle pattern. Break to the upside trade at $28.50 entry. Hit on Wednesday, watch the downside as this unfolds. Banks are doing well, but the news around the world isn’t favoring stocks.

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.