Trading Notes for Today, March 13th

On Tuesday we discussed the market was on the edge of moving lower. Wednesday it started that direction, but the buyers stepped in to push the indexes back to even on the day. Early worries were again focused on China as Hang Seng lost 1.7% overnight and Japan was down 2.6%. The sent the futures lower in the US and the rest is history as the buyers stepped in after the first thirty minutes of trading to push the indexes off their low.

Europe closed lower as well off 1% on Wednesday pushing IEV below the $47.70 support mark early, but rallied back to close at $47.75. That tagged our stops on the positions in the ETF, but we are still watching how this will play out short term. Unless the selling accelerates or at least gains traction in the US, I would look for a bounce off the current activity on the downside. How trade-able the bounce will be is still unfolding. Watch and adjust accordingly in the global market place.

Crude oil moved lower on Wednesday again at as we stated could test $97.50 support, and we did exactly that during the trading day and closed at $97.99. Move below this level opens the way to the next support at  $95.10. Energy struggled again today as XLE, SPDR Energy ETF tested $86.50 support and close even on the day at $87.17. Oil services (OIH) fell 0.7% and Exploration and Production (XOP) gained 0.7% after testing support and bounced into positive territory. Need some clarity from crude and investors on direction.

Metals remain a mixed picture. Gold gapped higher to continue to positive trend of late and maintains the upside buy opportunity. Copper was flat, but fell 11% in four days as the news from China has weighed on the outlook. Silver not responding to the upside in gold and remains in a downtrend off the February highs. Watch as the commodities get weaker in some areas and stronger in others.

The VIX index retreated to 14.4 and remains in the trading range after a early morning move higher. Didn’t hold the move higher and that took off the trading opportunities in VXX. The index is still worthy of our attention both from the view of investor sentiment and a trade opportunity if the sellers attempt to take control of direction.

Dollar (UUP) tumbles again on worries closing at support of $21.32. This brings the note relative to owing FXE short term is worthy of our attention moving forward.

Manage your risk today as back and forth bantering remains direction in stocks. Plenty of issues on the table and any one could be a catalyst as we remain in a news driven market currently.

Sectors to Watch:

  1. S&P 500 index attempted a run towards the 1850 support mark, but reversed and closed flat on the day at 1868. The challenge remains consistent with the economic/fundamental picture versus the technical trends which are showing some topping. Watch how the index responds today as the index looks for clarity and confidence to emerge. Support remains 1810 and for now. Tried the short trade off the early selling, but bounced back close in the red on the position. Watching where we start the day and may take exit to play the downside later.
  2. The NASDAQ bounced off the intraday low and move up the 10 DMA. How we progress the balance of the week will give a better indication of the near term direction. 4225 is the level for support short term. Pushed towards the short entry point and then reversed lower. Volatility is alive and well.
  3. Dow made a move lower on the day adding to the pressure on stocks. The index is still lagging the other indexes, and selling will not help the cause. Financials moved lower today with the broad markets hurting the index on the day. Watch the downside risk, but manage any upside opportunities.
  4. Russell 2000 Small Cap index flirted with breaking back below the 1181 mark. The bounced closed at 1191 giving some breathing room, and for now, we will hold our positions and adjust our stops on the move.
  5. Europe (IEV) is trading in unison with the US markets and broke below the $47.70 mark intraday, but closed back above that level. The uncertainty in the US is hitting the global sector as well. The key will be how the US markets advance this week. We hit our stops and now watch to see if the recovery happens or the downside materializes.
  6. Transports (IYT) made the move above $135.50 last week, and closed near the new high. Still holding tough short term and would love to find some upside momentum to follow through on the move. Look for transports to be an indicator the broader market near term.
  7. Consumer Services (XLY) pushed through resistance with entry at $65.50. We have been getting some leadership from the sector, but struggling to keep it going. Watch as indication of direction short. Stop now is the entry point on the trade to manage the risk.
  8. Financials (XLF) still struggling to gain any conviction or clarity in the sector. Patience is a virtue when it comes to the sector and the ability to sustain any upside of late. Manage positions and respect the downside should it find momentum.
  9. Real Estate (IYR) rates could rise more if the fear factor causes rotation to safety. Barely held above the $68 level on the close Monday, but had a bounce back as yields settled and move slightly lower. Nothing is clear near term, watch your stop and manage the risk of this position moving forward. $67.50 exit point in play.
  10. Bond yields have bounced off the low again and put bonds in position to pullback again from the move higher. Any negative news pushes money towards bonds. Thus, where are we going short term? No good answer at this point, thus patience.

The models can be linked to below and each has been updated for the current outlook:

Sector Rotation Model (updated Р3/12/14)

ONLY ETF Model (updated Р3/11/14) Short Trades for Volatility Posted

S&P 500 Index Model (Updated Р3/11/14)

ONE EGG Model (updated Р3/11/14)

Pattern Trading Setup:

Today’s opportunities:

  1. Short trades has chance on Wednesday, but the gap lower at the open says wait 30 minutes and let the opening range get established. It did and the move lower reversed back to the upside and never looked back. The downside is a possibility… patience as it unfolds, up or down. Talk of a reversal day on Wednesday, but the volume was weak.
  2. GMCR Рentry $109. Test of vertical  move higher.
  3.  SCTY Рentry $78.60. Support test and bounce in uptrend. Move back to $87.
  4. AMZN – entry $375. Breakout follow through back to $400.

Pattern Trade Tracking & Follow Up:

  1. SBUX –¬†entry $75.20. double bottom. Consumer sector. Stop $74
  2. SDS –¬†entry $28.85. Topping on the S&P 5o0 index equals bottom reversal for the short ETF. Good entry point, but rally put us in a negative position to start with. Stop $28.45.
  3. FIO – entry $11.50. Breakout trading range. technology. Stop $11.50. Nice break higher, but raised stop on current environment.
  4. VTSS – entry $3.82. Consolidating after move higher. Semiconductor. Stop $3.85.
  5. NEE – Entry $91 on the test of the breakout at $90. Held took the entry Friday. Utilities are struggling, watch the downside risk and push stop to the $90 mark.
  6. AAPL – entry $532. Downtrend break. Held support and potential move on new product introduction. Stop $528.
  7. PFE entry $32.05. Ascending triangle. Pharma. Positive analyst reports on stock of late. Stop $31.40. Nice upside follow through on Tuesday.
  8. RF entry $10.50. Breaking from consolidation. Financials. Confirmed on the upside. Stop $10.50. Nice upside move from the bank finally.
  9. TQNT entry 9.37. Flag on break higher. Looking for continuation of the upside move. Semiconductor. Stop $12. Gap higher and still moving higher, adjust your stop.
  10. FTK entry $24.75. Flag continuation of uptrend. Energy sector moving higher. Stop $26.
  11. SPY entry $178. Bottom reversal. Broad market index in position to bounce. Stop $186.
  12. QQQ entry $85.10. Move through resistance and follow through on bounce off support. Stop $89.40.
  13. BHI entry $57.15. consolidation breakout. Oil Equipment sector. Stop $61.60. Nice break higher and expect a test of the move as follow through. HIT STOP.
  14. GLD – Entry $121. Bottom reversal. Trade back to the $125 level. Took entry on move higher. Stop $129.75. Raised stop.

NOTE: The pattern trades above are setups that I see for a potential swing trade or short term 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. The best way to treat these as a learning tool is to assume a $100,000 portfolio and each positions receives a 5% allocation. If we state to take a 1/2 position as an example you would only allocate 2.5% to that position. I would use a downside risk of $500 per trade as a maximum loss. That will help  you learn position sizing and risk management. All investing comes with risk. Our job as investors is to manage the risk. Keep your focus and discipline in place.

Facebook (FB) Update: (see Facebook research page for archive of posts)

  • 2/18 – Raise stop to $58.95 currently and manage the move to the new high according to your risk. With the price moving through the top of the Bollinger bands some downside activity may be on the horizon or a continuation of the top consolidation.
  • 2/19 – $16-19 billion acquisition of WhatApp pushed the stock down 2.5% after the announcement in after-hours trading. Watching to see how investors react in trading today.
  • 2/24 – Continuation of the upside momentum. Plenty of news and comments on the stock, but the buyers remain confident short term. Looking at adding a trade on the stock with options. Watch to see how it trades today.
  • 3/1 – rolling top? Watching to see how this plays out short term and will look for a hedge on the remaining position this week. Raise stop to $63.75.
  • 3/5 – Target upgrade and stock runs higher on the move. Move stop to $65.90 and what how this plays out from this point patiently.
  • 3/12 – Setting up to add a $70 put contract for June at $6.85. 20 contracts. Looking at how we trade the balance of the week and if any weakness develops in the stock.