Trading Notes for Today, March 17th

Friday ended the week on a boring note as volatility remained on the upside with VIX moving to 17.8 and Small Cap index was on the upside gaining  0.4% or 1181 on the close and back at support. The S&P 500 index was flat along with the Dow and NASDAQ. The willingness to wait for the outcome of the vote in Crimea on Sunday was the reason for the slow trading, according to the media. Russia remains a worry for the US markets short term. All said not a great week for the markets, but it could have been worse.

What are we looking for this week?

In the news this morning is the vote for Crimea to return to Russian control. The US market futures are moving higher as a result (media driven). Speculation around the story is far from over, but watch for a bounce based on the current view of the markets. Never assume anything in news related moves. Follow the trend as it unfolds.

Outlook for the Week of March 17th

Sectors to Watch:

  1. S&P 500 index moved below the 1850 support and closed at 1841 to end the week. Now the decision on a follow through or do the buyers step back in? Watch how the index responds today to the downside sentiment. Support remains 1810 for now. Added short trade (SDS) and monitoring buyers interest. Adjusted stop on SDS.
  2. Watch EFA to find some support ($64.50 ). If it fails a short trade in EFU would be the opportunity. Low volume ETF use limit orders only. You can buy the June 66 put (EFA) @ $2.25 or better.
  3. If the EAFE fails to hold support, Europe (IEV) will likely break support as well. We would add a position in EPV on a break above $60.60.
  4. Emerging markets are next on the list to hold support at $38.07. Failure to do so opens the downside trade. EEV already has a position in the ONLY ETF Model and we would look to add to the position if support fails to hold. $23.25 EEV entry.
  5. The NASDAQ tested 4249 support on Thursday and held, but a move below this level invites the short term for the index as well. QID at $57.62 is of interest for a trade. Moved to the entry point into the close on Friday and waited for today. If we hold this level at the open enter the trade.
  6. Bond yields have tested 3.55% on Friday. Watch to see if we break below this level. If so, negative for stocks and positive for bonds short term. Flight to quality on fear will drive prices up and yields lower. If things calm down we will adjust our outlook accordingly.
  7. Technology (XLK) closed below $35.80 support and set up short opportunity. (REW, low volume) easier to short the ETF or buy $36 June puts for $1.45 or better.
  8. Energy (XLE) is near support at $85.80 and if we break a short in the sector would be warranted. ERY is 3x leveraged short ETF at $$20.90. ONLY ETF Model.
  9. Healthcare (XLV) failed to hold support at $58.65. Setting up short trade on the break. Short XLV or June 58 puts @ $1.85 or better. RXD is short ETF.
  10. Financials (XLF) has support at the $21.65 mark. A break opens the downside trade. SKF at $17.20 on sector breaking lower. Watching how this unfolds as the sector has not been much of a leader on the upside. Thus, downside may be limited.
  11. Crude oil (OIL) held support at $97.50 on crude and looking for an upside trade on a reversal. Entry near the $23.50 level. This would be a trade only on a bottom reversal.
  12. Copper (JJC) dumped lower on China fears. Could offer an upside trade on oversold conditions when the anxiety wears off. Watch and will post entry as this unfolds. JJC is the ETF for the metal or FCX is the stock to trade relative to the price of the metal.

NOTE: There are other trade opportunities posted in the Weekly Outlook for March 17th if you want to review them. We will continue to monitor the list throughout the week and add to this list what meets our risk/reward strategy for each model or pattern list.

Models:

Sector Rotation Model (updated Р3/15/14) Updated for the weekly outlook.

ONLY ETF Model (updated Р3/15/14) Short Trade Opportunities for Volatility Posted

S&P 500 Index Model (Updated Р3/15/14)

ONE EGG Model (updated Р3/15/14)

Pattern Trading Setup:

Today’s opportunities:

  1. Still cautious and suspect heading into the trading day. Be patient and have a willingness to let the trend define itself.
  2. SMH – entry $43.95. Test of support. Semi’s sold off with broad market. Upside still attractive if the broad indexes bounce.
  3. NLY – entry $$11.40. Continuation breakout. Move above the 200 DMA a plus. Mortgages on the rise in demand and will benefit Annaly.

Pattern Trade Tracking & Follow Up:

  1. AMZN Рentry $375. Breakout follow through back to $400. Gap open sold lower. Stop $360
  2. GMCR Рentry $109. Test of vertical  move higher. Stop $109. Nice follow through on Friday, raised stop to even. let it run if the move continues.
  3. SDS –¬†entry $28.85. Topping on the S&P 5o0 index equals bottom reversal for the short ETF. Stop $28.85. Watch how today plays out.¬†
  4. FIO – entry $11.50. Breakout trading range. technology. Stop $11.50. Nice break higher, but raised stop on current environment.
  5. VTSS – entry $3.82. Consolidating after move higher. Semiconductor. Stop $3.85.
  6. NEE – Entry $91 on the test of the breakout at $90. Stop $91.18. Testing the high.
  7. AAPL – entry $532. Downtrend break. Held support and potential move on new product introduction. Stop $528. HIT STOP
  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. GLD – Entry $121. Bottom reversal. Trade back to the $125 level. Took entry on move higher. Stop $131.30. 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.
  • 3/13 – Added 20 puts @ $70 for June at $7.05 today. This will act as a hedge against the position and add some profit if the shares break support.
  • 3/15 – Watch the put option trade as the stock approaches support at $67.20. We have a $1 gain on the contract and want to manage it as well as the stock position.