Trading Notes for Today, March 4th

Jim’s Market Notes:

March started with the NASDAQ hitting the 5000 level again after 15 years, but failed to the hold the move with some modest selling on Tuesday. Not sure selling is a big negative as a test of some kind is overdue. A push towards the 10 DMA was met with buyers in the afternoon showing some resilience. Watching how today unfolds to give some near term insight into how to manage trade gains near term. Patience as this all unfolds, but I have adjusted stops according to the current activity.

ISM services data out today along with the start of the jobs data ADP report. The Fed beige book is out this afternoon as well and will shed some light on the regional picture as well as the health of the economy overall. The weakening economic picture remains a concern from my view going forward.

Stall at or near the highs showing up in the charts… need to proceed with caution relative to trading activity. The volatility of positions is picking up and that could cause some heartburn short term. Watch the volume and money flow for clues on how this progresses.

NOTES OF INTEREST:

Atlanta Fed forecast Q1 GDP at 1.2% according to formula… that is not good in case you were wondering. The economic data has been slowing over the last four months and it could very well show up in Q1 numbers overall.

Buybacks returned in February with 104 billion dollars announced. That helped drive prices back towards the highs. Growth by treasury stock… the true American growth story. Growing revenue and earnings has not worked is the slow GDP cycle therefore manufacture growth through buying stock back to increase revenue. Accounting gymnastics… beautiful.

Bonds fell as yields were rising again on Monday. The thirty-year bond is now at 2.71% and the ten-year is 2.12%. We continue watch with a focus on yields rising and bond prices declining. TBT is of interest this week to add again if bonds decline. (Added on Monday)

Gasoline (UGA) broke higher on the strike concerns cutting into capacity and supply. Tested the move higher on Monday, but still in uptrend. Heating oil (UHN) continued to move higher as well on colder weather and consumption, but tested the move on Monday in the commodity. The strikes will impact this pricing as well if they expand and continue longer than anticipated.

Gold (GLD) attempted to push back through $116.50, but failed to hold the move. Now raises the question of base building or reversal? Watching this week for a trade on the upside if it follow through or a short trade if it breaks back below the previous low ($115).

Action Taken: “Vision without action is a daydream… Action without vision is a nightmare.” Japanese Proverb.

Adjusted stops on positions in play as we flip-flop to start the week. I am expecting the upside to remain in play, but we have to plan for the unexpected should our beliefs not play out as expected.

Added VMW on the upside move on Tuesday.

Sectors-to-Watch:

NASDAQ Index is in position to hit new highs going back to 2000. The large cap stocks in the index are doing their part to make that happen short term. IF we break higher from the flag pattern on the upside we will take a trade in the move short term. MONDAY: made the move higher as the index clears 5000. TUESDAY: moved lower, but I still like the upside short term.

Semiconductors make solid break on the upside on Monday, fell on Tuesday. The follow through puts the SOX in the drivers seat short term. The NASDAQ drive continues as a result of the move. Scanning the sector showed the following in position to break higher as well. LRCX, LLTC, SLAB, ADI, MXIM and MCHP.

Treasury bonds fell again on the rise in interest rates. The Fed continues to convince investors they are ready, willing, and able. TMV or TBT the short trades relative to rates going higher short term.

Solar (TAN) continuing the upside move with a follow through above the 200 DMA.

Financials (FAS) marking move higher. Decision time to add to positions.

Emerging Markets (EEM) in position to break from the current range and attempt for a reversal of the trend longer term. The leveraged trade for this would be EDC. If we can make the move higher and hold interested in the upside trade short term. (ONLY ETF strategy) TUESDAY: Testing lower and watching how that plays out today.

Europe (IEV) moved higher and $45.35 is level to add to positions if you are willing to accept the risk. EWG cleared $29.25 entry point. EWK cleared the $17.10 entry point. EIRL is moving vertical. EWH in position to break above the $22 mark. (ONLY ETF) TUEDAY: Sold in response to the US markets, but still watching the near term support to hold.

Watching how this week unfolds as the drift higher has been of showing some signs of weakness, but we don’t assume anything we follow the trend and look for what validates or shifts as we move forward. Markets remain in uptrend, but caution is advised along with managing your stops.

Money Management Strategies Links:

  1. S&P 500 Strategy
  2. Sector Rotation Strategy
  3. ONLY ETF Strategy
  4. ONE EGG Strategy
  5. Pattern Trading Strategy – Below
  6. Long Term Strategy – Below

Pattern Trade Setups:

  1. Broke to new highs with a gradual drift higher last week. Question is will the upside continue? The sentiment is positive, the money flow is positive and outlook is neutral. We continue with our stance of taking the opportunities and managing the risk as it unfolds.
  2. JD – entry $28.25. Cup pattern. break higher for the sector and the stock has been one of the methodical leaders the last two months. Stop $27. Target $33. Gapped at the open and sold… watching how this follows up today following a solid earning report.
  3. ATHM – entry $39.90. Trading range bottom breakout. Move above the 200 DMA would be a positive on the move from the trading range. Internet space is leading currently in technology sector. Stop $38. Target $44.
  4. STMP – entry $59. Flag pattern. Follow through on gap higher is the entry. Stop $55.70. Target $62.50.
  5. PXLW – entry $5.45. uptrend test consolidation. In position to continue the uptrend off the December lows. Stop $5. Target 6.50.

Pattern Trade Tracking:

  1. VMW – entry $86. reverse head and shoulder breakout. Test of the move or max entry at $87. Stop $83.50. Target $92.50.
  2. TSEM – entry $16.50. Weekly chart breakout of bowl pattern and 2012 high. Semi’s taking on leadership role in NASDAQ. Stop $16.75. Target $19.50
  3. FB – entry $80.25. pennant break upside. in mid consolidation phase. looking for upside trade on move. Stop $77.
  4. NKE – entry $95.50. trendline break upside. Retail remains a leader and the resumption in momentum for Nike is a trade. Stop $94.25. Target 99.40.
  5. SUNE – entry $22.55. triangle on weekly chart. Resumption of the longer term uptrend potential. Stop $21.40. Target $25. ADDED to TRADE Below.
  6. AMBA – entry $55.25. micro trend reversal. Tested support at $50 and looking for reversal and longer term uptrend to resume. Stop $54. Target $60.20.
  7. FAS – entry $126.70. resistance break. continuation of the double bottom reversal following test. if upside continues financials join the party. Stop $124. Target $133.
  8. GMCR – entry $122.80. bottom reversal. Move to the 200 DMA and then look for break of trendline higher. Stop $119.50. Target 139.60.
  9. CIEN – entry $20.25. consolidation range. biotech making move higher to resume uptrend. Leading sector again? Stop $20.25
  10. INFI – entry $15.15. wedge consolidation breakout. biotech has been struggling of late, but looking for upside to resume. Stop $14.75
  11. SUNE – entry $21.20. trading range breakout. Semi’s are moving higher and regaining leadership role. Target $23. Stop $21.20
  12. SVXY – entry $57. Downtrend line break. Broke the uptrend line on VIX. The short trade as the momentum shifts is the trade currently. target $61.50 (HIT). Stop $62.80 – raised stop and managing the risk, hit the target.
  13. C Рentry $49.80. break from double bottom base. Upside momentum in the sector short term. $52.50 target on move (HIT). Stop $52.50 target protected.
  14. AKAM – entry $64.50. double bottom breakout. Looking for move back to the previous high if technology resumes leadership role. Took position on opening strength today. Against my emotions, but I like the earnings. Stop $67.50. Manage the stop and let this unfold on direction.
  15. NXPI – entry $82.30. trading range breakout. The earnings report helped the upside and looking for the follow through short term. Semiconductor sector. Target $88 (HIT). Stop $95. Merger news sends stock flying. Stop up and protect the gains.
  16. F Рentry 16.12. trend reversal and break above 200 DMA. upside momentum from sales and target of $17.25 in play. Stop $15.80
  17. AMD – entry $3.07. trading range breakout test. Broke higher and testing the move in pennant pattern. Upside trade on the confirmation. Stop $2.93. Nice break higher and looking to follow through.
  18. NFLX – entry $460. trading range or flag breakout. Confirmation of the upside move from earnings in the consolidation. $485 target short term. Stop $460.
  19. IJH – entry $147.25. Breakout from range. The move would put the sector at a new high and the leadership role. Stop $147.25
  20. IWM – entry $119.50. break in range. The move through this level puts the upside back in play and expect leadership from the sector going forward. Stop $121.25
  21. SPY – entry $204.80. Range trade. Looking for move back to the previous highs on the positive sentiment. Stop $209.
  22. FSLR Рentry $45.50. Bottom range breakout. Alternative energy sector bouncing with oil. Look for trade to $52 if momentum follows through. Stop $57.50. Gapped higher and adjusting the stops with the target hit.
  23. WFM – entry $48. Flag. Longer term outlook very positive off earnings. Look to hold this position going forward. May add to our long term strategy below. Stop $52.50
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.
Long Term Opportunities: 
Long term positions take time to manage and patience to let them unfold. The short term can be managed with hedging or trading off the longer term positions. The goal is to build the position and manage the risk. Sometimes the short term news and events cause anxiety… the goal is to mitigate the risk and protect the downside as we allow the stock time and room to grow. If you don’t like long term holdings don’t read the data below.
  • Facebook (FB) – $73.15 entry (10/16/14) added 1000 shares back relative to the long term outlook following the choppy drop in markets. Earning remain¬†good, but the outlook showed higher costs and has kept pressure on the shares to stay in the current trading range. >¬†Added to position: 500 @ $77.50 – 1/8< ¬†TODAY:¬†¬†Holding above support and finally made move on the upside breaking above $80.50 only to reverse on Friday. Watching how it unfolds this week. Small bounce on Monday… still work to be done.
  • Twitter (TWTR) – ¬†(1) Added 500 shares at $42.80 (10/28/14). (2)¬†Added 500 shares at $39.20¬†on¬†1/9/15. ¬†(3)¬†Added 500 shares at $40.25 for short term trade to $42.25. Stop for added shares raised to¬†$46.25. This is a long term holding, but we will trade on short term technical data if warranted. Gapped higher on earnings and so far holding the move.¬†TODAY:¬†Raised stop on the traded shares above (#3). Testing move on upside and watching how it unfolds short term.
  • Bank of America (BAC)¬†(1) Added Jan 2016 $17 Calls at $1.15 (avg price)/300 contracts. (2) Added 2500 shares at the $16.35 mark ¬†on 10/21/14. Banks are¬†gaining some ground on the proposed hike in interest rates and I still like our position going forward as we practice patience. TODAY:¬†Broke¬†support again along with¬†investor resolve. More issues with lawsuit settlements sends people to the exits.¬†Small bounce back, but the downside is still in play.
  • Whole Foods Market (WFM)¬†(1) Added 1000 Shares @$48 11/20/14 starting position. The outlook has improved after making changes to the stores and adding new stores. The earning validated what I have been following for the last year and the company should be at the front side of a long term upside based on fundamental growth. So far so good on the sequential earnings period. TODAY:¬†Upside remains in play following earnings and looking for this to hold the course on a steady climb. Consolidating near the highs and need a follow through on upside.