Trading Notes for Today, March 7th

Market Outlook:

All eyes look to the jobs report this morning and not much good is expected. If it is better in any way the buyers will show up. If it is worse than expected the weather will be the reason. Thus, the only market moving event will be a better than expected number. The revision to the last few months is where it could get interesting. ADP was revised much lower and it will be of interest to see how the government report compares.

Yields on Treasury bonds are rising? Again the bond is reacting as if things are going well in the economy? No just an overbought sector balancing out. Watch to see how high rates tick currently, but it is definitely on the watch list.

Emerging markets emerge for the depths of despair. Watching for the bottom to break the downtrend line and to establish a move off the low. $40.15 ish and the 200 DMA will act as some resistance, but a move higher is worth a trading opportunity.

Gold is solidifying a move on the upside. Looking to move back to the August high, but first we have to get through the current resistance from the October high.

Dollar (UUP)dumped again on Thursday to support at $21.32. A break of this level opens the downside to $20.88 which is the lows of 2011. The dollar is getting ugly and this could offer some trades in the euro, yen and other currencies as a hedge. This will also impact the price of oil going forward which already has an upward bias.

Manage your risk today in light of the jobs report, good or bad the markets will have some reaction today to end the two day drift we have experienced. 

Sectors to Watch:

  1. S&P 500 index is holding above the 1850 level and added another new high at 1877. Watch how the index responds to economic data today. A test of the 1850 level is not out of the question short term. Support remains 1810 and for now as we manage the stops accordingly.
  2. The NASDAQ fell 6 points to be the only negative index on the day but remains at 4352. 4225 is the level for support short term. Technology is regaining the leadership role and buyers look to step back in and push prices higher going forward.
  3. Dow gained dropped 61 points to close at 16,421. Still lagging the other indexes, but making some progress towards the upside. For now patience as this plays out. Financials continue to led the index on a breakout move along the last three days.
  4. Russell 2000 Small Cap index jumped to a new high and holding the last two days near the 1205 mark. The small caps sector is one key to sustaining uptrend. Adjust your stops as necessary, but let it run.
  5. Europe (IEV) is trading in unison with the US markets currently and hit new high at $48.77 on Thursday. Holding the $47.70 mark as support and worth trading the upside as we discussed last week. Take what it has to offer and exit if and when the US markets move lower. Adjust your stops according to risk currently.
  6. Transports (IYT) made the move above $131.20 and broke from the trading range. Now looking for resistance at the $135.70 level as we hit against the January high. Watching how this plays as indicator for the broad indexes.
  7. Consumer Services (XLY) pushed through resistance with entry at $65.50. Great leadership currently for the sector and getting some upside follow through this week. Stop now is the entry point on the trade to manage the risk. Watch the reaction to the February sales reports.
  8. Financials (XLF) market needed some new upside leadership from the sector short term and Tuesday it began with the solid move followed up two more days of gains. We got our wish and now we trail our stops and manage the risk.
  9. Real Estate (IYR) made the move above $68 again and tested the last two days near the $68.80 level. Some topping showing in the position after a solid run higher the last month. Watching to a break higher, but we may test lower first. Watch how this plays out.
  10. Bond yields have bounced off the low again and put bonds in position to pullback again from the move higher. TLT is showing double top and a move back near $106 is not out of the question. Thus,  TBT shows a double bottom pattern worth watching. ONLY ETF Model.

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

Sector Rotation Model (updated – 3/6/14)

ONLY ETF Model (updated – 3/6/14)

S&P 500 Index Model (Updated – 3/6/14)

ONE EGG Model (updated – 3/6/14)

Pattern Trading Setup:

Today’s opportunities:

  1. Jobs Report Day, some topping and tipping action, willing to watch and see how today unfolds. Not saying it will be bad, but it is Friday and there is some indecision in the markets. Watch the VIX today to see if any anxiety builds from investors short term.
  2. FAS – entry $93 (post 3/6) Bottom reversal and break to new high. Financials making a run towards leadership. Gap open… passed for now looking for test opportunity. Don’t want to chase the trade.
  3. HPQ – entry $30.25. (post 3/5) Trading range breakout. Looking for upside move with tech sector.
  4. NEE – entry $91.90. (post 3/4) Test of breakout @ $90. Holds take entry. Utilities still in uptrend.

Pattern Trade Tracking & Follow Up:

  1. AAPL – entry $532. Downtrend break. Held support and potential move on new product introduction. Stop $523.
  2. KOG – entry $12.15. Trading range. Small move higher and then consolidation. Looking for breakout in the energy sector. Stop $11.65
  3. PFE entry $32.05. Ascending triangle. Pharma. Positive analyst reports on stock of late. Stop $31.40. Nice upside follow through on Tuesday.
  4. RF entry $10.50. Breaking from consolidation. Financials. Confirmed on the upside. Stop $10.20. Nice upside move from the bank finally.
  5. LEN entry $42. Consolidation breakout. Homebuilders. Stop $43. HIT STOP
  6. TQNT entry 9.37. Flag on break higher. Looking for continuation of the upside move. Semiconductor. Stop $11.50. Gap higher and still moving higher, adjust your stop.
  7. FTK entry $24.75. Flag continuation of uptrend. Energy sector moving higher. Stop $24.25. Nice move higher on Monday and follow through on Tuesday to break to new high.
  8. VIPS entry $106.50. Break higher from consolidation wedge pattern. Stop $155. Gap up of 32% on Tuesday! Earnings and target upgrade on stock.
  9. SPY entry $178. Bottom reversal. Broad market index in position to bounce. Stop $183.90.
  10. FANG entry $54. Ascending triangle breakout. Test and move higher. Energy sector. Stop $62.10.
  11. QQQ entry $85.10. Move through resistance and follow through on bounce off support. Stop $88.80.
  12. BHI entry $57.15. consolidation breakout. Oil Equipment sector. Stop $60.30. Nice break higher and expect a test of the move as follow through.
  13. GLD – Entry $121. Bottom reversal. Trade back to the $125 level. Took entry on move higher. Stop $128. Watching the reversal on Russia. 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 and what how this plays out from this point patiently.