Trading Notes for Today, May 13th

Notes for Tuesday:

New high for the S&p 500 index and it joins the Dow. NASDAQ and Small Cap indexes make solid reversal off recent lows to add to the excitement on Monday. It was excitement as the major indexes all held their respective moves higher on the day without erasing the gains into the close. The move put a positive spin on the markets to start the week and all the bulls came out of the closets to pronounce the upside in play again. I may not go so far, but the move was a step in the right direction for now.

The move in the growth indexes brought the most noise as the NASDAQ gained 1.7% to move to the next resistance at 4150 and a level of interest from my perspective if it can clear with some volume. The Russell 2000 index moved back above the 200 DMA and 1150 is the next level of resistance to face. The SOX index made a solid break from consolidation pattern and back towards the 591 resistance.

Positive day that now looks for a follow through.

Outlook for the Week of May 12th (Weekend Update)

Sectors to Watch:

  1. Small Caps РBack above the 200 DMA and it managed to quiet some of the rumbling about the index leading the broad market lower. One day does not create a trend reversal, but it does help quiet the sellers. Averts the short trade for now and look for a move above the 1135 mark as potential upside trade on follow through. IWM $112.75 entry.
  2. REITs –¬†The¬†sector continues to move higher, but we are watching the move higher in interest rates. If they move to aggressively to the upside it would have negative impact on this sector. Hold and manage this position with a longer term time horizon. Scan the sector for individual opportunities and trades. Dividend is 3.8% currently. (JOE at top of trading range (broke higher), LHO top of range, DFT top of range (nice breakout), DLR broke high from range (nice follow through), LXP broke from consolidation (good follow through), and WRI are a few of the REITs to watch.)
  3. Emerging Markets РThe sector remains challenged by the geopolitical issues in Russia. After all the ups and downs last week we were left with a consolidation pattern to watch. That gapped higher on Monday and we hold our positions for now. Still have a 12-36 month outlook on the sector to move higher. Added position to the EGG Model.
  4. Global markets have been tested on the news with Russia, but bounced last week and is moving to a new high on Monday. The EAFE index (EFA) pushed to new highs (above $68 barely). The longer term view of the asset class is still attractive and worth trading and potentially building positions as the opportunity unfolds. TUR, EPHE, EPI, THD, EWZ, EWP and EWL all trading positive direction with consolidation near the highs.
  5. Bond yields moved to new lows on the thirty year bond last week and currently at¬†3.49% and moving back to the resistance at 3.52%. This is worth our attention this week as the bounce could bring some selling in the sector short term. The ten-year hit 2.65% with a modest bounce after trading at the bottom of¬†the range it has been in¬†since January. Holding our bond positions, but aware that yields could rise short term… manage your stops and risk.¬†TBT is good hedge position for bond holding or trade in current move.
  6. Energy (XLE) remains a leader, but it is looking tired and ready for a pause short term. Be cautious and adjust your stops according to your time horizon. Technically overbought, but watching and managing the stops. Started the week on the upside and holding withing the consolidation pattern.
  7. Watching patiently for some leadership this week. There were some solid moves on Monday and they offers some trading opportunities for those willing to venture into the uncertainty that is the current market. The entries are no different, but the adjustments have to be made to the management of the positions. If targets are hit take some profit and let the balance play out with tighter stops. Be more aggressive on the risk management of trades in this environment.

Models:

Sector Rotation Model (updated Р5/12/14)

ONLY ETF Model (updated Р5/12/14)

S&P 500 Index Model (Updated Р5/12/14)

ONE EGG Model¬†(New Scan Results Posted –¬†5/12/14) EEM added.

Pattern Trading Setup:

Today’s opportunities:

  1. New week and same three things to watch… SOXX and S&P 500 index to hold the upside, Russell 2000 Small caps to move back above the 200 DMA, and NASDAQ to hold 3990 support. If these three don’t succeed, sellers will gain the upper hand. ALL Three made progress on Monday and set up a positive opportunity short term. Trade what the market gives and manage your risk.
  2. VIPS – entry $147. trading range bounce off low. Trade back to the topside of the range.
  3. ERUS – entry $$18.60. ascending triangle breakout. Russia has moved off the lows on positive comments from Putin. Move above $18.64 would be breakout point for the ETF.

Pattern Trade Tracking & Follow Up:

  1. AMGN – entry$112.75. Bottom reversal and break from consolidation.
  2. AAPL – entry $590. Test of gap higher. Splitting 7:1 and should add a upside boost short term to the stock.
  3. SANM – entry $21. Flag. Technology sector. inside trading day look for break today and follow through.
  4. TBT –¬†entry $63.80. bottom reversal. Trade on interest rates being too low. Watch today as there is some indecision on rates and global activity. Stop $63.
  5. MXWL – entry $15.25. Testing trend (30 DMA). Trade to $17 and exit. Stop $14.70.
  6. SDS – entry $28.30. Bottom reversal. negative sentiment picked up on Tuesday. Stop $27.50. watch the low on the ETF as exit. HIT STOP
  7. S Рentry $8.75. Bottom reversal. Telecom sector moving higher. Tested the move on Friday and moved higher Monday. Stop $8.41.
  8. HAL – entry 64. Flag. Energy wants to move higher. Patience. Stop $62.10.
  9. JBHT – entry $77.10. Flag on bottom reversal. Move to $80 target as transportation continues to be a leading sector. Stop $75.
  10. RAD –¬†entry $7.45.¬†Consolidation range near high. Breakout move should make it to $8 short term. Stop is $7.30.
  11. FCX – entry $34.20. trading range breakout. Copper moving higher again. Volatile trade, but nice setup and follow through. Stop $33.35.
  12. GE – entry $26.30. Trading range breakout. Value stock coming back into favor. Gapped on earnings above the entry… patience. Got the test early and added the position. Stop $25.70.

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)

  • 4/17 – Still looking for some positive action in the stock to warrant going long. Opened lower fought back to positive, but never showed any conviction and closed on a doji. Watch to see how it does in trading today. We could see another test of $56 before gaining any momentum on a bounce off support. Earnings are Wednesday and that isn’t a great thing to get in front of with a new position.
  • 4/23 – It is all about earnings today. Ad revenue good stock runs higher. The option trade we discussed last week has played out nicely on the move Tuesday. Take some profit on half and carry half into earnings would be the suggested play. I will be interested to read the earning report and determine how we want to deal with the position¬†moving forward.
  • 4/24 – Sold lower by 2% into earnings. Earnings were positive and stock gains the 2% back after-hours. Watching the open today. Need to hold the move above $63 and willing to add a longer term position back in the stock with 1000 shares. Attempted to make the move higher, but traded lower on the day. Plenty of opinions on the stock currently keeping it in check and a bottoming trading range. Patience as it all plays out.
  • 4/28 – Tested support at the $54.85 level. Watch to see if it breaks support. If it does the downside trade in order. (Trade result…¬†FB –¬†sold to support at the $54.80 level held and working higher. The bounce has worked its way to $59.78 and added some shares on a move to $60.05.¬†The target would be $63.50 or top end of the trading range currently trading in. Stop $58.30. HIT STOP)
  • 5/12 – solid bounce off the low, but remains within the trading range. could trade the move back to the upper end of the range at $63. Watch today to see how it moves.