Trading Notes for Today – May 13th

New week starts with questions about the continuation of the uptrend. We can all ask the same questions over and over and we can listen to the hype about what is wrong or right with the current trend, but in the end we have to manage our money according to our convictions and outlook. With that in mind, let’s set up the trading week.

Sectors to Watch:

  1. Healthcare (XLV) – in a consolidation range the last four weeks. Attempting to break out and looking for another entry point on the upside. XPH broke higher on Friday driven by the large cap biotech (XBI), which is now back at the previous highs. IBB, Nasdaq Biotech broke higher on Friday. This is a set up for the sector to regain leadership in the broad index.
  2. Base Metals (DBB) – consolidating near the low and looking for a catalyst to the upside. Copper (JJC) was upgraded giving some boost last week (break above $42.20 interesting) . Steel (SLX) is in position to break higher as well (attempting to break above $43.90 resistance). Look for entry and expect volatility with the trade.
  3. Mining (XME) – as the base metals move the mining stocks have bounced off the low as well. The resistance at the 50 DMA has my interest if cleared on the upside. Watch the entry point and manage the risk of the sector as it has been volatile short term. Stocks to watch in the sector… CLF – broke above $22. AKS – broke above $3.46. X – broke downtrend line and hitting resistance at $19.25. FCX – in position to break above $33.30 resistance. BTU – cup base of consolidation break at $21.30.
  4. Utilities (XLU) – broke the first level of support at $40.30, held at the key level of $39.65. Looking for a bounce play and opportunity to add to the position. If this breaks down and clears the 50 DMA short to $38.25 is in play.
  5. Energy – (XLE) testing near the breakout at $80. This is a sector to dig in and find opportunities. XOP and IEZ both offer plenty of interesting stocks. The following are just a couple I am watching near term. NFX – The break above the $23.35 level is an opportunity. CHK – break above $19.65 is positive. DO – break above $75 resistance. Look for the upside to follow through short term higher.
  6. Pattern Setups Carried Forward: 1) GRMN – Cup & handle pattern break above $35.75 still looks interesting. 2)  SNSS – descending triangle break above $5.70 looks interesting. Still playing out. Watch the $5.03 support could bounce for intra-pattern trade back to the $5.50-70 range. 3) NTAP – down trending channel with break above $35.75. Nice move on Friday, but still looking for the follow through.  4) TMUS – flag on gap higher. Move above $18. Made break on Thursday and looking for more.
  7. Pattern Setups For Today: 1)  V – Pennant pattern and looking for a continuation of the upside break on earnings. 2)  BAC – Pennant pattern set to break to new near term high. 3)  ORCL – Break above $33.95 resistance and fill the gap left on missed earnings. June 17th next earnings. 4) BSFT – cup pattern breakout at $25.70

Market continues to set new highs and money flow remains positive. This is a market you ride the upside and see what happens, but the longer it goes the downside risk that builds. Watch, manage and protect your money as this unfolds.