Trading Notes for Today, May 14th

Notes for Wednesday:

Market started higher and turned sideways on the day. No volatility and anxiety from the indexes the last two days. There is a willingness currently to almost wait and see. I am willing, but there is still some signs of wanting to move higher. The whip up and down is more than I want, but we still continue to scan for the opportunities. Exercise patience and discipline.

Retail sales were soft on Tuesday and that put a damper on things. The booming growth of 0.1% in April was below .4% expected. The March numbers were revised higher to 1.5%. The data around the economy continues to be hit and miss. This puts pressure on investors a they fail to gain any consistency and clarity from the news. That news sent treasury bonds higher and rates lower on the day. XRT fell 0.4% taking back some of the 2% gain on Monday. The break above $85 could still be possibility.

Gold volatility remains alive and well as the metal still cannot break above the $1300 level again and push higher. Copper gapped higher on Monday and held the gain for the most part. Steel (SLX) held on to Monday’s gains as well. The base metals complex remains positive after the bounce of $15.80 support. Commodities are still volatile and no all clear signal from yet.

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

Sectors to Watch:

  1. Small Caps – Back above the 200 DMA, but gave back some on Tuesday. Managed to hold the 1120 level and watch to see how it progresses today. As we stated yesterday one day does not create a trend reversal and now we have to see how this plays out near term. 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 remains in a uptrend. Interest rates are moving and that is creating some volatility in the sector. Not enough currently to hurt, but we have to keep our eye on how it progresses. 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 – The sector broke above the April highs as the peace (media) quiets the issues relative to Russia. After all the ups and downs last week we were left with a consolidation pattern to watch and we got the break on Monday. 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 moved to a new high on Monday. The EAFE index (EFA) pushed to new highs (above $68). 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 3.45% with reversal on Tuesday. This is worth our attention this week as the bounce could bring some selling in the sector short term. The ten-year hit 2.61% 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 has paused short term in the consolidation currently. 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 offer 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.


Sector Rotation Model (updated – 5/13/14)

ONLY ETF Model (updated – 5/13/14)

S&P 500 Index Model (Updated – 5/13/14)

ONE EGG Model (New Scan Results Posted – 5/13/14) EEM being managed.

Pattern Trading Setup:

Today’s opportunities:

  1. Market remains challenged relative to clarity and confidence. Remain disciplined in your approach and manage the risk of the current environment.
  2. GOOG – entry $533.85 – $530 July Call Option. double bottom reversal. Patience with the entry on this trade.
  3. SYRG – entry $11.25. test of support and bounce. 200 DMA holding currently and looking for a reversal. Energy sector still in uptrend test.

Pattern Trade Tracking & Follow Up:

  1. ERUS – entry $$18.75. 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. Stop $18.20.
  2. VIPS – entry $147. trading range bounce off low. Trade back to the topside of the range. Stop $143.
  3. AMGN – entry$112.75. Bottom reversal and break from consolidation. Stop $110.70
  4. AAPL – entry $590. Test of gap higher. Splitting 7:1 and should add a upside boost short term to the stock. Stop $580.20.
  5. SANM – entry $21. Flag. Technology sector. inside trading day look for break today and follow through. Stop $20.20.
  6. 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.
  7. MXWL – entry $15.25. Testing trend (30 DMA). Trade to $17 and exit. Stop $14.70.
  8. S – entry $8.75. Bottom reversal. Telecom sector moving higher. Tested the move on Friday and moved higher Monday. Stop $8.41.
  9. HAL – entry 64. Flag. Energy wants to move higher. Patience. Stop $62.10.
  10. JBHT – entry $77.10. Flag on bottom reversal. Move to $80 target as transportation continues to be a leading sector. Stop $75.
  11. RAD – entry $7.45. Consolidation range near high. Breakout move should make it to $8 short term. Stop is $7.30.
  12. FCX – entry $34.20. trading range breakout. Copper moving higher again. Volatile trade, but nice setup and follow through. Stop $33.35.
  13. 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.