Trading Notes for Today – May 20th

Bernanke is set to testify to Congress this week and you can be sure many will be listening for hints on slowing the stimulus. There will be plenty of news as well on which parts of the economy are doing well versus those that are not that could offer up some investment ideas. Throw in the minutes from the last FOMC meeting this week as well and there will be plenty to speculate on relative to the Fed actions going forward.

Tuesday Home Depot (HD) will announce earnings and give some insight in the housing sector. Does the upside in housing continue? To add to the data in the sector there is the Existing and New Home sales this week as well. XHB remains in the uptrend, testing the 10 DMA and holding the upside move.

HPQ – earnings are Wednesday and they will set the tone in the technology sector? Dell’s earnings were just plain bad… how will this show up in the HP news? Did they execute better? Or are the earnings a big disappointment. Either way there will be an opportunity in the stock.

Sectors to Watch:

  1. Yahoo rumored to be buying tumblr for $1.1 billion? Interesting purchase, but the analyst seem to like the idea. They are buying a company with $13 million in revenue for 2012? The expected growth is $100 million. That is still 11 times revenue? Very expensive acquisition for relative to financials. The stock should decline on the announcement. Watch for the opportunity to buy Yahoo cheaper for a longer term outlook. I like the plan and the direction of Yahoo and the upside in the stock looking forward is positive if they continue on the current path.
  2. Gold continued the trek lower again on Friday. GLL is now in play and I would like to add to the position if we take out the previous low $1354 and test the intraday low at $1320 with a target of $1130. ZSL cleared resistance and moving higher on declining prices.
  3. TLT still heading lower as yields rise. Use bounce as opportunity to add to the short side near term.
  4. OIL – short set up failed as the buyers are willing to drive the price higher. If we break downtrend line on OIL look for trade on the upside. UGA is the play if it clears the 50 DMA or any test of the move above $56.75.
  5. Utilities (XLU) – Still managing this bounce off support. Watch for the upside opportunity $40.35 is level to clear for upside trade.
  6. Facebook – The break of support at $26.50 on Thursday is a negative. Watch $25.25 as support and a exit on a break below $25 as it would violate the trading range. I am working on the Facebook page to post ASAP.

Pattern Setups For Today:

  1. IGN – Gap breakout on Cisco news. Watch for test of $28.75 level and continuation higher. (inside trading day on Friday? look for continuation on the upside)
  2. BMY – Break higher testing. Held $42.50 and looking for a continuation on the upside. (XBI is the ETF to track in conjunction with the stock)
  3. FOSL – Flag that should be bullish, but retail struggling. Fill the gap?
  4. KSS – breakout from channel on earnings. Gap left could get a test as retail is struggling.
  5. HEK – downtrending channel. at the top and resistance at $3.78. Look for break of the top channel line (downtrend) and move through resistance.
  6. AAPL – building a trading range and support at $420… Moved up to the resistance at $438. break higher opportunity for move back to $465, lower, test of the $390 level short.
  7. CHK – Attempting to break above resistance at the $20.55 level and move higher. Watch for move up on volume.
  8. DVN – Flag setup to break above $59.50.
  9. TSO – nice break above resistance at $59. Look for test or follow through on the upside. Rally with gasoline prices. PSX is on the Watch List as well for the refiners.

Still plenty of positives in traders minds. The adjustments on Thursday were not significant enough to get the attention on the sellers at this point, as seen in Friday’s buying. Watch, protect against what isn’t working and add to what is, don’t fight the trend.