Trading Notes for Today – May 21st

Monday was like watching paint dry or the grass grow. Boring. When the day ended nothing really changed… or did it? The biggest change for the day was in the energy sector. XLE gained 1.4% and oil services (IEZ) and exploration (XOP) were up nicely as well. Crude oil moved back to resistance at the $97 level. Gasoline was pushing against resistance and overall energy kept the market in a positive trend. Watch to see if there is further follow through today.

Today Home Depot (HD) will announce earnings prior to the open 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 (Wednesday) and New Home sales (Thursday) 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 did announce the purchase of 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 to $100 million in 2013. That is still 11 times revenue… not earnings? Very expensive acquisition relative to fundamental data. No decline of note and the stocks is holding up for now. Still like the outlook for the stock longer term.
  2. Gold reversed intraday and hit the stop on GLL. What now? Look for a move to $136.90 resistance and reversal or test of the bounce off the low. The downside is still in play unless something changes near term. One such change is rumor of US debt being downgraded? Watch this as gold will spike on that news.
  3. TLT – is 4116.50 support? Watch to see how this plays out short term and tighten your stop on TBF or TBT.
  4. OIL – short setup failed as the buyers are willing to drive the price higher. Added OIL on the break above the trendline. If the upside gains traction watch for an acceleration in price.
  5. UGA is the play if it clears the 50 DMA or any test of the move above $56.75.
  6. DIA – Short play to $148 and fill the gap left on the move higher. If market moves lower this is the play.
  7. Facebook – The break of support at $26.50 on Thursday was a negative. Watch $25.25 as support and a break below $25 would raise the question on hold and add to position as it bottoms, or sell and buy back as it bottoms. We are favoring selling and buying back as the next support is 10% lower at $23.28. Facebook page to track from the webinar is up and you should have received an email link if you requested it following the webinar. You must request access to the page to view it and the updates going forward.
  8. Question… is market setting up for a pullback? The uncertainty of the Fed action is putting some doubts in the market short term. Watch to see if it develops going forward. All the events are in place, but the sellers have to be willing to exert themselves. If it transpires watch to see how quickly the buyers step in as an indication of the upside strength.

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 and Monday? look for continuation on the upside.
  2. FOSL – Flag that should be bullish, but retail struggling. Fill the gap?
  3. UNG – channel or trading range break on the upside. $22.05 follow through?
  4. Follow up from Monday’s List:
  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. (Broke higher nicely – stop should be breakeven now)
  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. Upside move on Monday needs follow through.
  7. CHK – Attempting to break above resistance at the $20.55 level and move higher. Watch for move up on volume. (broke higher through resistance. Stop 20.25, Target 22.75.)
  8. DVN – Flag setup to break above $59.50. (breakout and entry for upside play 61.75, stop at 58.75)
  9. TSO – nice break above resistance at $59. Look for test or follow through on the upside. Rally with gasoline prices. (early test and go)

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.