Trading Notes for Today – May 25th

Market sells lower on Thursday, but manages to work its way back near even on the close. What clues if any were left for you and I to take away for our portfolio? Not many in reality, but I will say the buyers are still willing to buy on the dip. While the volume wasn’t overwhelming, it was sufficient enough to keep the sellers at bay for now. Thus, we now look for the momentum by sector and find the opportunities as the play out.

Sectors to Watch:

  1. I am still addressing questions on short plays? Yes, we added SH on the downside on Thursday and we now have to manage the lack of volatility that would drive the risk of the short play. Today we will be focused on the VIX and volume relative to the direction. Be patient measure the risk and take what comes.
  2. Volatility play with VXX or SVXY. If the move in the VIX goes back above the 14 level adding to the position in VXX. If we reverse and move lower in volatility, SVXY offers an opportunity. Either way looking to trade the increase in volatility this week. If we hit the targets on Friday we will take the profits, manage the trades.
  3. FCG tested as we stated, the $16.85 support level followed by a small bounce.  Watch to see if it holds and offers further upside opportunity.
  4. TLT – is $116 the support level? Volatility in the yield is pushing the ETF higher and lower of late. TBF may be the trade to hold and watch as the bonds unfold, but TBT will also offer trading opportunities to use the leveraged trade short on bonds going forward.
  5. OIL – Dropped near $92 support and bounced to close back near the $94.44 mark. Too much volatility short term to get in or out of trades easily. Watch as this may offer some opportunities short term.
  6. MLPs have been awful the last couple of days. The selling in REITs have been equally as bad. Volume in SRS has spiked as a result. IYR has dropped 5% in two days. No conclusion, but the sector is one to watch for opportunity on the bounce or the continued downside. Bounce would be the obvious.
  7. Facebook – A break below $25 raises the question on hold and add to position as it bottoms, or sell and buy back as it bottoms. I am selling and buying back as the next support is 10% lower at $23.28. STOP ON THE CLOSE of $24.75. The Waze acquisition is back in the news with Google in the mix. Not a positive for Facebook. News of teens like Twitter better, etc. All negative media talk circulating and putting downside pressure on the stock. Time to watch and see how it unfolds short term. If you want to track the Facebook research page send a request to Don@SectorExchange.com to obtain the link to the page.
  8. We started the week with this question… is market setting up for a pullback? The uncertainty of the Fed action has put some doubt 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. Wednesday gave some more insight into the answer as the nervousness relative to the Fed showed in the accelerated selling following a brief move higher. Thursday markets jumped lower on the worries, but then managed to rally back near even on the day. Is that the answer on how fast the buyers will jump back in? Today may offer more insight on the buyers versus the sellers, but it is a three day weekend and the market may sleepwalk into the weekend.

Pattern Setups For Today:

  1. The futures are pointing to flat open with a positive bias. Not expecting much today ahead of the Memorial Day weekend. Plenty will be leaving early to get away. Maybe we all should and get in an extra round of golf or a game of tennis. Heck call a friend and have a margaretta.
  2. ELN – Break above $12.10 top of trading range. In the drug sector which has seen positive momentum of late.
  3. CHK – Tested the breakout held and is ready to move higher? $23 target.
  4. KRE – tested the support near $32. Move back to the $33.30 level as trade.
  5. GE – breakout to new high. I like this position longer term.
  6. VVUS – Break above $13.75 cup and handle. In the drug sector as well.
  7. RRC – Wedge consolidation breakout, test and move back above the 200 DMA. Broke the downtrend line.
  8. Follow up from Thursday’s List:
  9. SNE – Continues to push higher as Japan’s market rallies and company turns around profit. PlayStation, Television, etc. sales are improving the bottom line. Watch for test near $20.50-21 as opportunity. Got the test in the AM, reversal and entry opportunity near $21 on the day. Stop $21, Target $23.50 as trade.
  10. UNG – channel or trading range break on the upside. $22.05 follow through? Got it with a gap higher on Tuesday. Holding… look for the upside follow through. Thursday follow through. Stop $22.40, Target $24.

Still plenty of positives in traders minds. The adjustments on Thursday were not significant enough to get the attention of the sellers to push their positions. ¬†Watch, protect against what isn’t working and add to what is, don’t fight the trend.