Trading Notes for Today, May 31st

Choppy markets make it difficult for short term clarity. This is not a time to be pontificating on market direction as the choppy activity is caused by a uncertainty looking forward. That said the buyers are still in control. As shaky as it sometimes appears, the upside has not thrown in the towel yet.

The futures are pointing lower as I post this by 0.6% on the S&P 500 index. The trend for the last six trading days and been up and down without much in the way of net change. Proceed with caution and manage your risk.

Sectors to Watch:

  1. Gold moved to resistance on GLD at $137. Looking for a break higher on the metal. Added GDX to Watch List of the EGG Model last night. Also added it in the Two EGG Model Watch list to trade against the dollar short UDN. Watch for the entry today.
  2. Banks are pushing to a new high with KBE breaking out. Added KBE and BAC to the Sector Rotator Watch list.
  3. Semiconductors (SOXX) broke to a new high on Thursday. Looking for a confirmation relative to the move on the upside and potential play in the sector.
  4. Short play on the NASDAQ. The index remains a big question mark and could offer the greatest downside play as the risk of the index is elevated. Watch for downside play in QID. On Watch List for ONLY ETFs. Same list has DXD, short Dow and DTO, short oil (hit entry on Wednesday).
  5. Agriculture commodities (DBA) are moving as a result of corn gaining on the upside. CORN broke higher the last two days and looking for a test and follow through on the upside. Tested on Thursday and gave entry at the $42 level.
  6. Emerging Markets (EEM) The sector is not reacting well to the global concerns on growth. Thus, a short play with EEV may pan out short term as the $23 level entry was hit on Wednesday and Thursday.
  7. China (FXI or GXC) is testing lower again! The one day bounce ended quickly. FXP is looking attractive on a break above 50 DMA. $20.40 entry look positive. China still looking weak.
  8. Japan fell 5% yesterday, bounced back, but leaves plenty of question marks going forward. I still like the upside opportunity. EWJ has support at $10.85 to $11.05 short term? Could be a trading opportunity back to the high near $12.40.
  9. Volatility falls to 14.5. There is no volatility in either direction and thus we will watch to see how it plays out.
  10. Facebook – No positions currently. The WAZE rumored buyout lost Facebook as a potential suitor… according to those rumors. We noted yesterday morning that the was impacting the stock on the upside and it did manage to gain 5.2% and close back at $24.55. We have a bounce, and now we watch for the upside opportunity if it continues higher. If not the downside will offer a short play.

Pattern Setups For Today:

  1. CRAY – Cup breakout at $18.05, initial target $18.85 and then 20.20.
  2. EMC – gap breakout test. $24.50 test and move higher.
  3. PKT – cup breakout $14.80 fill the gap up to $15.96 – $16.77.
  4. GNW – break from consolidation to new high. $11.05, target $11.70.
  5. MPC – 84.60 entry on break above the consolidations resistance. reverse head and shoulder pattern setup.
  6. HOV – Break from trading range or plateau above $6.20. Homebuilders are attempting to break higher as well.
  7. Follow up from Yesterday’s List:
  8. AAPL – Wants to break higher? Look for a move above the $445 level up to $465 resistance. July 445 calls. ($17.80 entry on the calls, closed at $21.10. $19  stop now.) Manage your position.
  9. PALL – Follow through on move higher and break above $73.85 resistance. $76.50 target. Hit the entry and held.
  10. SNSS – Break from the trading range. Attempted on Tuesday. Looking for follow through. Worth small trade on the upside Wednesday. $5.75 entry, $5.45 stop, $6.50 target.
  11. PACB – Break above the top the trading range. $2.65 (got the entry on Thursday with follow through day) manage the trade.
  12. QCOM – test of support at the 200 DMA. Held now looking for follow through on the upside. $64.65 level for entry on the upside. Up early then tested lower.
  13. CHK – Tested the breakout held and is ready to move higher? $23 target (close). Progressing nicely, raise your stop.

All investing comes with risk. Our job as investors is to manage the risk. That is what money management is all about.