Trading Notes for Today, October 10th

The Watch List and Play List have been updated for today. Review and execute according to your risk and investment objectives. If you have specific questions on any posts please forward them directly to Jim@JimsNotes.com.

Sectors to Watch:

  1. Are we ready for a bounce back from the current selling? The rumored meetings and settlement for a short term solution have the futures up early and some positive talk running in the headlines. As rumors go, we will see how it plays out, but in the meantime we have to manage our stops on short positions and move forward. I expect the choppy trading environment to return until something is announced, good or bad. Sticking to the major sector and indexes today to see how this reversal on Wednesday plays out.
  2. S&P 500 Model added the short SH play for the S&P 500 index. Raised the stop to break even as this news settles out. News driven markets make life a challenge, but we will manage the trade and deal with the news. The index bounced off the intraday low 1646 near another support level at 1645. The 1630 mark was my target on this test and have been close. The trendline break is still in play and the index would need to move back above the 1670 mark to reverse the move lower. Watch and see for now.
  3. Small Cap (IWM) was leading, but the reversal took the index below the 50 DMA and lower on Wednesday. Hit near the $103 support, but still not looking positive for a bounce. Watching, but not buying into the sector.
  4. Real Estate (IYR) The sector is struggling to hold support at $63.80. Broke down on Tuesday and added the downside play in SRS in the ONLY ETF Model. Interest rates are on the rise again with the FOMC minutes and a Yellen nomination on Wednesday. Still like the downside play, but watch the reaction to the broad markets.
  5. Dow Jones Industrial Average has been leading the downside as it confirmed the move below the 50 DMA and 15,100. The intraday push to the 200 DMA and reversal were my first signs of a bottom (for now). I like DIA on the upside opportunity of the reversal. I raised the stop on DXD and I am looking for an upside trade with a move above 14,850 and the uptrend line.
  6. Technology (XLK) tested near the $31.30 support level and bounced. It was one of the only positive sector along with Utilities on Wednesday. Watch for a follow through on the bounce/reversal as a trading opportunity with an entry above yesterday’s high of $31.77. Semi’s went to the 50 DMA and bounce as well leading the sector. Move above $66 on SOXX is of interest as well.

The models are holding steady in the current trading environment. We see too much risk for too little reward or, at best, banging your head against the wall. The selling on Monday and Tuesday put the downside in play until which time the powers that be in Washington find some solution. The rumored solution has show signs of an intraday reversal on Wednesday. It did not complete it technically, but you can see the desire of the buyers to step back in at this level. Futures are up and that means manage your stops into the open. The stops are adjusted on the short plays and if we gap open manage your exits accordingly. Manage your risk on trades more aggressively than your longer term holdings.

Pattern Setups For Today: We continue to manage the risk of the market and make our adjustments as necessary. Expect the choppy days to return as the rumor of a temporary settlement on the budget is discussed.

  1. Hit more stops just in time for the possible bounce! Oh well, there were some good gains and some losses, but it worked out to our advantage overall. If the bounce is coming on any type of solution to the debt, short or long term, the key to any follow through is in the earnings data which starts in earnest next week. The banks start tomorrow and we will be watching that news for insight to the sector.
  2. TBT – base range. Interest rates are moving up again on the FOMC minutes. Watch for move to $79 as trade on breakout. Entry $76.35.
  3. SUNE – Reentry at $8.42. Stopped on Wednesday. The upside is still in play and if the semi’s bounce back look to own the stock again.
  4. Follow up on previous trades or posts:
  5. VXX – Test 50 DMA. $15.55 entry. Uncertainty still in play. Stop $16.20. Hit Stop.
  6. SCSS – Trading range. 25.25 entry. Influenced by the housing sector. Like the upside outlook. Stop 25.25
  7. SUNE – Ascending Triangle – Break above the $8.35 mark. Entry $8.37. Semiconductor sector still in good shape. Stop $8.35 break even trade. Hit Stop – still like this trade and watching the reversal today.
  8. FSLR – saucer. Break above $41.62 entry. look for test and entry. Entry $42. TAN is running higher showing strength. Stop $42. HIT STOP
  9. AMCC – trading range BO. Entry $12.95. Positive sector on upside move. Tested back on Friday. Stop $12.50. Hit Stop.
  10. JASO – trading range – moved back to the top of the range. entry $9.60. Added and watching the upside? Stop $10.30. Sector remains positive. Hit stop
  11. STX – Cup. Break above $41.90 on volume is the entry. Entry $42.  Stop $43.80. Look for sector momentum to continue to boost the upside. Stop 44.62. Hit Stop — Look for reentry on the trade.
  12. DIA – reversal and support break. This has set up a downside play worth watching. entry DXD $32.60. Stop $34.60 Watch and manage today as news is driving direction. Take exit if stops are hit today.

Facebook (FB) Update:

  • Facebook – The sentiment towards the stock has shifted as it found support at the $22.80 level and moved to the top of the trading range before breaking higher and adding positions. The move above $24.50 was entry for position.
  • Added position at $24.75 (1000 shares). Stop is $22.75 for now. A move back above the 200 day moving average and we will add to the position. (Added 1000 shares at $25.65 on break) Sentiment towards the stock short term is gaining. Consolidating at the current levels and holding. Still like the upside near term as it is gaining positive comments from analyst.
  • Earning beat expectations on Wednesday and the stock jumped 29%. Here is where greed versus objective comes into play. This is a long term play and if the gains hold up today in trading the upside gain on the position is tempting. We will now have to design a way of protecting or realizing part of the gain short term. Be patient with the position on the upside as you are on the downside. Interesting link on earnings for facebook
  • 8/13 – The stock broke lower from the pennant. Watch and manage your risk. As stated yesterday we are going to establish a hedge to protect the downside risk. Add a December $37 Put on FB @ $3.35.
  • 9/2 – Nice bounce to $41.34 and new high. Tuesday reversed the move higher as markets react to speculation. Watching for any trading opportunities off the pullback test and then a move higher. Test of $39.30 level is the key to hold. If reverses back to the upside looking to buy 1000 shares as trade back to $42. 8/28 – Added 1000 shares at $39.95 for trade. Stop on that trade is $39.95 or break even now. If we hit the target at $42 sell half of the 1000 shares. Sold 1/2 ($42) on 8/30 for nice gain. Sold balance at $43 – 9/16.
  • 9/16 – Broke higher to continue the move, but it was a result of rumors relative to China allowing Facebook to operate within the country. They currently do not, and this would be a big opportunity. Based on the research behind this rumor there is no substantial evidence to any of the reports. Thus, I would expect the run to soften as the reality takes place on no deal in China.  Sold position on the selling on Monday in opposition to the market. Booked the profit and now watching to see how this news unfolds going forward. I never like a 4% decline in a stock…
  • 9/20 – love the way things work out sometimes. 6% bounce and back to the top and resistance and followed through to new high. Got the last of the sellers out of the way? Watching to see how it acts here. The addition to the NASDAQ 100 index added the initial upside move. Got big follow through on Friday with options expiration and the index rebalanced.  We will hold our long term position and look for the opportunity short term. Patience.
  • 9/27 – upgrade by Citigroup. Cleared the $50 level on Thursday. Watching to see how this holds up as the quarter ends and earnings are around the corner — Oct 21st. Still holding the uptrend and dealing with the current volatility of the markets overall.
  • 10/5 – moved below $50 and we were watching to see if we should take half of our position off. Nice bounce on Friday and we continue to watch and manage the current market emotions.
  • 10/8 – Downgrade from Raymond James and negative sentiment push the stock lower. Looking at our options… Today I am looking for a bounce back towards the $49 level. Entry for the trade is $47.50 with stop at $47. If the bounce fails or doesn’t materialize we will take 1/2 the position off at $45.50.
  • 10/9 – got a bounce off the intraday low back near the $47 mark. Still watching and managing our position.

NOTE: The pattern trades above are setups that I see for a potential swing trade or 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. All investing comes with risk. Our job as investors is to manage the risk. Keep your focus and discipline in place.