Trading Notes for Today, October 11th

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. We got the answer to, are we ready for a bounce back from the current selling? Yes we are. The gains on Thursday were in response to the rumored, leaked to the media, announced by the White House press secretary, and everyone else. The move was positive and put some hope back in the financial markets for the day. Today we see how traders and investors respond to the meeting with the President and Congressional leaders Thursday night and it was announced there was no deal, but they were talking. The terms of the deal matter to both sides as each side want to claim victory.
  2. S&P 500 Model is now in cash as we hit all our stops and we now look for the next opportunity. This is the result of a choppy market and risk management. Adding SPY to the Watch List in the event the upside continues through resistance as the news remains the driver in morning trading. Futures are flat heading into bank earnings with WFC and JPM before the open. They should offer some impact early.
  3. Small Cap (IWM) big rally back above the $105 level and we will watch the trading today.
  4. Dow Jones Industrial Average gained more than 300 points and closed back above the 15,100 level. If we hold I am looking for a position in DIA. If we fail, the downside support should hold again and we will wait to see how the Washington deals come out over the weekend.
  5. Technology (XLK) tested near the $31.30 support level and bounced. It was one of the only positive sector along with Utilities on Wednesday. And both followed through on Thursday. We were watching for a follow through on the bounce/reversal as a trading opportunity. Got the move (entry) with a open at $31.90 and a move to the 32.20 resistance/previous support level. Semi’s went to the 50 DMA and bounced as well leading the sector. The above $66 (entry) on SOXX helped as well as the index closed back near the previous highs. Both were trade opportunities on the bounce.

The models are getting choppy again in the current trading environment. The stops have pushed us to cash for the most part and we now have to regroup, take a deep breath, watch and let this unfold. If the upside is to be the direction of choice we have to get through the current headwinds in Washington and any settlement may be just the catalyst many are looking for. There is still too much risk for too little reward or, at best, banging your head against the wall. The rumored solution has shown signs of a reversal for the broad markets, but it isn’t a done deal yet. 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. The great thing about news driven markets is they will make you crazy if you let them. You get washout selling on Tuesday followed by a euphoric bounce on Thursday only to end up where we started the week. With the big swing in prices the charts are reestablishing trends and consolidation points. We will be patient today especially heading into the weekend.
  2. AAPL – triangle. $492 entry. Break from consolidation and run higher. (Note: don’t worry about the price. if you buy 10 shares and the stock move 10% you earn $490. If you buy 100 shares of a $49 stock that move 10% your earn $490.) It is about making money not share price.
  3. KBE – descending triangle. Trend continuation play long term. Move above the 50 DMA and the downtrend line a positive short term for the longer term trend. Entry $30.55
  4. DTO – Breakout NH. $34.35 entry. The short side of oil is in play with the break of support ahead in the futures on supply data. Our target for oil remains $98 near term.
  5. Follow up on previous trades or posts:
  6. 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. Gapped higher and passed on the entry. However, it did sell back to the original opening price and we will watch today.
  7. STX – Cup. Hit stop and took the re-entry Thursday at $45.25. Stop 44. Semi’s are still leading.

Facebook (FB) Update:

  • 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.
  • 10/10 – Got the move higher today for the trade on the upside move. The entry for the trade was on Wednesday intraday at $47.50 or Thursday at $48.25. We will use the higher price here to keep things simple. we added 1000 shares of the stock with a target back to the high ($51.25) heading into earnings on 10/21.

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.