Trading Notes for Today, October 21st

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. Small Caps (RUT-X) Russell 2000 index had a runaway gap on Friday and it needs to hold the Friday low (1106) to confirm today the move. Watching IWM.
  2. Interest rates and the Fed? Rates on the 30 year tested support at 3.63% on Friday. If the Fed worries relative to cutting stimulus emerge again rates will rise. I am watching TBT as a play on the Fed worries. ONLY ETF Watch List.
  3. If… interest rates climb we have to watch the downside risk in the interest sensitive sectors. Housing, REITs, Gold and Utilities to mention a few will struggle on the downside again.
  4. S&P 500 index (SPY) breakaway gap? Need to hold the low from Friday as well. $173.51 level to hold.
  5. Dow (DIA) lagging the rest of the market thanks in part to IBM. Plenty of other issues with the index relative to earnings. Watching on the downside if we get a test of the broad markets. DXD support at $32.20 could easily bounce to $33.50 with any negative tones.
  6. Energy made solid move higher also with a breakaway gap. XOP is the leader for the sector on the upside. Watch for the confirmation on the upside move. IEZ made big move on Friday as well. OIL is hanging onto support at $23.90.
  7. Technology is working on a breakaway gap as well thanks to Google. Watching $32.91 (Friday’s low) to hold and the upside to continue if this is a true breakaway. SMH moved to new high as well.
  8. Financials (XLF) – The $20 mark was recaptured on the bounce and hit the previous highs at $20.85. A break higher puts the sector in confirmation mode to the consolidation breakout. Watch for $21 entry on the move if it materializes.
  9. Real Estate (IYR) The sector moved to resistance level at $67.30. Looking for the break higher, depending on what happens with interest rates above. Negative get a test of the $65 level of support. The dividend trade is still worth our attention looking forward longer term. Patience is required for any position in the sector longer term.

The models have been updated for the trading week. The challenge is dealing with the setup of the breakaway gap on Friday. They need to hold the low on Friday in trading or it could become a climax run and reversal. I have posted some trades either way and we  will monitor how things work out on Monday and the balance of the week.  I am willing to buy as the opportunities as they are presented and the risk is justified. The bigger question is how quickly the attention will return to the fundamentals and reality of growth? What about the Fed cuts to stimulus? Risk remains elevated short term relative to what lies ahead. 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. This is a new week with new opportunities and worries on the horizon.

  1. New week and new data to deal with on the week. Watch the moves, adjust your stops on the entries from last week and we will see how this unfolds. Don’t assume anything. Trade discipline is key.
  2. K – bottom reversal breakout. $61.40 entry.
  3. ZUMZ – Breakout range. Looking for a test of the break. Entry $29.50 on the test. If continues higher $30.20 (high from Friday).
  4. GME – Breakout range. $53.20 breakout and looking for test on entry. The closer to the level the better.
  5. Follow up on previous trades or posts:
  6. AKRX – Breakout. Hitting new high on upside. Healthcare stock and leading sector. Entry $20.65. Positive moved, but watch and post stop at $20.15.
  7. CRM – Break downtrend off September high and continue the longer term uptrend. Entry $53.40. Technology sector. Stop $52. solid move higher.
  8. LEDS – Cup & Handles. Semi sector as leader. This is a low price stock. Don’t play if you don’t like risk. Entry $1.40. Still watching as failed to move higher on Friday.
  9. BAC – Reversal breakout. Financials moving higher. Entry $14.70. Earnings okay and done. Stop $14.50
  10. AXP – Breakaway Gap. Look for test of the move today. Entry $$79.50 ish. Added on the test. Stop $79.
  11. KEG – downtrend reversal. Entry $7.40. Energy sector regaining momentum. Watch for upside trade to previous high. Hit entry and set stop at $7.18.
  12. MXIM – Ascending Triangle. Entry $30.25. (still watching) Semiconductor and the consolidation is ready to break to the upside on a continuation in the technology space.
  13. QQQ – Triple top. Trade on break higher is the good news play out. Entry $80. Moved through the entry and traded lower again on worries. Still like the upside looking forward. Stop $81.30. Breakaway Gap? Watch and set stop at Friday’s low
  14. AAPL – triangle. $492 entry. Stop $503. Break from consolidation and run higher. Nice break from the consolidation on Monday as a follow through to the entry. (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. Nice move to the previous high and raising stop.
  15. 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. Stop 31. Nice move to follow through on the upside.
  16. STX – Cup. Hit stop and took the re-entryat $45.25. Stop 47.50. Semi’s are still leading. Expect volatility. Nice gain on the week with big move on Friday. This is what I was looking for is a continuation of the upside and why we bought the position back.

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.
  • 10/14 – Nice move, but still not trading with much conviction. Be patient and keep your stop at the $48 mark on this trade and minimize any downside risk on the move.
  • 10/21 – Made the break through resistance and breakaway gap. Adjust your stop on the 10/10 shares to $52.90 and let them ride today. Remember earnings are next week and we will have to deal with that.

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.