Trading Notes for Today, October 23rd

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 the move. So far it has held and we are looking for the upside opportunity on a follow through. Somewhat of a reversal intraday Tuesday and we will see how today unfolds. Watching IWM.
  2. Interest rates and the Fed? Rates on the 30 year tested support at 3.63% on Friday, rose to 3.68% Monday and fell to 3.6% on Tuesday. If the Fed worries relative to cutting stimulus emerge again rates will rise. However, if everyone believes they will not cut rates will fall. I am watching TBT as a play on the Fed worries. ONLY ETF Watch List. TLT broke higher on Tuesday… that may be the better trade with the shift in sentiment towards the Fed cutting stimulus.
  3. Gold moved higher on the drop in rates and the fall in the dollar. GLD broke out with a 1.9% gain on Tuesday and hit the 50 DMA. Move through the resistance could be a opportunity to own the metal or the minders with GDX.
  4. S&P 500 index (SPY) held the breakaway gap and has continued to add to the upside. Not willing to step in front of the train on this sector currently, but watching for a test or pullback opportunity short term.
  5. Dow (DIA) lagging the rest of the market thanks in part to IBM. Plenty of other issues with the index relative to earnings. Nice bounce on Tuesday to resume the upside move. Still mixed on the outlook and willing to see how this unfolds with greater clarity.
  6. Energy made solid move higher also with a breakaway gap, but testing the move higher on Monday. 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, but tested lower on Monday. The held on Tuesday, but the story is in Crude prices dropping to our target of $98 per barrel. We added DTO on the support break and now we watch to see how it plays out today? I like the stocks and dislike the commodity.  ONLY ETF Watch List
  7. Technology was working on a breakaway gap thanks to Google. However, the Netflix intraday washout pushed the button on computer selling relative to the high beta stocks. This could hurt tech stocks short term. Watch to see how today unfolds for more insight.
  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. Attempted the move on Tuesday, but failed to hold the move.
  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. The positive move in rates on Tuesday helped the upside for the sector. Watching for a follow through and opportunity to add. S&P 500 Watch List. Patience is required for any position in the sector longer term.

The models have been updated for the trading day. The challenge is dealing with the buyers versus the sellers this week. The sellers are unwilling to take on any risk short term. I can’t blame them at this point, but the short side of the market isn’t attractive at all based on the data. We have put some money to work, but cautiously. We are adding 1/2 position sizes as the entries are hit as the risk remains elevated. The bigger question is how quickly the attention will return to the fundamentals and reality of growth? Big assumptions being made the Fed will not cut stimulus until next year. Bonds have rallied and yields fallen on the belief. Manage your risk on trades more aggressively and monitor 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. Tuesday’s rumors were that program selling triggered on the big jump in NetFlix. That prompted some computer selling on the high beta stocks and it triggered a move that spiked lower. Most worked their way higher on the day from the selling, but the move sucked the enthusiasm out of the broad markets. Still looking for that statement move to the upside as climax run or continuation of the uptrend. Futures are pointing lower this morning as a continuation of the intraday activity from Tuesday… watch and manage your exit points.
  2. VXX – bottom reversal? This is setting up to bounce. The catalyst could be a pullback or test in the broad indexes. Entry $13.20. Hedge for portfolio.
  3. TITN – bottom reversal breakout. Entry $17.70 look for test and confirmation of the move above resistance.
  4. Day to be cautious and evaluate the moves relative to the trend.
  5. Follow up on previous trades or posts:
  6. BBBY – Triangle – Entry $77.45 confirm breakout. Still watching as consolidate near the entry.
  7. DTO – Breakout base. Entry$34.70. look for test of the move on Monday and entry. Climbed higher as oil fell 1.6% on the day.
  8. K – bottom reversal breakout. $61.40 entry. Nice follow through on the upside today.
  9. ZUMZ – Breakout range. Looking for a test of the break. Entry $29.50 on the test. If continues higher $30.20 (high from Friday). Big test on Monday – watch to see if the breakout holds on Tuesday — it did, but still watching for a reasonable entry point.
  10. GME – Breakout range. $53.20 breakout and looking for test on entry. The closer to the level the better. Entry $53.50 on nice move higher.
  11. 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.
  12. CRM – Break downtrend off September high and continue the longer term uptrend. Entry $53.40. Technology sector. Stop $52. solid move higher.
  13. 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.
  14. BAC – Reversal breakout. Financials moving higher. Entry $14.70. Earnings okay and done. Stop $14.30
  15. AXP – Breakaway Gap. Look for test of the move today. Entry $$79.50 ish. Added on the test. Stop $79.50.
  16. 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.
  17. 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.
  18. 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
  19. 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.
  20. 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.
  21. STX – Cup. Hit stop and took the re-entryat $45.25. Stop 48.50. 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.
  • 10/22 – banked our gain on the 10/10 shares of $4.65 a share. Looking at adding the Jan 55 puts  into earnings and beyond. I will finish up the research and make a decision for tomorrows update.
  • 10/23 – At issues is earnings and a topping market short term. From the longer term outlook we go into earnings positive. However, the stock has moved a long way and that creates the problem of the data being good enough to justify the price, according to analyst. That is generally a losing battle. Short term support is $51.26 and I want to see how the stock acts today with what looks to be a negative open.

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.