Trading Notes for Today, October 30th

The major indexes have managed to hold the breakaway gap and the buyers are still engaged. I am not looking for much different from what transpired last week. Earnings, economic woes, and the FOMC meeting head the list of things to watch. If you have specific questions on any posts please forward them directly to Jim@JimsNotes.com.

Sectors to Watch:

  1. Semiconductors (SOXX) Hitting resistance as well from a longer term perspective at $69. The upside is still in play and looking for the next opportunity as this plays out… up or down. Nice move back to the near term highs. Decision point on the break higher. Sector Rotation Watch List
  2. Natural Gas (UNG) as we discussed was at a key point technically. The chart shows resistance at the 200 DMA and the $19.73 mark. Last Wednesday the ETF made another attempt to break higher but failed and is now testing the uptrend line off the August low. Got the bounce off the trendline Friday… needed to follow through on the upside to hold.. didn’t happen. In fact, we broke the trend line on the downside. This shows negative technical data all over the place. Short trade in KOLD added on the move today. ONLY ETF Model.
  3. Small Caps (RUT-X) Russell 2000 index posted new high last week and is in the same position. The outlook is still for the uptrend to remain in play. The sector accelerated to a new high and is testing the move. There is plenty of room to test the move back to support at $108 ish. Watching IWM.
  4. Interest rates and the Fed? Rates on both the 10 and 30 year bond had been moving lower and pushing the prices up, but we have stalled into the FOMC meeting this week. Most believe the Fed will not cut stimulus and the rally in bonds will continue as rates decline further. Tuesday rates moved up 2 basis points to 3.62% nothing definitive on direction, but the rally in bonds is still under way short term. TLT broke above $107 for breakout move from near term lows. Watch the FOMC meeting results to impact the sector.
  5. Gold moving higher on what would amount to speculation. Holding above the 50 DMA for now, but it needs to make a move if the price going to challenge the August high near $137 on GLD. I like the miners on the move in GDX. Patience is required with any positions as there are too many opinions about the metals future.
  6. Energy made solid move higher the last two weeks, but that came into question with the crude oil supply data. Oil prices have been dropping the last four weeks and now the supply data is reflecting what we have been warning about… slower demand. I don’t believe it is slower in consumption it just isn’t growing and supply/production is increasing. The bounce in price on Friday was on my list of issues this week. Still watching oil prices relative to the sector, but the stocks continue to rally.
  7. Technology has been a benefactor of earnings on the upside. LinkedIn earnings will have a impact on the price today guidance disappointed. There is some increase in selling relative to the high beta stocks which could signal some rotation of assets near term. How this plays out short term will be important to how we play the sector near term. Large cap stocks have been moving again in the sector. SKYY, FDN, IGN, IGV and SOXX are all on watch relative to direction in the sector.
  8. Financials (XLF) – The sector hit the previous highs at $20.85. A break through this resistance level will take some conviction and leadership near term. It could set up a trading opportunity on the move which we are watching currently. Can’t seem to get the confidence needed to move higher for now.
  9. Real Estate (IYR) The sector moved through resistance at $67.30, however someone said BOO! on Tuesday and sold off early. Managed to recover some, but still looking for the break higher to continue.  Monday to the pending home sales Monday. It did recover from the initial drop, but watching to see how it follows through. What that has to do with the REIT sector is beyond me. Real Estate… Pending Home Sales???? Okay enough I still like the upside of the sector going forward as long as interest rates remain in check. Looking for the follow through on break higher. The positive move in rates helped the upside for the sector. Watching for a follow through and opportunity to add to existing position. S&P 500 Watch List.
  10. Japan (EWJ) hitting against resistance at the $12.10 level and testing lower. This has been a key resistance level for the ETF. Got small bounce, and was up again overnight. The move higher is in play again as the BOJ and economy provide some small reassurance that things are improving. $12.10 level to watch on the upside for breakout and continuation of the uptrend.
  11. China is also struggling relative to the news surrounding the banks, interest rates and the economy. Overnight assurances that liquidity remain (they are still putting money into the system) stocks bounced. Look for a higher open in FXI today and a possible filling of the gap left on the selling.

The models still face the challenge of dealing with the buyers versus the sellers. The sellers are unwilling to take on any risk short term. Any move on the downside has been tentative at best. I can’t blame them at this point, and the short side of the market isn’t attractive until the sellers are willing to poke their nose in and get it bloody. We have put some money to work, but cautiously. We are adding 1/2 position sizes with the entries hit as the risk remains elevated. The bigger question is how quickly the attention will return to the fundamentals and reality of growth? We continue to see rumbling from analyst and now the financial networks are picking up on the theme. 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 new worries on the horizon. Manage your stops on positions and stay alert to the response to earnings and the economic data today. Remember FOMC tomorrow.

  1. TTWO – double bottom – downtrend line. Entry $18.25. Gaming sector picking up on earnings and outlook.
  2. TOL – Trading Range BO – Entry $34.50 building a base since July. Look for move above the 200 DMA to expand and continue back towards the May high.
  3. GE – Flag. continuation of the upside on break. Entry $26.40.
  4. MOO – Break of downtrend line. moved above the 200 DMA. Entry $53.30. Tested Tuesday, but still in play.
  5. Follow up on previous trades or posts:
  6. BBBY – Triangle – Entry $77.45. Confirmed breakout. Hit the entry and looking for the follow through. Stop $76.
  7. CAG – bottom reversal. Entry $32.30. Cleared the 50 DMA and completing a cup pattern off the bottom. Entry $31.90. Stop $31.40.
  8. T – Double Bottom. Entry$35 on test. If no test 35.60 entry on break above the 200 DMA. Patience with the entry. Dividend plus growth play. At the 200 DMA and looking for the follow through on the upside. Entry 35.70. Stop $35.
  9. AMGN – V bottom. Entry $117.30. Look for test of the break higher on Monday as the entry point. Tested lower at open and took entry. Stop $116.
  10. BEE – Resistance Breakout – Entry 9.10. REITs are moving higher and a break to new high would be positive short term. Stop $8.80.
  11. HBAN – Flag – looking for the break above $9 as entry. Banks need to lead. Broke higher and reversed. Stop $8.80. Watching how it plays out on Monday.
  12. VXX – bottom reversal? This is setting up to bounce. Bounced, but still watching to see how it plays out short term. Entry $13.20. Hedge for portfolio. Stop $12.58. Looking to add to the position.
  13. K – bottom reversal breakout. $61.40 entry. Nice follow through on the upside. Stop $63.50. Inside day set up to add to the position. Need to move above the 200 DMA. Nice move on Monday higher.
  14. GME – Breakout range. $53.20 breakout and looking for test on entry. The closer to the breakout level the better. Entry $53.50 on nice move higher. Stop $53.50
  15. 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.
  16. CRM – Break downtrend off September high and continue the longer term uptrend. Entry $53.40. Technology sector. Stop $52.
  17. AXP – Breakaway Gap. Look for test of the move today. Entry $$79.60. Added on the test. Stop $82.50.
  18. QQQ – Triple top. Trade on break higher. Entry $80. Moved through the entry and traded lower again on worries. Still like the upside looking forward. Stop $82.10. Breakaway Gap? Watch and manage your risk.
  19. AAPL – triangle. $492 entry. Stop $518. Break from consolidation and run higher. Nice break from the consolidation 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. Following through on the upside. Manage your stop into earnings. Okay to exit if you don’t want the risk the results. HIT STOP

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. (Held support on Wednesday and Thursday… watch for now.)
  • 10/24 – Small bounce held the 10 DMA and watching. Puts are still an attractive trade short term.
  • 10/28 – Earnings … this could get interesting on the results. Add Dec 52.50 Puts for $5.85 or better for earnings announcement.

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.