Trading Notes for Today, October 31st

HAPPY HALLOWEEN!

The major indexes struggled to hold the breakaway gap on Wednesday following the FOMC meeting and we will watch to see if the buyers are still engaged. This week has been similar to last week thus far and we will see how it finishes out. Earnings, economic woes, and the FOMC meeting response remain 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 from a longer term perspective at $69. The index has provided some leadership short term, but testing currently as the broad markets adjusted to the data and the FOMC meeting. $68 is the support to hold today.
  2. Natural Gas (UNG) Failed to break higher and is now testing key support at the $17.90 mark. Short trade in KOLD added on the move Tuesday. If this level holds we will have to monitor the risk of the short trade and take our exit. Looking for a continuation break below $17.90. Hit stops on FCG on Wednesday.
  3. Small Caps (RUT-X) Russell 2000 index posted a new high Tuesday and tested lower on Wednesday. The move filled the gap and needs to hold if the uptrend is to continue. The outlook is still for the uptrend to remain in play. There is plenty of room to test the move back to support at $108 ish. Watching IWM.
  4. Interest rates and the Fed? The initial response to the announcement on Wednesday was for rates to tick higher. By the end of the day they were basically flat as the Fed continues to promise more QE or money dump. TLT broke above $107 for breakout move from near term lows and is holding for now.
  5. Gold was moving higher on what would amount to speculation. Held the 10 DMA as support on Wednesday a and now we watch to see if the move can hold above the 50 DMA for now, but it needs to make a move if the price is 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 the volatility in the stocks can be seen on the intraday chart as crude prices have moved down. Oil was down 1.4% on the day and back below the $97 level. Watch the outcome for the stocks as we move forward and keep your stop in place.
  7. Technology (XLK) has been a benefactor of earnings on the upside. The ETF was off slightly on the day today, but held the gains overall. Large caps have been helping, but the news from LinkedIn on earnings guidance didn’t help matters (down 10%) in the sector. Watch for test and opportunity short term.
  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. The FOMC meeting didn’t help despite the promise of more stimulus on the way. Watching for a clear indication from the stocks.
  9. Real Estate (IYR) The sector moved through resistance at $67.30, however someone said BOO! on Tuesday and sold off early. That selling continued on Wednesday as investors fear higher interest rates hurting the sector. Not sure how REITs have that type of exposure, but irrational moves are worth tracking and following for the resulting opportunities.

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, as the buyers are not exactly robust in their approach to the market currently. 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? The FOMC news was not reassuring relative to the economy either. 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. Manage your stops on positions and stay alert to the response to earnings, the Fed and the economic data today.

  1. SKF – Break of support. Entry $19.60. The reversal of another attempt to break higher on XLF is in play. The failure is the inverse play with SKF.
  2. COH – bottom reversal – Entry $51. Gap lower on news and reversal to gap point. The fundamental side of the stock is rebuilding. The play is to fill the gap back to $53 on the turnaround story.
  3. 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.
  4. Follow up on previous trades or posts:
  5. GE – Flag. continuation of the upside on break. Entry $26.40. Moved higher and tested. Stop $25.60.
  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. STOP HIT
  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 today, may take exit at 10 DMA.
  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. Started higher after FOMC watch this morning for push or look for exit near the $12.80 mark.
  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 higher, being tested. honor your stops
  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 $54.25
  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 $82.45. Breakaway Gap? Watch and manage your risk.

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.
  • 10/30 – Earnings were great, but too much said by the CFO and erased all the gains after-hours. My concern into earnings were they would not be good enough to please everyone. I was wrong on that account, but the conversation on the earnings call became an issue when the teen usage and not ramping up newsfeed ads. Both are issues, and examples of how when the stock price moves higher in a short period every little detail is scrutinized. Watching how this plays out today? Pre-market showing a small gain. Manage your puts against the stocks activity and be patient.

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.