Trading Notes for Today, October 7th

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. New week with plenty of data on tap. Earnings, FOMC minutes, economic data and the budget debate. Promises to be interesting as we remain cautious and look for some resolutions to permit the clarity to develop. We will start the week patiently and the Watch Lists have been updated. There are both short and long opportunities to take advantage of what happens short term. With the futures pointing lower this morning it looks like the sellers with start with an effort to break below the next support levels.
  2. Solar (TAN) hitting new highs with a test Thursday. First the move above $31.10 and then the follow through on the upside as stocks in the sector look good. Looking to add position on a break higher. ONLY ETF Watch List.
  3. Small Cap (IWM) is where we continue to look for some direction on the upside. The sector has established a three week trading range of $105-107.50. Looking for some leadership from the sector if the upside is to remain in play. Got it  last week with a move above the $107.50 level, but failed to hold the move. Watch to see how it unfolds short term.
  4. Real Estate (IYR) The sector is struggling to hold support at $63.80. Fear of the government shut down impacting lending in the housing sector, the economy weakening and just good old uncertainty are adding to the downside pressure in the sector. ONLY ETF Watch List has trade details.
  5. Dow Jones Industrial Average is leading the downside as it confirmed the move below the 50 DMA and 15,100. The index gets the award for short term volatility. 14,750 support level is coming into play on the downside. Watch and let the volatility play out. DXD trade on the pattern list below is benefiting from the short term selling.
  6. Healthcare (XLV) retreated back to the 50 DMA and held. This has been one of the leading sectors with Biotech and others pushing the broad index higher.  Some downside pressure from the healthcare providers (IHF) as the media over hypes the Healthcare Act and the potential impact on the sector and the economy. Still looking for the buyers to hold the sector up. Move above $51.25 would be positive. S&P 500 Model Watch List.
  7. Added Telecom (IYZ) to the S&P 500 Model Watch List. Need a break higher from the consolidation range above $28.
  8. ONLY ETF Model Watch List has the short set ups for the week. These were covered on the weekend update.
  9. It is a new week and we will start cautious as stated. Watch to see how it unfolds, will the sellers exert more than just a negative open to week? How will earnings play into this? How long will Congress keep the debt debate in play? Uncertainty creates volatility watch the VXX trade as an opportunity.

The models are holding steady in the current trading environment. We see too much risk for too little reward or, at best, banging your head against the wall. The resulting uncertainty in direction has presented a lack of clarity for the broad markets. Throw in the fight about the budget and you get the potential pullback or test of the uptrend or the upside euphoria based on hope. The market is in the midst of a test, but we have to be cautious as the uncertainty has created a choppy market. They are bad for trading as you get whipped in and out of positions. We have updated the Watch List in the models to have some short and some long opportunities based on the strengths and weaknesses of the current situation. Watch and let them unfold without making any assumptions in either direction.

Pattern Setups For Today: We continue to manage the risk of the market and make our adjustments as necessary. Choppy markets lack clarity and we have to be patient as the trades and leadership establish themselves.

  1. TBT – bear flag. 76.30 entry. Watch the negative news around the budget.
  2. GMCR – bear flag. $77 entry. Watch for bounce off the test lower and move back to the 50 DMA.
  3. AAPL – triangle. $485 Dec Call option @ $23. Stock needs to hold above $483.
  4. VXX – Test 50 DMA. $15.55 entry. Uncertainty still in play.
  5. Follow up on previous trades or posts:
  6. SCSS – Trading range. 25.25 entry. Influenced by the housing sector. Like the upside outlook. Stop 24
  7. SFLY – Descending triangle. Support at the 50 DMA. Bounce off support is the entry $55.80. Stop $55.10
  8. PSX – Base trading range. Entry $59.50 Series of higher lows off the August lows. Ready for move to $64? Stop $58.
  9. SUNE – Ascending Triangle – Break above the $8.35 mark. Entry $8.37. Semiconductor sector still in good shape. Stop $8.35 break even trade.
  10. XRT – cup & handle. Break above $82.90 new high and entry (Not hit still watching). Consumer still consuming.
  11. COF – cup & handle. Break above $69.80 new high and entry. Nice move on Friday. Consumer credit. Stop $68.
  12. FSLR – saucer. Break above $41.62 entry. look for test and entry. Entry $42. TAN is running higher showing strength.
  13. AMCC – trading range BO. Entry $12.95. Positive sector on upside move. Tested back on Friday. Stop $12.50.
  14. BXP – Trend Test. The spike higher from the FOMC news has fully tested back to the trendline. Held above the 50 DMA and ready to bounce higher. Entry $107.30. Added and looking for the upside follow through. Stop $105.
  15. JASO – trading range – moved back to the top of the range. entry $9.60. Added and watching the upside? Stop $10.17. Sector remains positive.
  16. STX – Cup. Break above $41.90 on volume is the entry. Entry $42.  Stop $43.80. Look for sector momentum to continue to boost the upside. Nice bounce higher, but watching the outcome.
  17. TRIP – Consolidation on gap higher. Entry $75.50. In leading internet sector. Stop $76. Testing the move higher.
  18. XNPT – Pennant. Entry $5.80. In leading sector. Stop $5.60. Looking for upside follow through.
  19. DIA – reversal and support break. This has set up a downside play worth watching. entry DXD $32.60. Stop $33.50. Watch and manage today as news is driving direction. Take exit if stops are hit today.
  20. IWM – base breakout and trendline. $102.50 entry. Stop $105. Watching to see if follows through to new high.
  21. KOG – ascending triangle breakout – cleared $10.30 for the entry and made move higher. Entry $10.40. Stop $12.25. Getting extended on the upside and looking to lock in some gains on half of the position today. Watch to manage the exit.
  22. SBUX – Test of support $70. Move above $71.30 for the entry. Added trade $71.30. Stop $75 both positions. Add to the position on confirmation of move above $72.50. Back to the top end of the range. Manage the profit as we hit against resistance.

Facebook (FB) Update:

  • Facebook – The sentiment towards the stock has shifted as it found support at the $22.80 level and moved to the top of the trading range before breaking higher and adding positions. The move above $24.50 was entry for position.
  • Added position at $24.75 (1000 shares). Stop is $22.75 for now. A move back above the 200 day moving average and we will add to the position. (Added 1000 shares at $25.65 on break) Sentiment towards the stock short term is gaining. Consolidating at the current levels and holding. Still like the upside near term as it is gaining positive comments from analyst.
  • Earning beat expectations on Wednesday and the stock jumped 29%. Here is where greed versus objective comes into play. This is a long term play and if the gains hold up today in trading the upside gain on the position is tempting. We will now have to design a way of protecting or realizing part of the gain short term. Be patient with the position on the upside as you are on the downside. Interesting link on earnings for facebook
  • 8/13 – The stock broke lower from the pennant. Watch and manage your risk. As stated yesterday we are going to establish a hedge to protect the downside risk. Add a December $37 Put on FB @ $3.35.
  • 9/2 – Nice bounce to $41.34 and new high. Tuesday reversed the move higher as markets react to speculation. Watching for any trading opportunities off the pullback test and then a move higher. Test of $39.30 level is the key to hold. If reverses back to the upside looking to buy 1000 shares as trade back to $42. 8/28 – Added 1000 shares at $39.95 for trade. Stop on that trade is $39.95 or break even now. If we hit the target at $42 sell half of the 1000 shares. Sold 1/2 ($42) on 8/30 for nice gain. Sold balance at $43 – 9/16.
  • 9/16 – Broke higher to continue the move, but it was a result of rumors relative to China allowing Facebook to operate within the country. They currently do not, and this would be a big opportunity. Based on the research behind this rumor there is no substantial evidence to any of the reports. Thus, I would expect the run to soften as the reality takes place on no deal in China.  Sold position on the selling on Monday in opposition to the market. Booked the profit and now watching to see how this news unfolds going forward. I never like a 4% decline in a stock…
  • 9/20 – love the way things work out sometimes. 6% bounce and back to the top and resistance and followed through to new high. Got the last of the sellers out of the way? Watching to see how it acts here. The addition to the NASDAQ 100 index added the initial upside move. Got big follow through on Friday with options expiration and the index rebalanced.  We will hold our long term position and look for the opportunity short term. Patience.
  • 9/27 – upgrade by Citigroup. Cleared the $50 level on Thursday. Watching to see how this holds up as the quarter ends and earnings are around the corner — Oct 21st. Still holding the uptrend and dealing with the current volatility of the markets overall.
  • 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.

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.