Trading Notes for Today, October 9th

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. Is the market panicking or are traders pushing their position on the VIX? Volatility spikes are allowing the sellers to advance their short plays and they are getting stronger. There is nothing wrong with that per say, but don’t believe every headline you read on what is pushing the market up or down. The trader side of me was willing to take the trades on the short side today as we posted. How this all plays out is up to those in Washington making a deal onpassing a budget near term. The farther it goes the more volatility the market will create due to the uncertainty.
  2. All the major indexes showed a negative move on Tuesday again and this time the NASDAQ and the Russell 2000 joined the push lower. In fact, the NASDAQ led the push with a drop of 2% closing at the low of the day. We hit the entry on TZA, SDS and SRS. We already had DXD and SKF. These are all trades and we will treat and manage them as such. See ONLY ETF for details.
  3. S&P 500 Model added the short SH play for the S&P 500 index.
  4. Small Cap (IWM) was leading, but the reversal the last two days took the index below the 50 DMA and following the other indexes lower. We added short play here on the ONLY ETF Model.
  5. Real Estate (IYR) The sector is struggling to hold support at $63.80. Broke down on Tuesday and added the downside play in SRS in the ONLY ETF Model.
  6. 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 and negative momentum. 14,750 support level is coming into play on the downside as Tuesday sold below the trendline near the August low. Watch and let the volatility play out. DXD trade on the pattern list and ONLY ETF Model continues to do well.
  7. Healthcare (XLV) broke support at $50.25 for exit if not already out. Watching the $49 level for support.
  8. ONLY ETF Model Watch List has the short set ups for the week. These were covered on the weekend update.
  9. Not pretty as the issues in Washington continue to weigh on investors. The volatility spiked higher on Tuesday and the VXX trade in the S&P 500 Model is playing out well.
  10. Futures are pointing higher to start the trading day, but we have to watch the headlines as rock throwing continues between Congress and the White House.

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 selling on Monday and Tuesday have put the downside in play until which time the powers that be in Washington find some solution. We have updated the Watch List for the ONLY ETF Model to house the short trades and they are playing out well. This is the highest risk model which is why we start there. If this continues we will add some unleveraged short trades in the other models. manage your risk accordingly going forward on these trades.

Tuesday nights video update offers some suggestions on managing the risk of the trades.

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. We took exits on positions Tuesday as the selling accelerated after a slow start to the trading day. The fear of the government falling off a a cliff financially is building. I added short plays on the models as we watch the risk of the trading environment rise. Today offers some hope with the futures slightly higher.
  2. Follow up on previous trades or posts:
  3. AAPL – triangle. $485 Dec Call option @ $23. Stock needs to hold above $483. Entry $24.20. Stop is $22 on the option. Expect volatility. All things considered a volatile day! Hit stop, but we will watch for the bounce.
  4. VXX – Test 50 DMA. $15.55 entry. Uncertainty still in play. Stop $16.20.
  5. SCSS – Trading range. 25.25 entry. Influenced by the housing sector. Like the upside outlook. Stop 25.25
  6. SUNE – Ascending Triangle – Break above the $8.35 mark. Entry $8.37. Semiconductor sector still in good shape. Stop $8.35 break even trade.
  7. COF – cup & handle. Break above $69.80 new high and entry. Nice move on Friday. Consumer credit sector. Stop $68. HIT STOP
  8. FSLR – saucer. Break above $41.62 entry. look for test and entry. Entry $42. TAN is running higher showing strength. Stop $42.
  9. AMCC – trading range BO. Entry $12.95. Positive sector on upside move. Tested back on Friday. Stop $12.50.
  10. JASO – trading range – moved back to the top of the range. entry $9.60. Added and watching the upside? Stop $10.30. Sector remains positive.
  11. 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. Stop 44.62.
  12. XNPT – Pennant. Entry $5.80. In leading sector. Stop $5.60. Looking for upside follow through. STOP HIT.
  13. 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.
  14. 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. HIT STOP
  15. SBUX – Test of support $70. Move above $71.30 for the entry. Added trade $71.30. Stop $76 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. HIT STOP

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.
  • 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.

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.