Trading Notes for Today, September 10th

Notes to Note: 

Too much Apple hype and the markets sold before and after the news. Without making too much of the selling on Tuesday it did get the attention of investors as the sellers exerted control on the day. This has been anticipated by many as the upside has not seen much in terms of a test. The NASDAQ has been moving laterally similar to the S&P 500 index which managed to move below the 1993 mark and break its lateral movement. Dow looked similar with less of a drop below the lateral movement. Semiconductors showed more of a test lower, but had room off the recent push higher to give up more and held the 10 DMA. Small caps were the negative on the day with the test of the 50 DMA again in play. Makes for an interesting day as we look to see if the test lower continues.

* Trading environment is compressing holding periods on trading positions again. Thus, the choppy markets are back after the three week reversal. Watch how this unfolds and if a test lower results.

* Bottom reversal patterns are working while breakouts are failing. Sign of a topping currently.

* If tops fail, define the next support levels. If they hold, trading opportunity. If they fail, short opportunity and it could get interesting from there.

Sectors to Watch:

Financials (XLF) at key point on the upside trek. Tested to end the week and held on nicely. Need follow through on the upside and the banks are the sector to watch. Both regional (KRE) and large banks (KBE) are in play on the pattern list with the test complete looking for the upside to push through. (ONLY ETF model and Pattern Trading) TODAY: bounce back from the selling on Tuesday. If fails the downside may gains momentum. Honor your stops.

Solar (TAN) broke above the $45 high from June and is in position to move higher and potentially test the $51 high from February. Test it did today as the energy stocks all moved south on worries. The downside risk is now in play and we will see how today unfolds or if it folds it’s tent. (Sector Rotation Model)

Semiconductors (SOXX) breaking to new high and completing the ‘V’ bottom. How much upside is left in the sector after climbing nearly 9% to this point. Answered on Tuesday… not much. The parts are of interest on the move with the recent leaders showing some positive signs. TODAY: looking for rebound from the selling and potential upside trade if it evolves.  (ONLY ETF SOXL)

Model Position Notes: 

Below are some notes on positions in models and what we are watching looking forward:

  • Volatility Index (SVXY) Shifting gears as the step in and take advantage of the opportunity. VXX trade bounced back to the upside and now we see if the sellers are serious or this was a one day event again.
  • The EAFE index (EFA) Watching the 50 DMA approach the 200 day for a cross that technically is a big negative. Failed to hold the move and the $66.70 mark to keep the trend. TODAY: Looking for signs of upside life or the short trade is where we head.
  • Emerging Markets (EEM) added to position on upside move through $45.10. We tested in the overall sector and dropped tot he support at $44.50. Held, but watching to see if we bounce back or keep selling. Watching the short term uptrend in play to hold. TODAY: Manage the risk and see how long we can hang tough for the upside to resume. (Sector Rotation Model)
  • S&P 500 Index (SPY) Tested lower again on Tuesday, but held some support at the $199 mark. Still need to follow through on the upside or the exit is near by. A rounding top or sideways consolidation in play. (S&P 500 Model) TODAY: Need to bounce back.
  • Small Caps (IWM) Tested back near the $115 support again and worries are rising in the sector near term. Stop at $115 as this tests the micro trend higher. Entry added at the $115 level and initial trade at $112.50 for the position. TODAY: Need to hold the move from Friday and Monday while maintaining our stops. (ONLY ETF Model – TNA)
Watch List Opportunities:
  1. Sector Rotation Model – Updates to Watch List
  2. S&P 500 Model – Updates to positions
  3. ONLY ETF Model – Updates to Watch List
  4. ONE EGG Model – Added position

Pattern Trade Setups:

  1. SDS – entry $24.50. Bottom reversal. The selling picked up on Tuesday and this is a hedge as much as trade on the move.

Pattern Trade Tracking:

  1. KBE – entry $32.90. cup breakout. Looking for follow through on the upside. Stop $32.50
  2. KRE – entry $39.50. cup breakout. more upside potential if the sector gains momentum. Stop $38.65
  3. DBA – entry $26.50. Agriculture attempting to reverse off the lows again. Need to clear $26.92 on upside to show positive reversal and momentum. Stop $25.75.
  4. NFLX – entry $477.50. Test of upside in play and holding $470 support. Stop $460.
  5. BAC – entry $16.30. breakout. Held the move higher and now looking for the follow through to $17.30 short term. Stop $15.95
  6. AGN – entry $163.50. Test lower and move through resistance. drug manufacturer. Stop $158.90.
  7. YHOO – entry $36.50. trading range break. Internet sector moving higher. Stop $40.25
  8. CELG – entry $89. wedge breakout. healthcare leadership short term. Stop $92.40.
  9. EEM – entry $44.50. break above resistance again. upside trade still looking longer term. Stop $44.50 for now, but give some room if the volatility picks up. HIT STOP
  10. SSO – entry $113.50. Bottom reversal on test lower. Trade on the bounce only for now. $117 target on the trade. Stop $119.30 HIT STOP
  11. SOCL – entry $20.15. Cup and Handle breakout. Upside back in play. Stop $20.10
  12. FDN – entry $59.85. trading range. Upside still in play. held up well in selling last week. Stop $61.75.
  13. PLUG – entry $5.10. Base breakout. Looking for the move from the base to accelerate as the trend is drifting higher. Stop $5.10
NOTE: The pattern trades above are setups that I see for a potential swing trade or short term 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. The best way to treat these as a learning tool is to assume a $100,000 portfolio and each positions receives a 5% allocation. If we state to take a 1/2 position as an example you would only allocate 2.5% to that position. I would use a downside risk of $500 per trade as a maximum loss. That will help  you learn position sizing and risk management. All investing comes with risk. Our job as investors is to manage the risk. Keep your focus and discipline in place.
Long Term Opportunities:

  • Facebook (FB) – Testing the break higher and has held up well in the recent selling. $73.15 entry point to add 1000 shares back on the long term outlook. (see note page for history. ADDED shares on 8/7 – $73.15 — Stop $71.50
  • 8/26 – pushed back towards the previous high and looks ready to break higher from the consolidation. Watch for opportunity to add to positions short term.
  • Twitter (TWTR) – entry $45.50 1000 shares (last trade). This was recommended on our webinar as the next long term position we have been trading since bottoming in June. Adjust your Stop to $45 for now on position and we will make adjustments as we extend the upside.