Trading Notes for Today, September 13th

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. Financials tested the gap higher from Tuesday. The sector remains challenged by outside events and analyst comments, but has move higher the last two weeks. KBE & KRE are trading sideways at best and still need some kind of catalyst on the upside if the trend shifts. IAI has been the strength of the sector as the brokers added a solid moves higher, but the topping look the last couple of days could test lower if the sentiment shifts gears short term. Watch IAI and KIE for clues short term on direction. Their leadership has pushed the index higher and any downside acceleration would be a negative short term.
  2. Volatility index bounced off support at 13.8 slightly, but showing that volatility is just around the corner. SVXY trade in the S&P 500 model has work well on the recent move and we have raised the stop on the position to protect the gains. Manage the risk of the trade and raise your stop. This also puts VXX back in the post as an opportunity.
  3. Healthcare (XLV) tested support at the $49 level, but reversed and moved above $49.95 mark hitting the entry point for the S&P 500 Model as a trade. Made a move above $50.20 to follow through with the $51.50 mark in sight as the previous high. The sector is holding up well and continues in the current uptrend.  Biotech (IBB) has moved above the previous high and accelerating. Watch and manage the elevated risk on the sector, stop at $201.50.
  4. Technology bounced and made a move  back towards the previous high. We added a play in the S&P 500 Model. Apple pulled the index down Wednesday, but helped hold the sector steady on Thursday. The semiconductors (SOXX) had a second inside day after clearing resistance at $63.50 and moved to the previous high at $66.85. Internet (FDN) is leading on the upside as well in the sector. IGN and IGV both made solid moves on the upside. Sector still in a leadership role.
  5. Consumer Discretionary sector bounced and then cleared $58.75 level resistance level and move back towards the $60.75 mark. Scanning the sector shows some solid moves higher in retail stocks show with XRT cleared the 50 DMA and working on a micro trend reversal. Home builders made another move higher, but closed lower on the day. Still like the overall outlook for the housing sector. Watch and manage the risk short term.
  6. The global markets bounced led by the EAFE index (EFA) moving above the August high and pushing back towards the May high. Europe (IEV) cleared the August and May highs and added to the gains on Wednesday. China (GXC) made a big move higher and is setting the pace on the upside the last two weeks. The emerging markets (EEM) have bounced off the lows and cleared the key resistance at $40 and resting on the 200 DMA currenlty. Testing the last two days and we have to manage our downside risk should the selling accelerate.
  7. Treasury yields were lower Wednesday at 3.84% on the 30 year bond, and 2.90% on the ten year bond. Back to challenging the resistance at the old highs. The worry about the FOMC meeting next week, improving economic data and the overseas growth pushing inflation (like China) has pushed rates higher, but looking for some sideways movement short term.
  8. Crude oil cannot find a clear direction of late. The up and down has some to due with the Syria and some to do with supply and demand, but for the most part the move has been purely driven by speculation. However, if the news from China is real on the economic improvements, look for the upside to hold near term. Downside risk is still to be watched as speculation has a funny way of dissipating and stops should be tight if you are trading the move off the bounce.
  9. The market leaders are starting to test the moves higher. NFLX, DDD, KORS, GMCR and others showed some selling on Thursday. How they and others play out during this period will set the tone and the trend moving forward.

The models are putting money to work, and for the near term, the bias is to move higher. We added as the bounce pushed some sectors through resistance on the bounce off support. Thus, we remain patient and let this all unfold moving forward.

  1. The S&P 500 Model. Adjust your stops as volatility is on the rise. Want stops closer to even and targets as the leaders start to test the move.
  2. The Sector Rotation Model. Watching as the leaders start to test.
  3. The ONLY ETF Model. Adjusted stops and managing the risk now.
  4. The ONE EGG Model. Scanning looking at a play in the financials with KBE see Watch List.

Pattern Setups For Today:

  1. Expecting some volatility today and not much of a change heading into the FOMC meeting next week.
  2. VXX – Bottom test support and bounce. $14.75 entry. $15.25 target. Sell at target if hit.
  3. Follow up on previous trades or posts:
  4. BK – Triangle – $31.20 entry on break above the resistance. Added 1/2 position watching to see if we follow through and will add the other half.
  5. DBA – reverse head and shoulder – $25.50 entry on break higher. Hit the entry. Stop at $25.20.
  6. DHI – Bottom consolidation – closed above $19.40 and looking to confirm the breakout entry at 19.70.
  7. C – bottom reversal. testing the break above $50.25. Looking for entry and move higher in the large banks. Tested again on Thursday and looking for a bounce.
  8. BIIB – cup & handle. Move through $230 entry. Biotech is leading the way. Nice follow through higher. Stop $225
  9. NTES – pennant. Move above $73.50 entry. Internet one of leaders as well. Nice move higher. Stop $71.
  10. BDSI – breakout test. Move above $5.30 entry. Biotech sector. Hit entry. Stop $5.10
  11. IYR Р$64 breakout from double bottom. Took the entry on the move higher. Rates are slowing and repair from the damage should move to $66.50 as a start. Manage the stop at $63.
  12. BTU – Break double bottom in uptrend reversal. move above 50 DMA entry @ 18.70. Target $20.50. Added on early move higher. Stop 18.10.
  13. IWM – base breakout and trendline. $102.50 entry. Stop $104. Manage the stop in follow up to solid move higher.
  14. KOG – ascending triangle breakout – cleared $10.30 for the entry and looking for a test of the move higher. Entry $10.30 (max $10.40). Stop $10.40.
  15. AMZN – reversal. move back above $294 on volume is entry. Oct $295 call. Entry $16. Stop $289.80 (stock) Follow through on upside. Tested on Wednesday.
  16. XLNX – Trend continuation. The test of the 50 DMA and uptrend. Bounced to resistance at $44.65. Look for continuation of the upside move with $47 target. Added $44.75. Stop $46. Held gains and adjusted stop.
  17. VECO РBase breakout Р $35.35 entry. target $38.10. Added on the upside follow through. Stop $34.75. Testing
  18. SBUX РTest of support $70. Move above $71.30 for the entry. Added trade $71.30. Stop $74 both positions. Add to the position on confirmation of move above $72.50.
  19. AFOP – Breakout Test – solid move higher from the trading range at $34.50. If holds support and resumes upside advance, look for trade up to the previous high near $40 (hit target on Wednesday). added $35. stop $39.
  20. DDD РTest of breakout from trading range. Patience and look for entry above $49.50.  Target is $54. added at $49.70. stop $50.90. HIT STOP Thursday.

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 on 8/30 for nice gain.
  • 9/11 – 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. ¬†Hold stop to $42.50 (target) on the 500 shares purchased for a trade.

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.