Trading Notes for Today, September 16th

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. Volatility index bounced off support at 13.8, but we could see signs of showing that volatility is just around the corner as we face the FOMC meeting this week. There is plenty of talk of the move being priced into the markets already. I would like to say I believe that, but if the Fed does anything outside the current thinking look for the volatility to pick up. The bigger surprise at this point would be if the Fed delayed the cuts in stimulus. 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.
  2. Consumer Staples (XLP) is in position to move above the $40.80 resistance and the 50 DMA. If this transpires today the upside play would be added to the S&P 5oo index.
  3. Healthcare (XLV) Remains one of the leaders on the current move off the lows two weeks ago. Biotech (IBB) has been the primary leadership. Pharma (XPH) and medical devices (IHI) are in position to break above the July highs and push the broader index higher. Watch for follow through on IHF, healthcare providers which pushed to a new high last week.
  4. Technology is still attempting to take on a leadership role with a break above the $32.40 mark on the ETF. The semiconductors (SOXX) provided the initial spark on the move higher, but is testing near the high at $66.80. Look for follow through and push to lead the sector. Internet (FDN) is leading on the upside as well in the sector. IGN and IGV both made solid moves on the upside.
  5. The global markets bounced led by the EAFE index (EFA) moving above the August high and now consolidating near the $62.85 level. Looking for a follow through on the upside for the global markets. Europe (IEV) cleared the August and May highs and testing the $43.50 level currently. China (GXC) made a big move higher, but has stalled near the $75.70 level currently. Watching for a follow through higher if we are continue the uptrend. The emerging markets (EEM) have bounced off the lows and cleared the key resistance at $40 and resting on the 200 DMA currently. Look for continuation of the upside short term.
  6. Treasury yields were lower 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 worries are in play relative to the FOMC meeting this week. Watching to see how they respond. If the upside resumes I want to add a position in TBT again.
  7. 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. Downside risk is still to be watched as speculation has a way of dissipating and stops should be tight if you are trading the commodity.
  8. The week is starting with the headlines focused the Larry Summers withdrawal for Fed Chairman speculation. That has gold higher, oil lower and the dollar lower. The futures are up 1% as I put this post out and that will push the major indexes back to the July highs. Speculation is beautiful… stops in place and watch how it plays out to start the week.

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. The open on Monday will be a gap higher, don’t chase stocks higher. Look for the best opportunities relative to risk.

  1. The S&P 500 Model. Adjust your stops and let it run for now.
  2. The Sector Rotation Model. Watching as the leaders start to test. Watch how they play out on Monday.
  3. The ONLY ETF Model. Adjusted stops and managing the risk now. Watch the gap higher relative to new trades.
  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 this week with the FOMC meeting, but Larry Summers news is of more interest as we start the week. The bump higher will push the VIX lower and that is something to watch. Manage your stops on positions.
  2. YY – Breakout test. Tested the $44 breakout level on Friday. Watch the upside momentum to continue. $46.70 entry (max $47.20).
  3. BZH – Breakout test. Tested the $17.85 level and looking for a move higher. $18.41 max entry.
  4. Follow up on previous trades or posts:
  5. 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. Stop @$30.70.
  6. DBA – reverse head and shoulder – $25.50 entry on break higher. Hit the entry. Stop at $25.20.
  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. Entry $50.40 and Stop $49.50.
  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. IYR – $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.
  11. IWM – base breakout and trendline. $102.50 entry. Stop $104. Manage the stop in follow up to solid move higher.
  12. KOG – ascending triangle breakout – cleared $10.30 for the entry and made move higher. Entry $10.40. Stop $10.40.
  13. AMZN – reversal. move back above $294 on volume is entry. Oct $295 call. Entry $16. Stop $294 (stock) Follow through on upside. If upside move holds into trading today take 1/2 position off.
  14. 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.
  15. VECO – Base breakout –  $35.35 entry. target $38.10. Added on the upside follow through. Stop $34.75. Testing
  16. SBUX – Test 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.

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.
  • 9/13 – 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. There was some selling on Friday, but watch to see if we can clear the $45 level short term.

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.