Trading Notes for Today, September 18th

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. Market makes move toward the previous high in follow up to Monday’s gains. But, today is D-Day for the Fed and their decision on cutting stimulus. Do they, do they delay or do they cut too much? The choices are going boil down to those three and market reaction will be one of interpretation of what the Fed says. 1) they cut the expected $10-15 billion and everyone is happy? or is it already priced in? 2) they delay, which is signal the economy is not healthy enough yet. That could offer an initial upside move only to be followed by negative selling on the fact the economy is still termed ‘weak’. 3) they cut too much and the markets overreact to the news. Or it could be any combination thereof. This is why I stated in the update last night that I am cautious and willing to watch on the sidelines as it plays out with some clarity. ¬†Not enough information for clarity on this one. Error to the cautious side not the gambler side.
  2. Volatility index bounced off support at 13.8 on Monday, and it wandered higher Tuesday to 14.6 a sign that volatility is hanging around as we face the FOMC meeting today. 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 (see above), look for the volatility to pick up. The bigger surprise at this point would be if the Fed delayed the cuts in stimulus to later in the year. SVXY trade in the S&P 500 model has worked well on the recent move and we have raised the stop on the position and we need to manage the gains into the meeting today, $107.75 stop is what I am watching and maybe taking half off into the announcement in the afternoon.
  3. Consumer Staples (XLP) is in position to move above the $40.80 resistance and the 50 DMA. It was accomplished in a single bounce on Monday and held on Tuesday.We gapped above the entry to add the position on Monday and we passed for now. I like what we see and we will continue to watch the sector for more upside and use a test of the move as an entry point.
  4. Healthcare (XLV) gapped above the July high and 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) added to break above the July highs and push the broader index higher. We got the follow through on IHF, healthcare providers which pushed to a new high last week. Hold and watch.
  5. Technology is still attempting to take on a leadership role with a break above the $32.40 mark on the ETF. Unfortunately Apple has been up and down hindrance to the move.  The semiconductors (SOXX) is testing near the high at $66.80 and made a move on Monday, and added a move above the high on Tuesday. Still looking for follow through and push to lead the sector. Internet (FDN), Networking (IGN) and Software (IGV) are all making solid contributions on the upside.
  6. Utilities remain the sector that is out of favor. Then why post it to the sector update? It is worth watching for the bounce or reversal opportunities. There is a bottom building in the index and the stocks equally are showing some bottom pattern. GXP as an example found support at $21.50 and is working off the low. DUK likewise has made a move off the lows. APU has built a base in which a break above the 200 DMA would be an entry point. It won’t be quick to reverse the and go straight up, but this sector offers attractive dividends and upside for the patient investor.
  7. The global markets bounced led by the EAFE index (EFA) moving above the May high and is looking to keep the move going with the US markets. Looking for a test relative to the big move higher in 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.
  8. Treasury yields were lower at 3.84% on the 30 year bond, and 2.85% on the ten year bond. Back to challenging the resistance at the old highs. The worries are in play relative to the FOMC meeting today. Watching to see how they respond following the announcement on stimulus cuts. If the upside resumes I want to add a position in TBT again.
  9. Crude oil finding direction on the downside this week. The up and down news with Syria prompted speculation on the upside and the supply and demand issues on the downside, making the move one driven by speculation. Oil fell 2.1% on Monday and 1% on Tuesday, but closed at support near the $105.50. I like $95 as target on oil currently. DTO is the trade on the potential move lower if you are willing to take on the risk.
  10. Today is all about the FOMC meeting and the response. However, the real response of late has come the day following the meeting. This means Thursday may be the real response from investors. Eyes open, ears tuned and stops in place is how we will approach the day.

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 was a gap higher with a small follow through on Tuesday. Still willing to be patient and let the direction develop and then put money to work with some clarity going forward. Looking for the best opportunities relative to risk.

  1. The S&P 500 Model. Adjust your stops and let it run for now. Watch as we approach the August highs.
  2. The Sector Rotation Model. Watching as the leaders start to test. Adjust your stops accordingly.
  3. The ONLY ETF Model. Adjusted stops and managing the risk now. Watch how today sets up relative to the Fed.
  4. The ONE EGG Model. Scanning looking at a play in the financials with KBE see Watch List.

Pattern Setups For Today:

  1. Manage your stops on positions.
  2. MTL – Pennant – Entry $3.70. The sector is moving in positive trend and the stock is poised to assist on the upside from the short term consolidation.
  3. IYZ – Breakout test. Entry $22.80. Looking for move back to the previous high.
  4. Follow up on previous trades or posts:
  5. SSNC – Pennant – clear the high at $38.20 for entry. Software is one of the leaders in tech. Nice upside move.
  6. YNDX – Test of Breakout. Moved higher and tested now need a continuation on upside. Internet is one of leaders in tech. Nice push and follow through on the day with entry at $35. Stop$33.79.
  7. YY – Breakout test. Tested the $44 breakout level on Friday. Watch the upside momentum to continue. $46.70 entry hit. Stop $45.20.
  8. BZH – Breakout test. Tested the $17.85 level and looking for a move higher. $18.40 entry. Tested at open and then moved higher. Stop $17.90.
  9. 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. Nice follow through on Monday.
  10. C – bottom reversal. testing the break above $50.25. Looking for entry and move higher in the large banks. Entry $50.40 and Stop $49.50. Looking for a move above $51.25 resistance.
  11. BIIB – cup & handle. Move through $230 entry. Biotech is leading the way. Nice follow through higher. Stop $232 on move higher.
  12. NTES – pennant. Move above $73.50 entry. Internet one of leaders as well. Nice move higher. Stop $72.80. still looking for the stock to break above te $77 level on upside.
  13. IYR Р$64 breakout from double bottom. Took the entry (64.20) on the move higher. Rates are slowing and repair from the damage should move to $66.50 as a start. Manage the stop at $63.50.
  14. IWM – base breakout and trendline. $102.50 entry. Stop $104.80. Manage the stop in follow up to solid move higher. Nice move higher on Tuesday. Watch how it plays out going forward.
  15. KOG – ascending triangle breakout – cleared $10.30 for the entry and made move higher. Entry $10.40. Stop $10.90. Break above $11.30 would be positive short term.
  16. AMZN – reversal. move back above $294 on volume is entry. Oct $295 call. Sold half of the position at the open on Monday at $300. Sell balance if we hit the stop. Solid move to $304 Tuesday, and raising stop to $300 on stock.
  17. 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 (HIT TARGET). Added $44.75. Stop $46.50. Nice uptrend move manage the stop.
  18. VECO РBase breakout Р $35.35 entry. target $38.10. Added on the upside follow through. Stop $35.35. Testing
  19. 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. Move above $76.50 would be continuation.

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…
  • 9/17 – love the way things work out sometimes. 6% bounce and back to the top and resistance. Watch to see how it act here. The addition to the NASDAQ 100 index added the upside move. It could just as easily reverse. We will hold our long term position and look for the opportunity 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.