Trading Notes for Today, September 19th

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 decides it likes the wimp factor of the Fed. All talk… no action taken and the indexes move higher. The only challenge this puts in place, once the initial euphoria settles, uncertainty of what will transpire from the Fed going forward. All the speculation over what and how ends with nothing. All the ranting about what needs to be done to curb the stimulus and nothing. The big winner was commodities, the big loser was the dollar. Today will solidify the short term direction if the buyers follow through on the upside.
  2. Volatility index moved lower to close at 13.6 on Wednesday as the threat of volatility completely subsided on the news. The bigger surprise at this point would be if the Fed delayed the cuts in stimulus to later in the year, that was Wednesday’s comment and that is what was delivered. 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 in follow up today.
  3. Consumer Staples (XLP) has now managed to move back to the previous highs and in position to go higher as his unfolds. I like what we see and we will continue to watch the sector for more upside.
  4. Healthcare (XLV) moved above the July high and remains one of the leaders on the current move off the lows. 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. IHF, healthcare providers which pushed to a new high tested lower on Wednesday. Hold and watch, but mange your risk.
  5. Technology is still attempting to take on a leadership role with a break above the $32.40 mark on the ETF. The semiconductors (SOXX) tested the high at $66.80 and higher on Wednesday. The index is looking soft and taking some profit here may be prudent. Taking half off and managing the balance looks like the move. Internet (FDN), Networking (IGN) and Software (IGV) are all made solid contributions on the upside Wednesday.
  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. I was wrong about the latter part of that comment… it gained 3% on the surprise news from the Fed on Wednesday and near our initial move or target. Hold and manage the upside short term.
  7. The global markets bounced led by the EAFE index (EFA) moving above the May high and is looking to keep the moving with the US markets. The easing had been hanging over the global markets and this was a big boost on the upside. Europe (IEV) cleared the August and May highs with ease moving higher. China (GXC) made a big move higher as well and hitting the January high again. The emerging markets (EEM) have bounced off the lows and cleared the key resistance at $40 as the easing was a big boost to the sector. Look for continuation of the upside short term globally.
  8. Treasury yields dropped on the Fed news to 3.75% on the 30 year bond, and 2.7% on the ten year bond. The rally provides a needed bounce in the bond and brings out the buyers will the Fed as the primary source. This opens the way to buying the bond short term.
  9. Crude oil and all of commoidities for that matter found a spark from the Fed. The upside is back in play and a weaker dollar will only spark the move higher. Still all speculative as demand has not changed. Manage your stop if you own the sector currently.
  10. Today is all about the follow up to the surprise outcome of the FOMC meeting . A follow through is a vote of confidence that the stimulus will fix the 1.5% growth of the US economy. (joke) It is all in the perception from investors and puts more speculation into play on the upside.

The models are putting money to work, and for the near term, the bias is to move higher (reinforced by the Fed). 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 week has followed through on the bounce off the lows started last week. Looking for the best opportunities relative to risk.

  1. The S&P 500 Model. Adjust your stops and let it run for now. Watch and hang on for the ride.
  2. The Sector Rotation Model. Watching as the leaders move higher, and where the best opportunities lie looking forward. 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. NIHD – descending triangle – telecom space attempting to break higher. Entry $7.10.
  2. Follow up on previous trades or posts:
  3. Manage your stops on positions. Got the big move on Wednesday from the Fed and we have to manage the upside currently.
  4. 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. Nice push higher for stock on Fed news. Stop $3.55
  5. IYZ – Breakout test. Entry $27.80. Looking for move back to the previous high. Stop $27.50
  6. SSNC – Pennant – clear the high at $38.20 for entry. Software is one of the leaders in tech. Nice upside move.
  7. 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$35.
  8. YY – Breakout test. Tested the $44 breakout level on Friday. Watch the upside momentum to continue. $46.70 entry hit. Stop $45.85.
  9. 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 $18.40. move stop to break even.
  10. BK – Triangle – $31.20 entry on break above the resistance. Added 1/2 position watching to see if we follow through. Stop @$30.70. Banks continue to struggle here.
  11. 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 and got it on Wednesday.
  12. BIIB – cup & handle. Move through $230 entry. Biotech is leading the way. Nice follow through higher. Stop $235 on move higher.
  13. 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.
  14. IYR – $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 $65. Raise stop as moved through the resistance at $66.50.
  15. IWM – base breakout and trendline. $102.50 entry. Stop $104.80. Manage the stop in follow up to solid move higher. Watch how it plays out going forward.
  16. 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. Watch to hold the move and manage the exit.
  17. 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. Solid move to $304 Tuesday, followed by nice gain on Wednesday to the target of the July high. Raise stop to $305.
  18. 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. Take half off and manage balance at the stop.
  19. VECO – Base breakout –  $35.35 entry. target $38.10. Added on the upside follow through. Stop $35.35. HIT STOP
  20. 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. Move above $76.50 is a continuation of trend.

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. Starting to top near the high? Watch for a test short term to support? Maybe $42 ish.

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.