Trading Notes for Today, September 24th

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. Three days of testing and today will be the tell of the tape. Plenty of issues facing the broad markets, not the least of which is a multi-personality Fed running around. Cut stimulus, don’t cut stimulus… it sounds like elementary school again, he loves me, he loves me not! Throw in the maturity of Congress with the debt ceiling debates and no wander there is some selling in the broad markets. All said, a lack of clarity is driving and we know that is not good short term.
  2. Small Cap (IWM) is where we need to start today for clues on where we are heading. The sector held the 10 DMA, had an accumulation day on volume, closed positive versus the other major indexes and the three day test has put the upside back in play. Looking for the upside to continue and add to the position IWM. A move above $107 is add, and move below $105.50 is a negative and take some profit from the move.
  3. NASDAQ 100 index (QQQ) thanks to Apple bounced off the 10 DMA. For now as Apple goes… so goes the index. Plenty of large cap stocks struggled on Monday and this is an index worthy of our attention going forward… short or long.
  4. Dow Jones Industrial Average moves vertical down as well as up. DIA sold to support at $153.25 on Monday. Watching the downside possibilities short term. Bounce… gets interesting.
  5. Treasury bonds continue the bounce off the recent lows. The upside is limited from my view, but the flattening of the yield curve is a positive for the broad indexes. $106 resistance on TLT and $104 support for now. Looking to stay in this range for now and watching the interest sensitive sectors in conjunction. Double bottom set up with a potential to move higher? Watching.
  6. Mid Cap (IJH) fell to support at $124.55 and weaker than the small cap stocks. Watch for signs of downside leadership.
  7. Healthcare (XLV) moved above the July high, but testing back below them on Monday. Some downside pressure from the healthcare providers (IHF) and the saber rattling in Congress over Obamacare. Biotech (IBB) tested as well hitting stop at the 10 DMA. Watch to see if the downside in the sector accelerates or holds support.
  8. Technology made move above $32.40 and is now testing that level from the selling on Friday, which held on Monday, thanks to AAPL. The semiconductors (SOXX) tested the high at $68 on a vertical move and could test from the aggressive gains. $66.70 level tested on Monday and we need to hold support. Internet (FDN) experienced some serious selling on Monday and I am watching to see how this leader plays out. Software (IGV) sold lower as well testing the first level of support. The networking (IGN) sector continued to sell lower testing support at $30.75 and breaking below the 10 DMA. Tech is struggling in this test for the major indexes.
  9. Financials (XLF) looking to hold $20.30 as moves lower. That didn’t transpire on Monday and the next level of support at the $20.11 level is now in play? ¬†Banks (KBE) remain the challenge and earnings may not favor the sector short term. Mortgage business has been weak with the higher interest rates. Watching the downside risk. SKF is short financial ETF, $21.05 is level to watch.
  10. Utilities (XLU) saw money flow back after Friday’s selling and test lower. I like the sector longer term.
  11. Energy (XLE) reversal moved below support at $83.85, previous high, watch to see if selling accelerates and tighten stops. Crude oil (OIL) reversed to $103.40 and still looking for more downside without a rise in demand as speculation dries up. $102.50 level to watch for support to hold or we head towards our target of $98.
  12. Gold (GLD) too much speculation and uncertainty for my taste. $125.50 level to watch for now.
  13. Today is about support. We are at the first level of support and how it deals with the current sentiment will give direction for the near term. Not excited about being short, but we have to watch and take what the market gives. The key is not to assume anything and trust what you see, not what you feel.

The models are stalled looking for new plays as the spike last Wednesday (FOMC meeting with not cuts in stimulus) elevated the risk, followed by uncertainty the balance of the week. I am speculating this is setting up for a test on the downside from the move higher (three days of modest testing). We added some positions on the bounce through resistance and we continue to scan for opportunities, but the risk/reward is out of balance. Thus, we remain patient and let this unfold. This is the final week of the month and quarter. Earnings are around the corner with plenty of economic data to add to the mix. The bias remains with the buyers for now.

Pattern Setups For Today:

  1. We hit plenty of stops on Monday and took money off the table as the uncertainty continues to break down the trades taken. Always manage your risk in short term trades. If the momentum returns the opportunities will present themselves again.
  2. LNKD Рbroke downtrend line. Short set up and test.  Nov 240 Put is the set up with the entry break of $240 on the stock. We closed at that level on Monday. $18 or less on Entry.
  3. STX – Cup. Break above $41.90 on volume is the entry. Tech is testing the uptrend short term. Look for sector momentum to continue to boost the upside.
  4. TSRO – Test of trading range BO. Hold above $40.85 breakout level and then continue the move higher. Watch the biotech sector to continue from test on the upside. Be patient.
  5. Follow up on previous trades or posts:
  6. TRIP – Consolidation on gap higher. Entry $75.50. In leading sector. Added early, but then reversed. Stop $72.50.
  7. XNPT – Pennant. Entry $5.80. In leading sector. Still in pattern and watching
  8. DIA – reversal and support break. This has set up a downside play worth watching. entry DXD $32.60. Stop $32.15
  9. IYZ РBreakout test. Entry $27.80. Looking for move back to the previous high. Stop $27.50  HIT STOP Monday.
  10. SSNC – Pennant – clear the high at $38.20 for entry. Software is one of the leaders in tech. Nice upside move continues. Stop 38.50 HIT STOP Monday.
  11. 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. entry at $35. Stop$35.50
  12. YY – Breakout test. Tested the $44 breakout level. Watch the upside momentum to continue. $46.70 entry hit. Stop $47.50 HIT STOP Monday.
  13. BIIB – cup & handle. Move through $230 entry. Biotech is leading the way. Nice follow through higher. Stop $243 on move higher. Hit target at $243 – looking to take half off if stalls.
  14. NTES – pennant. Move above $73.50 entry. Internet one of leaders as well. Nice move higher. Stop $73. still looking for the stock to break above the $77 level on upside.
  15. 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. Raise stop $65. The FED influence creating volatility. Honor the stop.
  16. IWM – base breakout and trendline. $102.50 entry. Stop $106. Manage the stop in follow up to solid move higher. Watch how it plays out going forward.
  17. 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. Hit target look for exit if reverses.
  18. 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 $310. Watch as hit new high on Friday.
  19. 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.
  20. SBUX РTest of support $70. Move above $71.30 for the entry. Added trade $71.30. Stop $75 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…
  • 9/20 – love the way things work out sometimes. 6% bounce and back to the top and resistance and followed through to new high. Got the last of the sellers out of the way? Watching to see how it acts here. The addition to the NASDAQ 100 index added the initial upside move. Got big follow through on Friday with options expiration and the index rebalance. ¬†We will hold our long term position and look for the opportunity short term. Patience.

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.