Trading Notes for Today, September 27th

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.

As a side note I am starting to post charts again on TC2000 as third party research. The goal is to show you more on set ups for trades from a technical perspective. Any feedback as usual is appreciated.

Sectors to Watch:

  1. Market finds a way to close positive. However, it was not a convincing day overall. The markets are stuck in neutral and we have to be patient as they grind it out looking for some clarity. Today ends another week of trading fun and Monday we conclude the quarter. Look for the usual suspects of portfolio rebalancing and positioning. It can only get more interesting as we move forward.
  2. Small Cap (IWM) is where we continue to look for some direction on the upside. The sector tested and held the 10 DMA and continued to test the resistance at the $107.50 ish mark. I am still looking for the upside to continue if the upside is to resume short term.
  3. NASDAQ 100 index (QQQ) bounced back above the 10 DMA on a solid day. The move lower has been methodical, but the bounce on Thursday provided some positive short term. This is an index worth our attention going forward… short or long.
  4. Dow Jones Industrial Average is leading the downside but bounced back above the 50 DMA with some signs of life heading into the last trading day of the week and a rough week it has been for the index. 15,450 is the level to watch on the upside.
  5. Treasury bonds bounced off the recent lows as yields declined on the Fed actions. The upside I have viewed as limited, but the move in the thirty-year bond yield to 3.69% completed the rounded top on the yield chart. That could lead to a further drop in rates. Thus, the rally in the bonds. TLT moved above the $106.20 resistance and returned to it today. It is still poised to make a run at $110.30 on the upside. The double bottom set up is worth watching and trading going forward.
  6. Mid Cap (IJH) fell to support at $123 held and bounced, but has held and looks ready to move back to the previous high.
  7. Healthcare (XLV) moved above the July high, but retreated back to the 50 DMA. This has been one of the leading sectors with Biotech and others pushing the broad index higher.  Some downside pressure from the healthcare providers (IHF) as the saber rattling in media over Obamacare has had an impact on the sector. IHF finding support at $87.30, IBB is back from the selling pushing towards the high, and XPH bounced off support and back to the 10 DMA.
  8. Technology made move above $32.40 and is now testing that level the last few days, but it remains suspect in the current conditions. The semiconductors (SOXX) tested support and has held up well in this environment… looking for a upside bounce. Internet (FDN) experienced some serious selling on Monday and bounced back on Tuesday, Thursday the ETF hit a new high. The internet space has been a leader in the move. Software (IGV) sold lower, but held the next level of support and is working higher again. The networking (IGN) sector sold lower testing support at 50 DMA and closed with another test on Thursday.
  9. Financials (XLF) looking to hold $20 as support? The new war of suing the banks and regulating the fine, etc have pushed sector lower on speculation. Banks (KBE) remain the challenge and with no clarity it will keep the sector neutral at best. SKF is short financial ETF, $21.05 was our entry on Tuesday and we have to manage against the downside reversal.
  10. Utilities (XLU) is settling in at the 200 DMA and I still like the sector longer term outlook for the patient investment. 4% dividend and long term growth work well. Some more selling on Thursday, but I expect this to stay in the current trading range.
  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 support at the bottom end of the current trading range near the $102.50 level. Refiners remain the weakest sector and the downside is in play.
  12. Gold (GLD) too much speculation and uncertainty for my taste. $125.50 level to watch for now.
  13. Today is again about support holding and a bounce materializing. Remember trend reversals take conviction on behalf the side that is attempting to make the turn. If we are speculating for more selling then we need the sellers to step in and exercise their convictions. Until that happens looking for more of the same.

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 in direction as a lack of clarity. I am speculating the market is setting up for a test on the downside from the move higher (five 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 modestly with the buyers for now.

Pattern Setups For Today:
We continue to manage the risk of the market and make our adjustments as necessary. Choppy market lack clarity and we have to be patient as the trades and leadership establish themselves.

  1. This is still a very choppy market. I kept the posts from yesterday even though they didn’t hit the entry points. Plenty of noise to fight short term. Watch Apple today as the iPhone 5 launch wears off and the reality of the forward guidance sets into the stock. The downside is setting up. I am not posting a short, but the set up is there for a trade to $465. A friendly reminder… Set your stops.
  2. BXP – Trend Test. The spike higher from the FOMC news has fully test back to the trendline. Held above the 50 DMA and ready to bounce higher. Entry $107.30.
  3. Follow up on previous trades or posts:
  4. SOHU – pennant – moved above the $73.42 mark and looking for follow through today. Entry test of $73 or max of $74 on the trade. Stop is $71.30. Gapped above our entry and passed for now.
  5. SMH – pennant – move above the $40.50 mark would be positive for this leader. Has held great during the test the last week. Still testing, but I like the trade.
  6. JASO – trading range – moved back to the top of the range. entry $9.60. Stop break of the 30 DMA. Sideways day watch today.
  7. ESRX – bottom reversal day. Look for a follow through on Wednesday’s move. Entry $63.25. Sideways day watch today.
  8. STX – Cup. Break above $41.90 on volume is the entry. Entry $42.  Stop $42. Tech is testing the uptrend short term. Look for sector momentum to continue to boost the upside. Closed near the entry point. Took the entry when hit early in the trading day. Solid gain of 4.9% on the day put stop at break-even.
  9. TRIP – Consolidation on gap higher. Entry $75.50. In leading sector. Added early, but then reversed. Stop $72.50.
  10. XNPT – Pennant. Entry $5.80. In leading sector. Still in pattern and watching.
  11. DIA – reversal and support break. This has set up a downside play worth watching. entry DXD $32.60. Stop $32.60 Raise.
  12. 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$36.20
  13. IWM – base breakout and trendline. $102.50 entry. Stop $105.50. Manage the stop in follow up to solid move higher. Watch how it plays out going forward, if we break above the $107 resistance look to add to the position.
  14. KOG – ascending triangle breakout – cleared $10.30 for the entry and made move higher. Entry $10.40. Stop $11.30. 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.
  15. SBUX – Test 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. Back to the top end of the range. Manage the profit as we hit against resistance.

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 rebalanced.  We will hold our long term position and look for the opportunity short term. Patience.
  • 9/26 – upgrade by Citigroup. Cleared the $50 level on Thursday. Watching to see how this holds up as the quarter ends and earnings are around the corner — Oct 21st.

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.