Trading Notes for Today, September 30th

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 looks to start the week with worries about the shutdown of the government. The House voted and the President reacted and now the 24 hour showdown begins. The headlines are full of what if’s as we look to start a fun filled week. The economic data was to take center stage, but the Congress has taken on the that role for now. We will watch to see how this proceeds. The futures are trading lower and they will progress throughout the trading day based on what takes place today.
  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. Looking for some leadership from the sector.
  3. NASDAQ 100 index (QQQ) bounced back above the 10 DMA on a solid day. The move lower has been methodical, and the pennant is looking for direction. This is an index worth our attention going forward… short or long. $77 support on the downside should the sellers push lower for now.
  4. Dow Jones Industrial Average is leading the downside as it traded below the 50 DMA to close the week. The index gets the award for short term volatility. 15,450 is the level to watch on the upside and 14,750 on the downside.
  5. Treasury bonds bounced off the recent lows as yields declined on the Fed actions. Will the yields react to Washington? Watching to see what trades result from the fight.
  6. 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 still holding an uptrend.
  7. Technology holding $32.10 and has tested 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) is trading near it’s high. The internet space has been a leader in the move. Software (IGV) sold lower and in consolidating near the high. The networking (IGN) sector sold lower breaking support at 50 DMA. Downside building momentum short term.
  8. 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.
  9. 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 Friday, but I expect this to stay in the current trading range.
  10. 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.
  11. Today is the last trading day of the month, but the focus has shifted this morning to the budget and a shut down of the government. Will the drama build throughout the trading day? Remember this is a outside market event and it will have a temporary impact on the markets. The outcome will have an equal impact as it unfolds. The speculation is the worst part as it whips markets around. Be patient and manage your stops in trading today as we face a gap lower open.

The models are stalled looking for new plays as the spike from the FOMC meeting with not cuts in stimulus elevated the risk. The resulting uncertainty in direction has presented a lack of clarity for the broad markets. Throw in the looming fight about the budget and you get the potential pullback or test of the uptrend. The market has been in the midst of a mild test, but we have to be cautious as the uncertainty has created choppy markets. In turn they are bad for trading as you get whipped in and out of positions. 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. Earnings are around the corner with plenty of economic data to add to the mix and the budget wars have begun. Look for the opportunities in the reactions to the news going forward.

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 choppy market. Plenty of noise to fight short term. Watching today as this unfolds. A friendly reminder… manage your stops if we follow through with a gap down open.
  2. Follow up on previous trades or posts:
  3. BXP – Trend Test. The spike higher from the FOMC news has fully tested back to the trendline. Held above the 50 DMA and ready to bounce higher. Entry $107.30. Added and looking for the upside follow through.
  4. JASO – trading range – moved back to the top of the range. entry $9.60. Stop break of the 30 DMA. Added and watching the upside? Stop $9.38.
  5. 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. Nice bounce higher, but watching the outcome.
  6. TRIP – Consolidation on gap higher. Entry $75.50. In leading internet sector. 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 $32.60 Raise. Watch and manage today on news.
  9. 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
  10. 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.
  11. 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.
  12. 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.
  • 9/27 – 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. Closed at $51.24 and new high again.

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.