Trading Notes for Today, September 3rd

Notes to Note: 

We start the month with hope and get more mixed reviews on the global economies prompting the sellers to take a shot. In the end the buyers remained diligent stepping in to push the broad markets back to a neutral position with small caps and the NASDAQ pushing higher. Some winners, some losers and some unchanged on the day… something for everyone in the end.

Sectors to Watch:

Russia (RSX) agreement to stop fighting signed with Ukraine. Watch for the country to get back some of the losses accumulated over the last three days. This will have a ripple effect to Europe as well. Watch IEV and FXE.  These are trade setups on the news only. $24.50 entry level would be of interest on the rebound. (ONLY ETF model)

Financials (XLF) at key point on the upside trek. Need follow through on the upside and the banks are the sector to watch. Both regionals (KRE) and large banks (KBE) and they both made move above resistance level on Monday. Watch for follow through and upside trade opportunities. (ONLY ETF model and Sector Rotation model)

Model Position Notes: 

Below are some notes on positions in models and what we are watching looking forward:

  • Volatility Index (VXX) added to the move in volatility. That faded by the end of the trading day as the nerves calmed, but the worries persist. Stops are tight and we will see how this unfolds to start the day with plenty of economic data that can help or hurt the outlook short term. (S&P 500 Model)
  • Crude Oil (UCO) added position in the commodity as it bounced on the worries in Russia and completed a bottom reversal pattern. That ended quickly at the start of Monday’s trading as the European economic data pointed to slower demand. Hit our stops and took the exit on the move. The downside play could be the next step and we will look today for follow through on the downside. (ONLY ETF Model)
  • The EAFE index (EFA) finally reversed the short term downtrend started on June 19th as Europe (IEV) turned the corner to help the upside of the index. Both remain in a testing phase of the move with negative economic data on Monday tripping the sentiment. With the reversal off the lows we now see resistance at the 200 DMA on EFA. Getting through this resistance point ($67) is the key to continue the move off the low and any interest in owning a position in the ETF. TODAY: Watching how it responds to news on economies. Honor your stops.  (Sector Rotation Model)
  • Emerging Markets (EEM) added to position on upside move through $45.10. We are getting testing in the overall sector, but solid strength in specific countries short term. Watching the short term uptrend in play. Digging in to see what country ETFs are leading. TODAY: Watch how we respond to the recent weaker trading. Measure your stops. (Sector Rotation Model)
  • Homebuilders (ITB) move through resistance and then checked lower on the new home sales for July. Still looking for the move above the $24.10 level after the failed attempt. Still holding support for now. (ONE EGG Model) This is the Sector Rotation Model as well and that allows us to replace the EGG position if we turn up better opportunity while this plays out.
  • S&P 500 Index (SPY) Holding near the high on the close. Still need to follow through on the upside move. We will see how that unfolds today? (S&P 500 Model)
  • Small Caps (IWM) made a move above the $117 level to keep the upside trek in play short term. Moved through the $115 level and resistance at the 200 DMA. The move gave another entry point for the sector. $112.50 was the entry point initially for the position. Stop at $112.50 or break even.  TODAY: Confirm the move higher with target at the $120 mark. (ONLY ETF Model – TNA)
Watch List Opportunities:
  1. Sector Rotation Model – Updates to Watch List
  2. S&P 500 Model – Updates to Watch List
  3. ONLY ETF Model – Updates to positions

Pattern Trade Setups:

  1. Mixed markets creating long and short trade opportunities.
  2. KBE – entry $32.90. cup breakout. Looking for follow through on the upside.
  3. KRE – entry $39.50. cup breakout. more upside potential if the sector gains momentum.

Pattern Trade Tracking:

  1. DBA – entry $26.50. Agriculture attempting to reverse off the lows again. Need to clear $26.92 on upside to show positive reversal and momentum.
  2. NFLX – entry $477.50. Test of upside in play and holding $470 support. Stop $455.
  3. UCO – entry $32.10. bottom reversal. looks ready to bounce for trade back to $34.30. Stop $31.25.
  4. UNG – entry $22. double bottom. consolidating near the lows and looking for a move back to the upside with $24 target. Stop $21.
  5. BAC – entry $16.30. breakout. Held the move higher and now looking for the follow through to $17.30 short term. Stop $15.65
  6. XLE – entry $98. consolidation pattern. Energy attempting to make move back to the upside. Positive break take position. Crude holding $92.70 support currently. Stop $96.70.
  7. ITB – entry $24.15. bottom reversal. The data is showing some signs of bottoming. There is more data out today on permits could help upside. Gapped over entry and watching for test to take the entry. Move above $24.10 offers alternative entry point as well. Stop $23.75.
  8. TXMD – entry $5.50. break from consolidation. In the drug sector and in position to move higher. be patient and watch the volume it sometimes falls during day. Stop $5.35.
  9. AGN – entry $163.50. Test lower and move through resistance. drug manufacturer. Stop $158.90.
  10. ERX – entry $118.90. wedge consolidation breakout. Setting up to move higher as trade. Back to the 50 DMA would be positive. Stop $116.
  11. VXX – entry $27.75. back near lows on VIX and bottom support. Looking for some volatility following more than a week of peace and quiet. $28.60 trade target for position. Stop $27.75
  12. YHOO – entry $36.50. trading range break. Internet sector moving higher. Stop $34.40
  13. CELG – entry $89. wedge breakout. healthcare leadership short term. Stop $89.
  14. RFMD – entry $11.50. pennant upside continuation. Need semiconductors to regain positive momentum if broad markets are to regain upside. Stop $11.
  15. EEM – entry $44.50. break above resistance again. upside trade still looking longer term. Stop $44 for now, but give some room if the volatility picks up.
  16. SSO – entry $113.50. Bottom reversal on test lower. Trade on the bounce only for now. $117 target on the trade. Stop $118
  17. SOCL – entry $20.15. Cup and Handle breakout. Upside back in play. Stop $20.10
  18. FDN – entry $59.85. trading range. Upside still in play. held up well in selling last week. Stop $61.25.
  19. PLUG – entry $5.10. Base breakout. Looking for the move from the base to accelerate as the trend is drifting higher. Stop $5.10
NOTE: The pattern trades above are setups that I see for a potential swing trade or short term 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. The best way to treat these as a learning tool is to assume a $100,000 portfolio and each positions receives a 5% allocation. If we state to take a 1/2 position as an example you would only allocate 2.5% to that position. I would use a downside risk of $500 per trade as a maximum loss. That will help  you learn position sizing and risk management. All investing comes with risk. Our job as investors is to manage the risk. Keep your focus and discipline in place.
Long Term Opportunities:

  • Facebook (FB) – Testing the break higher and has held up well in the recent selling. $73.15 entry point to add 1000 shares back on the long term outlook. (see note page for history. ADDED shares on 8/7 – $73.15 — Stop $71.50
  • 8/26 – pushed back towards the previous high and looks ready to break higher from the consolidation. Watch for opportunity to add to positions short term.
  • Twitter (TWTR) – entry $45.50 1000 shares (last trade) This was recommended on our webinar as the next long term position we have been trading since bottoming in June. Stop is $42 for now on position and we will make adjustments as we extend the upside.