Trading Notes for Today, September 4th

Notes to Note: 

Another interesting day for the broad markets with the NASDAQ forfeiting gains and crude oil rebounding. The talks there was a peace agreement with Russia and Ukraine were unclear and remain that way to some degree. Sector movement was news driven and speculative with Apple stock reacting to Samsung announcement, crude oil and energy reacting to Russia, and the global markets bouncing higher on the Russia/Ukraine talks. A little something for everyone, but not much in terms of change or momentum. Maybe today is more clarifying and unifying… let’s hope.

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) – 9/4 – We did get the gaps higher and it gave no room for the trade. Watching today to see how it follow through on the less than clear agreement between the two parties. Nice move in IEV, EFA and EEM in response to the news.

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) – 9/4 – Gapped higher and then spent the rest of the day fading to close lower. No clear entry point on either bank ETFs with the action and waited to see how it unfolds today.

Model Position Notes: 

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

  • Volatility Index (VXX) small rise in volatility on the day, but the ETF dropped 1.1% as investors were mixed on their response to Russia. Watching to see how this unfolds today as futures are flat as I post this. 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 (UCO) hit stops as the bounce back on the news in Russia was a boost to the price. That is news related and took some of the selling speculation out of oil. The downside is still the bias and we will watch to see how it unfolds going forward and which direction unfolds. Traded lower overnight and back below $95? DTO short side trade held 200 DMA and could setup for entry.
  • 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. Made move through resistance point ($67) to continue the move off the low in response to Russia/Ukraine. TODAY: Watching how it responds to news and follow through on the upside momentum.  (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: Bounced back on Russia news. still looking to maintain the current uptrend. (Sector Rotation Model)
  • Homebuilders (ITB) dumped lower on speculation the mortgage market would get tighter this fall as the Fed withdraws from quantitative easing and buying mortgage backed securities and proposal in Congress to limit Fannie Mae lending. Again a speculation point creates opportunities. Hit our stops on the position, but still like the outlook for the builders.
  • S&P 500 Index (SPY) Holding near the high on the close. Still need to follow through on the upside move. A rounding top or sideways consolidation in play. (S&P 500 Model)
  • Small Caps (IWM) made a move above the $117 level to keep the upside trek in play short term on Monday, but reversed that course on Tuesday as one of the sectors that saw selling. Moved through the $115 level and resistance at the 200 DMA and 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: response to the modest selling on Wednesday if move back towards $115 may take half the position off today. (ONLY ETF Model – TNA)
Watch List Opportunities:
  1. Sector Rotation Model – Updates to positions
  2. S&P 500 Model – Updates to positions
  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. HIT STOP
  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 $12.15.
  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.