Trading Notes for Today, September 5th

Notes to Note: 

News continues to lead the market on a wild ride this week. I thought it would economic news that was the dominating driver, but it has been Russia, the ECB, interest rates, etc. The economic data has been relevant, but to speculate relative to other issues. The intraday swings the last two days of opening higher, but closing lower show the lack of conviction from the buyers and the willingness of the sellers to step in or profit taking of selling into the rallies. It is a cautious time short term and I am willing to tighten stops and manage the risk of the trades short term and see how it unfolds.

Sectors to Watch:

Russia (RSX) remains a news driven trade. It regained some of the losses accumulated over the week and settled lower on Thursday. There is a ripple effect to Europe and the emerging markets. These are trade setups on the news only. $24.50 entry level was gapped above and watching for that to settle near a tradable entry point. (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 regional (KRE) and large banks (KBE) and they both made move above resistance level on Monday. Unable to hold the early gains and passed on both for now, but still watching 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) small rise in volatility on the day with selling into the rally the last two days. 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¬†moreeconomic data that can help or hurt the outlook short term.¬†(S&P 500 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. There is some¬†resistance at the 200 DMA on EFA. Made move¬†through resistance point ($67) Wednesday and retraced to that point Thursday. Need to hold the move and the $66.70 mark to keep the trend.¬†TODAY: Watching how it responds and if it can 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: Patience as we end the week and look for the best opportunities in the sector.¬†(Sector Rotation Model)
  • 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) TODAY: the $199 level is of interest on the downside if break we would look to exit our positions.
  • Small Caps (IWM) made a move above the $117 level to keep the upside trek in play short term on Tuesday, but reversed that course on Wednesday and that is what we are watching. Stop is now $115 as this tests the micro trend higher. 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. TODAY: response to the modest selling again on Thursday, if it moves below the $115 we will exit the position. (ONLY ETF Model – TNA)
Watch List Opportunities:
  1. Sector Rotation Model РUpdates to positions
  2. S&P 500 Model РUpdates to positions
  3. ONLY ETF Model – Updates to positions

Pattern Trade Setups:

  1. Mixed markets creating chop again as worries return. Willing to see how the news of the jobs report impacts the day and we will take if from there.

Pattern Trade Tracking:

  1. KBE – entry $32.90. cup breakout. Looking for follow through on the upside. Stop $32.50
  2. KRE – entry $39.50. cup breakout. more upside potential if the sector gains momentum. Stop $38.65
  3. 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. Stop $25.75.
  4. NFLX Рentry $477.50. Test of upside in play and holding $470 support. Stop $460.
  5. UCO – entry $32.10. bottom reversal. looks ready to bounce for trade back to $34.30. Stop $31.25
  6. BAC – entry $16.30. breakout. Held the move higher and now looking for the follow through to $17.30 short term. Stop $15.95
  7. 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. 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. 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 HIT STOP
  11. YHOO – entry $36.50. trading range break. Internet sector moving higher. Stop $34.40
  12. CELG – entry $89. wedge breakout. healthcare leadership short term. Stop $92.40.
  13. RFMD – entry $11.50. pennant upside continuation. Need semiconductors to regain positive momentum if broad markets are to regain upside. Stop $12.15. HIT STOP
  14. EEM – entry $44.50. break above resistance again. upside trade still looking longer term. Stop $44.50 for now, but give some room if the volatility picks up.
  15. SSO – entry $113.50. Bottom reversal on test lower. Trade on the bounce only for now. $117 target on the trade. Stop $119.30
  16. SOCL – entry $20.15. Cup and Handle breakout. Upside back in play. Stop $20.10
  17. FDN – entry $59.85. trading range. Upside still in play. held up well in selling last week. Stop $61.50.
  18. 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.