Trading Notes for Today, September 9th

Notes to Note: 

Monday stocks again attempted to sell lower, but the buyers stepped in to keep the upside in play. Until some clarity is gained relative to the outlook for the economy both domestically and globally the US markets are stuck in a sideways range and movement. Added stimulus in Europe helped the sentiment, but that will take time to show up in the data. Take what the market has to offer and don’t make any assumptions. This remains a trading market with an uptrend bias.

Sectors to Watch:

Financials (XLF) at key point on the upside trek. Tested to end the week and held on nicely. Need follow through on the upside and the banks are the sector to watch. Both regional (KRE) and large banks (KBE) are in play on the pattern list with the test complete looking for the upside to push through. (ONLY ETF model and Pattern Trading)

Solar (TAN) broke above the $45 high from June an dis in position to move higher and potentially test the $51 high from February. Could test the move and continue higher offer a better entry point. Alternative energy continues to rise as the energy sector struggles on lower oil prices the last few months. Watch and trade based on the upside continuation. (Sector Rotation Model)

Semiconductors (SOXX) breaking to new high and completing the ‘V’ bottom. How much upside is left in the sector after climbing nearly 9% to this point. The parts are of interest on the move with the recent leaders showing some positive signs. SNDK, ALTR and BRCM have shown solid upside moves of late. (ONLY ETF SOXL)

Model Position Notes: 

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

  • Volatility Index (SVXY) Shifting gears as the buyers step in again buy-the-dip theme. This has setup Tuesday for a break lower in the VIX and upside in ETF that shorts the VIX (SVXY).  High velocity trade as it move quickly… manage the asset accordingly on size and stops.
  • The EAFE index (EFA) finally reversed the short term downtrend started on June 19th as Europe turned the corner to help the upside of the index. EAFE remains in a testing phase. There was resistance at the 200 DMA on EFA. Watching the 200 DMA approach the 50 day for a cross that technically is a big negative. Need to hold the move and the $66.70 mark to keep the trend. TODAY: Watching for a continuation of the bounce off the August lows following the test. (Sector Rotation Model)
  • Emerging Markets (EEM) added to position on upside move through $45.10. We tested in the overall sector, but solid strength remains in specific countries short term. Watching the short term uptrend in play. Digging in to see what country ETFs are leading. TODAY: Futures are pointing lower and the test remains in play $44.50 level to watch fro support. (Sector Rotation Model)
  • S&P 500 Index (SPY) Tested lower again on Monday, but the rebound was less closing down on the day. Still need to follow through on the upside. A rounding top or sideways consolidation in play. (S&P 500 Model) TODAY: Need to follow through on upside bounce.
  • Small Caps (IWM) Tested back near the $115 support and bounced, still needs to clear the previous highs above the $117.50 mark. Stop at $115 as this tests the micro trend higher. Entry added at the $115 level and initial trade at $112.50 for the position. TODAY: Need to hold the move from Friday and Monday while maintaining our stops. (ONLY ETF Model – TNA)
Watch List Opportunities:
  1. Sector Rotation Model – Updates to Watch List
  2. S&P 500 Model – Updates to positions
  3. ONLY ETF Model – Updates to Watch List
  4. ONE EGG Model – Added position

Pattern Trade Setups:

  1. UCO – entry $31.20. reversal off the intraday low on Monday. Watch for the follow through upside and add a trade in crude to bounce. $34 target on trade.
  2. SVXY – entry $87.50. The shift in momentum on Friday points towards less volatility to start the week. break through resistance is entry.
  3. TAN – entry $42.25. Test of breakout above resistance. Watch your entry on the test be patient. No test and gapped higher at the open. Watching.

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 – entry $477.50. Test of upside in play and holding $470 support. Stop $460.
  5. BAC – entry $16.30. breakout. Held the move higher and now looking for the follow through to $17.30 short term. Stop $15.95
  6. 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. HIT STOP
  7. AGN – entry $163.50. Test lower and move through resistance. drug manufacturer. Stop $158.90.
  8. YHOO – entry $36.50. trading range break. Internet sector moving higher. Stop $40.25
  9. CELG – entry $89. wedge breakout. healthcare leadership short term. Stop $92.40.
  10. 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.
  11. SSO – entry $113.50. Bottom reversal on test lower. Trade on the bounce only for now. $117 target on the trade. Stop $119.30
  12. SOCL – entry $20.15. Cup and Handle breakout. Upside back in play. Stop $20.10
  13. FDN – entry $59.85. trading range. Upside still in play. held up well in selling last week. Stop $61.50.
  14. 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. Adjust your Stop to $45 for now on position and we will make adjustments as we extend the upside.