Trading Notes for Today, September 9th

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. Financials attempting to bounce with XLF moving above the $19.78 mark and looks to move towards the 50 DMA as the next resistance. The sector remains challenged by outside events and is still lagging the overall market. This is not a straight forward sector short term and it has to be managed from a longer term outlook. I am still looking to add to the position as we move forward the clarity grows. Slow and steady goes the race. Added to Rotation Model Watch List.
  2. Volatility index started the week at the short term high of 17.75, it had faded to 15.65 on Thursday, but spiked to 16.80 on Friday with Russia stepping into the Syria mix, but settled in an closed lower as some normality returned. This is the state of the markets currently and we are having to manage the risk of the volatility. If the intraday volatility of the VIX picks up we will exit any plays relative to the VIX. For now watch to see how this plays out on Monday.
  3. Utilities broke short term support at $37.10 and set up a potential short trade. A test and close below support is a short opportunity, but $36.50 support is holding. Based on the spike in yield on both the 10 and 30 year bond the sector should have fallen more… leaving an opening for a potential bounce. That is what we got on Friday and now I looking for a potential upside trade on the move through $37.20 upside. Added to the Sector Rotation Watch List.
  4. Healthcare (XLV) has tested support at the $49 level and is making a move back to the upside. The move above $49.95 hit the entry point for the S&P 500 Model as a trade. Made a move above $50.20 to follow through the next entry point. Biotech (IBB) has bounced back nicely and moved above the previous high. Watch and manage the elevated risk on the sector, stop at the entry point of $198. Still lacking momentum short term. Manage position in the S&P 500 Model.
  5. Technology has held up well during the last four weeks of selling or testing lower. We added a play in the S&P 500 Model, but XLK has stalled at or near the resistance of $31.80. The semiconductors (SOXX) cleared resistance at $63.50 and is a leader thus far. Tested $64.25 level on Friday, watch for entry to add to position if you missed the opportunity. Scanning XLK shows some bounce moves off the recent lows that are of interest if the momentum follows through. Added ROM to the ONLY ETF Watch List.
  6. Consumer Discretionary bounced off the current level of support also with the uptrend line in play as well. Looking for a upside follow through in this sector if we can clear $58.75 level. It stalled, but held in place so far. Have to be patient and let the trade develop. JCP (again), KSS, M and KMX all put in solid upsides with breakout or reversal moves on Thursday and Friday. The homebuilder stocks were up nicely on Friday to help as well.
  7. The global markets bounced off the downside as the EAFE index (EFA) gained 3.3% for the week. Europe has been under pressure from oil prices moving higher, but Europe ETF (IEV) bounced 2.6% on the week. China (GXC) made a big move higher and has gained 5.5% this week, and cleared the previous highs at 73.10. The emerging markets (EEM) have bounced off the lows and gained 4.6% on the week and heading back to the key resistance at $40. All is good on the bounce as the global markets follow the US lead.
  8. Treasury yields rose again to 3.84% on the 30 year bond, and 2.91% on the ten year bond. The worry is back about the Fed, improving economic data and the overseas growth pushing inflation (like China). So much for the buy signal some have called for in Treasury bonds. We added a short play with TBT in the ONLY ETF Model to capitalize on the short term move in bond prices and it has done exactly that.
  9. Crude oil jumped on the Putin comments over Syria and is flirting with the $110 per barrel level. The upside remains in play as we are now back at the highs from last week at the peak of the worries. Downside risk is still elevated short term and stops should be tight if you are trading the move.
  10. Commodities were lower as DBC is testing support again at the $26.50 mark. Got a bounce on Friday with the move in gold off support. Watch to see if we hold here or break lower. The dollar moved above resistance at the $22.25 mark (UUP) and then ran into the Syria buzz saw on Friday. Watch an let the emotions calm. Gold and silver both bounced finally on the jobs report Friday. Watching to see if there is any follow through on the upside. Natural gas reversed on Thursday losing 3.7% to end the week as the inventory data was disappointing.
  11. As we stated above the focus is on the news and it makes for a volatile market. Trading is working to some degree, but the emotions are running high. The biggest question moving forward is sentiment relative to stimulus cuts and Syria. The optimist are buying, the pessimist are selling, and the rest are watching. Based on the sideways activity… watching is winning.

The models remain under invested for the simple reason of uncertainty going forward. We added positions on Wednesday as the bounce pushed some sectors through resistance on the bounce off support. Thus, we remain patient and let this all unfold moving forward.

  1. The S&P 500 Model. Manage the SVXY trade today. Remember to watch the open and manage your stops on any outside news, i.e. Syria. Stops close on SH as well.
  2. The Sector Rotation Model. Added to the watch list… looking for more upside and volatility this week.
  3. The ONLY ETF Model. Adjusted stops.
  4. The ONE EGG Model. QQQ is the trade set up to start the week.

Pattern Setups For Today:

  1. Futures are
  2. Follow up on previous trades or posts:
  3. IWM – base breakout and trendline. $102.50 entry. Got move after dip on news. Stop $100.
  4. YY – cup. $44 entry. Breakout and follow through on the upside. Stop $41.60.
  5. KOG – ascending triangle breakout – cleared $10.30 for the entry and looking for a test of the move higher. Entry $10.30 (max $10.40). Stop $10.10.
  6. AMZN – reversal. move back above $294 on volume is interesting trade. Oct $295 call. Entry $16. Stop $289.80 (stock)
  7. XLNX – Trend continuation. The test of the 50 DMA and uptrend. Bounced to resistance at $44.65. Look for continuation of the upside move with $47 target. Added $44.75. Stop $45. Held gains and adjusted stop.
  8. VECO – Base breakout –  $35.35 entry. target $38.10. Added on the upside follow through. Stop $34.20. Testing
  9. AAPL – The buyers are in play. bounce off the $485 level is of interest short term. Added the $495 Oct Call ($19.80 – 8/28) on reversal and move higher. Moved above $493 entry point. Tested the support and looking for the bounce. Stop $16.50 on call option.
  10. CLDX – Breakout Test – $21.70 support tested on Wednesday and looking for a bounce back to the $24 high. $22 entry. Added and manage stop at $23. Nice move higher.
  11. SBUX – Test of support $70. Tested and bounced. Looking for a move above $71.30 for the entry. Added trade $71.30. Stop $69.50.
  12. AFOP – Breakout Test – solid move higher from the trading range at $34.50. If holds support and resumes upside advance, look for trade up to the previous high near $40. added $35. stop $35.
  13. DDD – Test of breakout from trading range. $40.40 is level to hold and then look for entry. $50 max entry on the trade. Target is $54. added at $49.70. stop $50.90.
  14. FST – Cup & handle breakout. Entry is $5.60. Natural gas stock, sector reversing on rise in commodity price. Hit entry and moving higher. Stop $5.30.

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. In addition sell a December $37 Put on FB @ $3.35.  If the stock falls we can put our stock to someone at $37 prior to expiration in December.
  • 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 on 8/30 for nice gain. Watch and manage the balance at breakeven on the stop.
  • 9/8 – Broke higher to continue the move on Friday. Raise stop to $42 (target) on the 500 shares purchased for a trade.

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.