Trading Notes for Tomorrow, January 21st

This is becoming a stock pickers market and that requires more work on our behalf to dig into the winning sectors to find the best stocks to own. The pattern list we produce every day has been doing well as we take what the market gives and avoid the weakness. Patience is the key as it all unfolds.  This week promises to be more interesting with a greater amount of earnings being reported and emotions may rise in response. There will be some key data points to watch relative to how they impact the market from both a short term and longer term outlook. Remember that Monday was a holiday and the trading week will be shortened and it could impact somewhat how we trade today. We will continue to take this one day at a time.

Sectors to Watch:

  1. S&P 500 index is still struggling to push through to a new high as earnings stall the move higher closing at 1838. The sideways action continues and we are content to watch and see how it unfolds. Watch the impact of earnings and economic outlook on the index. Watching for entry if the move higher develops. S&P 500 Model.
  2. NASDAQ leads the way with the index closing at 4196 and testing the break to the new high. If the upside tests back to 4180 and holds, looking to add the position in QQQ. Sector Rotation Model.
  3. Small Caps (IWM) the Russell 2000 index moved lower closing at 1168 and testing the break to new high. Take it for what it is at this point and use the 30 DMA as a stop or exit point on short term trades.
  4. Financials (XLF) struggled as earnings disappoint on some and better on others. This is putting pressure on KBE and tested as well as the regional banks (KRE), added to watch list for Sector Rotation Model. The insurance companies (KIE) attempted to join the upside run, but stalled as well. I still like the fundamentals of the sector and would look for the opportunities in the sector going forward based on momentum being regained in the stocks.
  5. Healthcare (XLV) set the pace on the upside again this week. IHI, XPH and IHF are all adding to the upside as well. Analyst warnings about the benefits of the AHA being priced in already and the downside risk rising. Watch and monitor your stops as this unfolds.
  6. Telecom (XTL) made a solid move higher gaining 1.6% on Wednesday and held the gains Thursday. The hope is this will follow through on the upside. I still like the individual plays better than the overall sector. The Apple deal with China Mobile helped the sector regain some upside momentum, but the individual stocks are still the clearest winners/leaders.
  7. Technology (XLK) held the new high posted last week, but watching the SOXX after the INTC news was disappointing. Internet, Networking and Software are still on the upside short term.
  8. China (FXI) Entry $36.55 if it can clear the 200 DMA and bounce off the recent support for a micro trend reversal trade. (Sector Rotation Model). Faded on Thursday, but still looking for a upside follow through from the bottoming consolidation pattern.
  9. Oil is rising off the low on speculation of demand rising again globally as the economies recover in Europe. Took the entry on Friday and now looking for the upside to continue short term. Manage your stop. (Sector Rotation Model)
  10. Gold miners (GDX) broke out on Friday as posted on the pattern trade list. Watch the upside move with a target at the $25 level on the ETF. Scanning the ETF is worth the time to find the leaders. SLW, MUX, NGD, and PAAS are a few that stand out currently.
  11. Bonds have rotated to favor on the stability in interest rates. Worth trading to obtain a risk free dividend. See below.
  12. Commodities are producing some trades, but not much relative to trending higher near term. See below.
  13. REITs are attempting to reverse the downside trend short term. The Asset class below covers the opportunities based on are current scans.
  14. Global Fixed Income below… PCY added at $27.25 as emerging market sovereign bonds move above resistance. This is a dividend play with an intermediate time horizon. EMB is in position to break above resistance as well with $109.30 entry point. PICB remains in play as dividend play also.

The models are updated and our short term view continues to dominate the process currently. The economic data has remained positive enough to keep the buyers engaged. There is plenty to watch, to like,  to worry over and to contemplate as we move forward. Earnings showed some positives with Bank of America beating expectations, but it has also showed some negatives with Best Buys miss and decline of 28%. The fear factor is still looming in reference to earnings and we will have to be patient as it all plays out. The pattern list (below) is where we are posting most trades short term as a result of the current market environment. As shown above the models are being added to as well. The key is to manage the risk on trades more aggressively and monitor your longer term holdings with trailing stops to account for any rise in volatility.

Pattern Trading Setup and Tracking:

  1. CURE – Entry $75.30. Continuation of uptrend in healthcare sector.
  2. FXP – Entry $17.50. Continuation of uptrend if breaks two week consolidation.
  3. QLD – Entry $100. Continuation of new high on test. Watch and be patient.
  4. WEN – Entry 9.12. Break from trading range. Fundamentally performing well in tough sector.
  5. Follow up on previous trades or posts:
  6. JBL – Entry 17.60 test. Broke above resistance $17.48 and testing. Stop $17.30.
  7. TQNT – Entry $8.50. follow through on break from trading range at $8.40. Semi’s still moving higher. Stop $8.10.
  8. GILD – Entry $75.50. Break through resistance, triangle. Biotech is still leading sector. Stop $75.50.
  9. GDX – Entry $22.50. Break from bottom consolidation. Gold is attempting to bounce as well. Stop $22.
  10. PALL – Entry $72.55. Bottom reversal at resistance. intermediate term downtrend line. Metals are gaining momentum short term. Stop $$71.50.
  11. V –  Entry $223. Consolidation top. Financials working higher as sector. Stop $223. Big move Friday.
  12. PIN – Entry $17.60. Ascending triangle. Country ETF wants to break higher short term. Stop $17.40 STOP HIT
  13. NVDA – Entry $15.90. Trading range breakout. Semiconductors upgraded and moving higher. Stop $15.70.
  14. CBB – Entry $3.65. Trading range breakout. Telecom sector is stock picking sector for now. Stop $3.58.
  15. HPQ – Entry $28.85. Ascending triangle. Upgrade to PCs with stock in position to break higher. Stop $$28.50.
  16. GLD – Entry $121. Bottom reversal. Trade back to the $125 level. Took entry on move higher Stop $119.
  17. RSOL – Entry $4.15. Break to new high, double bottom weekly chart. Solar still moving higher and merger pushed the stock higher on Thursday. Stop $4.
  18. QCOM – Entry $74. Trading range breakout. Telecom pulled back looking for a continuation of the upside move. Stop $72.50 (1/14 – took off stop at open on gap lower? no reason for the move).
  19. ATNI – Entry $57.50. trading range breakout. Telecom sector remains a leaders. Stop $57.50
  20. FHN – rounded bottom breakout. Entry $11.85. Nice upside breakout. Stop $11.85
  21. PJC – trading range breakout. Entry $39.90. Stop $38.95.
  22. SKUL – Reversal follow through resistance. Entry $6.09. Sector bouncing back. Gapped open with Entry at $6.30 and stop $7.40.
  23. ITB – Ascending Triangle breakout. Entry 23.60. Trade on the break higher. Patience with entry. Stop $24. STOP HIT
  24. XLK – Test of low and bounce. Entry $34.75. Watch for test and then entry. Stop $35.50.
  25. GLW – Trading range. Entry $17.28. Upside if momentum returns to technology. Stop $17.80.
  26. VMW – Flag. Entry $87.45. Looking for continuation of the upside. Stop $95.
  27. STX – Entry $50.25. Continuation within the range. Setting up to continue higher. Got the move. Stop $59.
  28. HBAN – Breakout from trading range. Entry $9.13. Not much test, but steady trading. If no test, max entry is 9.20. Be patient with the upside as this the stock has a pattern of breaking higher, run and then consolidate. Stop $9.60. STOP HIT.

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.

Facebook (FB) Update:

  • 12/30 – Hit stop on position added and managing our positions of 2000 shares long term.
  • 1/2 – Watch the test of support at $53.40. could offer another trading opportunity.
  • 1/5 – Short setup on the current activity could be the trade. Need to be patient to see how this will unfold.
  • 1/6 – big reversal on Monday to close up 4.8%. Watching to see how that holds near term.
  • 1/8 – Testing the previous high after test lower. Break and we will add a position on the move higher. Retest lower and we look at the downside in relationship to the broad markets. Entry $58.50 add 500 shares.
  • 1/14 – Testing the move lower again – double top? Watch the downside risk short term.
  • 1/17 – Tight trading range. Interested in adding position still if we breakout to new high. Downside risk still in play.