Trading Notes of Today, February 25th

Market Outlook:
Another positive day for investors that led to the S&P 500 index moving above the January high, but failed to hold it on the close. The afternoon drift lower was somewhat of a concern as the market seemed to loose interest on the upside. The breakout for the index and many of the sectors to new highs looked to put the next leg higher firmly in play. By the end of the day most were left sitting at the key levels and wandering what happened to the buyers. Definitely something to watch today as the futures are pointing slightly lower on the day.

Earnings in the energy sector give boost on upside as XLE hits against resistance at $88.50. The equipment and oil services stocks had better news than expected relative to revenue and earnings. Still looking for the upside break through resistance short term.

Sectors to Watch:
  1. S&P 500 index made a run at breaking above 1850 short term and that is the level to watch today. Support is 1810 and for now the index looks content to remain in this range.
  2. The NASDAQ added 29 points and continues to move modestly higher. 4225 is the level of interest for support short term to hold the move above the January high.
  3. Dow moved to 16,207 adding 103 points on Monday. The index is still in need of a catalyst to return to keep the uptrend going short term. For now patience as this plays out.
  4. Russell 2000 Small Cap index moved to 1174 and was close to the 1181 high for January intraday. For now we will hold our positions and adjust our stops on the move higher.
  5. Europe (IEV) is trading in unison with the US markets and Monday was more of the same adding 0.6% on the upside. Need to hold $47.70 currently. Adjust your stops according to risk currently.
  6. Transports (IYT) made the move above $131.20 entry opportunity. Gave up most of the gains on the day and watching to see how it plays out today.
  7. Consumer Services (XLY) pushing through resistance with entry at $65.50. Made a solid move early in the day and settled at the entry point on the close.
  8. EAFE index (EFA) made the upside break to new high and opportunity to add to existing positions at $67.30. Watch and manage your stops.
  9. Financials (XLF) need some upside leadership from the sector short term. Made move above the entry at $21.65 level, but gave it back as well. Manage your risk short term.
  10. Real Estate (IYR) has continued to add to the upside and we are at the next entry level if the upside continues. Made the move above $68 only to come back into the close.
  11. Review the Weekend Update.

The models can be linked to below and each has been updated for the current outlook:

Sector Rotation Model (updated – 2/24/14)

ONLY ETF Model (updated – 2/24/14)

S&P 500 Index Model (Updated – 2/24/14)

ONE EGG Model (updated – 2/24/14)

Pattern Trading Setup:

Today’s opportunities:

  1. GS entry $166.50. Bottom reversal. Financials attempting to break higher. Patience.
  2. SDS entry $29.80. Bottom reversal. Sellers put the buyers on notice again Monday. Watch.
  3. FCG entry $20. Test of breakout. natural gas ETF broke above resistance and is testing the move higher. Looking own as close to the entry as possible and avoid chasing. Jumped higher at the open and willing to watch versus chase.
  4. S entry $8.73. Wedge, consolidation. Telecom sector. Patience as retracted the jump higher on Friday. Nice rebound on Monday.

Pattern Trade Tracking & Follow Up:

  1. JBL entry $18.80. Trading range consolidation. Technology sector. Stop $18.40
  2. LINE entry $33.50. Consolidation breakout. Energy sector.  Stop $32.75
  3. LEN entry $42. Consolidation breakout. Homebuilders. Stop $40.50.
  4. PXLW entry $5.25. Reversal top and test of support. Held the support at $4.80 and now positioned to reverse direction back toward upside. Software sector.
  5. AEIS entry $27.85. Triangle consolidation breakout. Energy sector. Passed on entry with volatile open. Watching today for the trade with positive day. (2/18 post) Stop $27.50.
  6. TQNT entry 9.37. Flag on break higher. Looking for continuation of the upside move. Semiconductor. Stop $10.80. Gap higher and 26% gain on the day. Raise your stop.
  7. FTK entry $24.75. Flag continuation of uptrend. Energy sector moving higher. Stop $23.80. Nice move higher on Monday to break to new high.
  8. VIPS entry $106.50. Break higher from consolidation wedge pattern. Stop $109.80.
  9. EEM entry $38.75. Bottom reversal and continuation higher. Stop $38.25
  10. EFA entry $65.25. Bottom reversal and continuation higher. Stop $65.25
  11. SPY entry $178. Bottom reversal. Broad market index in position to bounce. Stop $182.
  12. FANG entry $54. Ascending triangle breakout. Test and move higher. Energy sector. Stop $60.10.
  13. QQQ entry $85.10. Move through resistance and follow through on bounce off support. Stop $88.40.
  14. BHI entry $57.15. consolidation breakout. Oil Equipment sector. Stop $60.30. Nice break higher and expect a test of the move as follow through.
  15. GLD – Entry $121. Bottom reversal. Trade back to the $125 level. Took entry on move higher. Stop $126.25. Momentum remains positive short term and watching to see how it responds to the move.

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: (see Facebook research page for archive of posts)

  • 2/18 – Raise stop to $58.95 currently and manage the move to the new high according to your risk. With the price moving through the top of the Bollinger bands some downside activity may be on the horizon or a continuation of the top consolidation.
  • 2/19 – $16-19 billion acquisition of WhatApp pushed the stock down 2.5% after the announcement in after-hours trading. Watching to see how investors react in trading today.
  • 2/24 – Continuation of the upside momentum. Plenty of news and comments on the stock, but the buyers remain confident short term. Looking at adding a trade on the stock with options. Watch to see how it trades today.