Trading Notes for Today, January 28th

Jim’s Market Notes:

Not a good day for the broad indexes as investors sell on the worries relative to earnings, economic data, and global issues with economic and geopolitical challenges. The end result was a decline of more than 2.5% for the NASDAQ and 1.4% for the S&P 500 indexes. The challenge for investors is the lack of clarity about direction and the trading range remains in play short term.

SPY held the $202.50 support and a move lower would test the $198.50 mark (1992 index). Not at it was draw up to start the week, but we take what the market gives and adjust accordingly. Stops honored on the trades.

QQQ at the 101.40 support and the next level is the previous low $99.60. Remains in the downtrending channel and the large cap selling on Tuesday is the biggest concern. Earnings remain a challenge with Microsoft dropping 9.4% Tuesday. After-hours gains from Apple and Yahoo will help today, but we have to be on watch for a confirmed break lower. Stops remain and patience is key.

XLF testing $23.50 support again with the 200 DMA as key going forward.

Futures are pointing higher for the NASDAQ on earning from Apple and Yahoo. S&P 500 index and Dow are flat currently. Oil is down 1.7% overnight and pushing back towards the $45 mark. Gold is flat. Asia was quiet and Europe opened slightly lower. Looking for support to hold today… if more selling is the results negative sentiment resumes leadership. Remain patient and manage your risk today.

Be patient as this unfolds today.

Sector Trends to Trade:

Crude Oil (UCO) The volatility in oil remains. The downtrend is in charge, but oil is attempting to build a base short term. This is one sector to watch overall as investor interest is rising based on the belief prices will not remain low going forward. Some speculation in the trading process, but the reality of the speculation will be validated by the charts moving forward. Entry level for the trade on the upside is $7.60 and the stop initially would be $7 to allow for room with volatility. (Added to ONLY ETF Strategy)

Small Cap (IWM) The index cleared resistance on Monday and tested in the selling on Tuesday. Held the $117.25 support and close back above the $118.50 entry mark. That show strength in the sector versus the large caps selling on both the S&P 500 index and the NASDAQ 100 index. Entry for trade on upside is $118.50. We will manage the risk as a micro-trend trade and see how it unfolds moving forward. (Added to the Sector Rotation Strategy)

Midcap (IJH) Like the small cap index continues to show upside strength relative to the other indexes. Looking for the same upside move in the sector and entry of $146.50 as micro-term trade. Rising wedge pattern is positive technically and I will be patient with the entry as this unfolds.

Solar Energy (TAN) the sector has been beaten down by the decline in oil prices and speculation that demand will fall with the price of oil. The base is building at support near the $32 mark. The trading rang and micro-trend break at $34.50 on Tuesday got my attention as a possible upside trade in the sector. The volatility will remain with oil prices low, but it does offer an opportunity worth tracking both technically and fundamentally. Entry would be test of $34.50 level or move above $35.25.  (ONLY ETF Strategy)

Emerging Markets (EEM) the sector is testing the break from the base pattern on the recent lows. If the test holds and continues the upside move I am interested in a longer term position. Stimulus is a good reason for the upside to gain some momentum on the longer term view. It will require patience and management of the risk. Looking for entry near the $39.75 level on the move if it materializes. (Sector Rotation Strategy)

Money Management Strategies Links:

  1. S&P 500 Strategy¬†–
  2. Sector Rotation Strategy
  3. ONLY ETF Strategy
  4. ONE EGG Strategy – updated
  5. Pattern Trading Strategy – Below
  6. Long Term Strategy – Below

Pattern Trade Setups:

  1. Volatility is back as concerns over earnings and data continue plague the outlook. Emotions stirred again and tested lower on Tuesday. I am willing to be patient for now and see how this unfolds. Manage risk with your stops and see how far it will take us.
  2. SIRI – entry $3.70. Weekly chart break through resistance in consolidation pattern. This is the third attempt to break through this level since September. $3.90 Target and $3.55 stop.
  3. TNA – entry $79.05. Trading range resistance. Small caps continue to attract money as the large caps struggle. I like the short term upside in the sector. Stop $75.50 Target $84.

Pattern Trade Tracking:

  1. VMW – entry $83. Bottom reversal and trend break. Attempted the move higher on Friday and tested. Looking for upside to follow through with technology leading. Stop $80.
  2. INFI – entry $15.65. micro-downtrend break. biotech remains a leader and setup is good. Stop $14.90.
  3. SKUL – entry $10.40. Ascending triangle. $10.25 breakout on Friday and follow through for entry. Stop $10.
  4. VIPS – entry $23. Flag. Break above short term resistance and trade to $24.75. Stop $22.
  5. FEYE – entry $34.50 test of move Friday. Trading range breakout $34.20. Watch the confirmation of the move with max entry at $35. Stop $33.
  6. ENPH – entry $11.10. bottom reversal within the trading range. Semiconductors have been a leader and looking for move at least midway in the range to $12.60. Stop $10.85.
  7. QLD – entry $135. break downtrend line and reversal off support. NASDAQ has been leading on the bounce off support the last three trading days. Swing trade on the move higher. Stop $135. HIT STOP
  8. SPXL – entry $85.50. trendline break and bottom reversal swing trade. Stocks trying to move higher again after test of support again. Stop $83.75. HIT STOP
  9. TBT Р entry $41.60. base and bottom reversal. If stocks rally looking for bonds to fall modestly enough for trade opportunity on the breakout. Stop $39.90. HIT STOP
  10. SVXY – entry $56.90. bottom reversal. VIX index receding as the fear subsides, but uncertainty still in play. Watch for swing trade on the reversal. Stop $$58 HIT STOP
  11. BABA – entry $100.40 (15 cents above posted entry). Resistance and trend reversal. Bounce off support and break of resistance would be entry. Trendline break at 105.25 would be point to add to position. Stop $100
  12. GILD – entry $104. bottom reversal and trendline break. Fundamental news driving the upside reversal. Trendline break entry point. Stop $104
  13. TSEM – entry $13.45. descending triangle. Confirmation break on the upside from consolidation and uptrend resumption. Stop $13
  14. GDX Рentry $19. Break from consolidation bottom. Look for trade on the upside move in gold miners short term. $20.50 short term trade target. NUGT gives you the leverage. Stop $21.50 (target price + profit).
  15. WFM – entry $48. Flag. Longer term outlook very positive off earnings. Look to hold this position going forward. May add to our long term strategy below. Stop $46.90
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: 
Long term positions take time to manage and patience to let them unfold. The short term can be managed with hedging or trading off the longer term positions. The goal is to build the position and manage the risk. Sometimes the short term news and events cause anxiety… the goal is to mitigate the risk and protect the downside as we allow the stock time and room to grow. If you don’t like long term holdings don’t read the data below.
  • Facebook (FB) – $73.15 entry (10/16) added 1000 shares back on the long term outlook following the choppy drop in markets. 10/28 – Earning¬†were good, but the outlook showed higher costs and the first reaction is sell the shares from traders. Still trading sideways range as investors sort out the facts and fiction. (we added to our positions. 500 @ $77.50 – 1/8) Watching how the downside plays out. (Bought 20 of¬†the $75 puts for March on¬†the downside break $4.25 – looking to roll them forward if we test the bounce).¬†TODAY:¬†¬†Reversed on Tuesday dropping 2.2% with the internet sector. Watch the earnings from Apple and Yahoo to help going forward. Earnings are Wednesday and we will see how it unfolds.
  • Twitter (TWTR) – ¬†Added 500 shares at $42.80 (10/28). This is a long term holding and we will manage the downside risk going forward. Looking to buy shares on break above $39.20. (Added 500 shares at $39.20¬†on¬†1/9.) TODAY:¬†Resistance at the $39.50 mark broke again and watching for follow through on upside.¬†Watching for trading opportunity on the position on the break higher.¬†
  • Bank of America (BAC) We own the Jan 2016 $17 Calls at $1.15 (avg price)/300 contracts. Banks were¬†gaining some ground and I still like our position going forward. We add our long positions in stocks back (Added 2500 shares at the $16.35 mark ¬†on 10/21). Stop is $15. TODAY:¬†¬†Hit the resistance at $16.20 and struggling to find any upside momentum.
  • Whole Foods Market (WFM)¬†11/20/14 Start coverage. The outlook has improved after making changes to the stores and adding new stores. The earning validated what I have been following for the last year and the company should be at the front side of a long term upside based on fundamental growth. Adding 1000 Shares at $48 to start the position.¬†Small range as market keeps stock in check. TODAY:¬†¬†Cleared the $52¬†resistance and moved up to maintain the uptrend. Held well in the selling on Tuesday.