Financials

Yesterday trading presented good opportunity to execute and hold solid trade ideas throughout the morning session.  While the markets price action was not a screaming long it did support good long trade ideas once it hit monthly highs.  The financials in particular showed good strength in the markets yesterday, which was led by Goldman Sach (GS) making new monthly highs and JP Morgan JPM) hitting new 52 week highs (however brief).  I also notice strength in the insurance part of the financial sector (which is also continuing in today’s trading) with HIG and PRU with both stocks testing yearly highs. 

Looking at JPM price action from yesterday we can see some points of entry that emerged from solid scenario development.  As you can see on the daily and hourly charts the stock was a solid long, above all moving averages with a solid bias to the upside.  Coming strong right out of the open within the first 5 min closing above yesterdays range, this was the first entry you could have executed.  While this is an aggressive entry it was justified because of the strength in the higher time frames.

  Now the second entry (which is the entry most traders probably identified) was near the 15 min ORB.  Looking at the charts we get a nice ten minute pause with a great risk/reward (with a close below 47.50 as your out).  The key to the success of this trade was holding it through the markets pullback.  If you setup and stuck with the proper rick parameters you would have no reason to get out of the trade, if you would look at the 15min chart we can see that price action did not create a lower low all morning. 

Looking at the daily and hourly chart for today’s price action we see a low volume pause, an inside day continuing from yesterday afternoon sideway action.  From this information we can anticipate a continuation to the long side in the upcoming days with price action making new highs.  We do have some resistance on the weekly charts around the 48.20 level so I would not get aggressive until we and comfortably hold above this level. 

Markets and the XLE

Today the markets continued it move higher in a relatively lack luster way compared to Fridays action when the turmoil in Egypt soften with Hosni Mubarak stepping down as president.  The strong buying in the markets continues as two of the major three indexes make new 52 week highs.  The Dow Jones Industrial Average (DJI) was the index today that did not make new highs with the SPY and NASADQ, which could have prompted a sell divergence in the markets, but was not realized in today’s price action.  Showing continued strength in the markets. 

The energy sector performed very well today as many of the Keystone Trading Groups components watched in the XLE (energy ETF) made 52-week highs.   Exxon-Mobil (XOM) had an explosive day right out of the morning trading and continued to push higher throughout the day on strong volume.  While smart trading cautioned traders to be less aggressive until we broke the $84.00 two week resistance level, once above price action continued higher another dollar with little resistance.  Valero Energy (VLO) was another stock that had a strong morning and once above Fridays highs took off another .75 cents in the longs flavor. 

Another stock that looks interesting and shows promise for a continued move higher is Baker Hughes (BHI).  While the stock did not breakout like some of its counterparts today, this two week low volume pause looks ripe for the stock to push higher in a big way.  It looks similar to XOM on the daily charts.  As XOM had an huge move in the beginning of the month followed by two week low volume pause that resulted in an explosive move higher in today’s price action.  I will be looking BHI and other components in this sector to continue higher in the upcoming weeks.