Seeking Alpha

Morpheus Tradin...'s  Instablog

Morpheus Trading Group
Send Message
Deron Wagner is the founder and portfolio manager of Morpheus Trading Group. His daily focus is managing and trading the Morpheus Capital Hedge Fund, which he founded in April of 2004. He also teaches his swing trading strategy with The Wagner Daily newsletter, which provides exact entry, exit,... More
My company:
Morpheus Trading Group
My blog:
Morpheus Trading Group - swing trading blog
My book:
Advanced Technical Analysis of ETFs
  • Potential bottoming action in (YCS) - November 8, 2010 0 comments
    Nov 8, 2010 8:41 AM | about stocks: YCS, AGG, TMF
    MTG logo

    The Wagner Daily - November 8, 2010
    Concise technical analysis and picks of the leading global ETFs



    Commentary:

    After an explosive breakout day on November 4th, Friday's trading action was subdued. The major indices were stuck in a choppy trading range for most of the day. However, stocks did manage a late day bounce that moved the major averages into positive territory at the close. On the day, the S&P MidCap 400 led all indices by posting a 0.6% gain. Following closely behind, both the S&P 500 and the small-cap Russell 2000 finished up 0.4%. The Dow Jones Industrial Average and the Nasdaq both managed slim 0.1% gains for the session.

    Turnover fell across the board in Friday's trade. Nasdaq volume dropped significantly, as It finished down by 17%. On the NYSE, volume dropped by a more modest 5%. Advancing volume outpaced declining volume by a ratio of 2.3 to 1 on the NYSE. Although positive, the advancing volume to declining volume ratio was only 1.3 to 1 on the Nasdaq. The internals suggest that the market was "catching its breath", following Thursday's monster rally.

    In Wednesday's newsletter, we placed the iShares Russell Microcap Index (NYSEARCA:IWC) on our official watchlist. IWC hit our buy "trigger" of $45.03, and we entered the trade. The 15 days of consolidation by this ETF, provided the "springboard" for the rally. This zone of consolidation now serves as a formidable level of support. IWC is now well positioned to continue its rally.

    The ProShares UltraShort Yen (NYSEARCA:YCS), is exhibiting signs of bottoming. Prior to a reversal, it is common to see a significant volume spike that propels an ETF in the opposite direction of the prevailing trend. This spike is considered a leading indicator, and as such should not be used as a signal to immediately enter a trade. The spike in volume generally precedes the actual reversal by three to six weeks. In addition, the counter trend move often involves a gap-up, and the first breach of the 20-day MA after a protracted slide. Since the gap is the first test of the moving average, it often fails and the downtrend resumes. However, the volume begins to fade during this phase of the selloff. At some point, volume spikes and begins to trend upwards, but the ETF consolidates. In other words, the sudden increase in volume does not propel prices lower. YCS has been consolidating over the past 13 trading days. Its volume has been increasing during this timeframe. Yet, YCS has not moved lower. YCS has gapped up on strong volume, and tested the 20-day MA twice in the past four trading days. A potential buy signal would be triggered if YCS gapped above the consolidation zone. By no means are we calling a bottom in YCS. We have no interest in "bottom fishing." YCS could easily resume its downtrend. However, the current technical pattern suggests that we should be aware of a possible reversal.



    For the past 12 weeks the iShares Lehman Aggregate Bond Fund (NYSEARCA:AGG), has consolidated in a tight trading range. Additionally, AGG is consolidating at its all time highs. A break above the August 25th high of $109.09 could trigger a buy signal for this ETF. We will notify our members should a buy signal occur.



    The Direxion Daily 20+ Year Treasury Bull 3x (NYSEARCA:TMF), has been in a downtrend for over two months. Further, it has formed a head and shoulders-like pattern. TMF is currently resting on a key support level just below the neckline. The 50-week MA also provides intermediate support. However, TMF appears to be headed lower. A rally into the neckline or downtrend line provides potential entry points to short this ETF. The projected target for this trade would be in the vicinity of $29.00.



    As we stated in the November 5th newsletter, most ETFs are forming similar patterns. Consequently, we are inclined to be more cautious despite the recent strength in the market. When "laggards" begin moving the market, it is only wise to take notice. The uptrend remains intact, but there is evidence that the market is reaching an extreme. Nonetheless, until the market provides a clear signal of trend reversal, we remain respectful of the current market sentiment.


    The commentary above is an abbreviated version of our daily ETF trading newsletter, The Wagner Daily. Subscribers to the full version receive specific ETF trade setups with detailed trigger, stop, and target prices, as well as daily updates on all open positions. Intraday Trade Alerts are also sent via e-mail and/or text message, on as-needed basis. For your free 1-month trial to the full version of The Wagner Daily, or to learn about our other services, please visit morpheustrading.com.

    Deron Wagner is the Founder and Head Portfolio Manager of Morpheus Trading Group, a capital management and trader education firm launched in 2001. Wagner is the author of the best-selling book, Trading ETFs: Gaining An Edge With Technical Analysis (Bloomberg Press, August 2008), and also appears in the popular DVD video, Sector Trading Strategies (Marketplace Books, June 2002). He is also co-author of both The Long-Term Day Trader (Career Press, April 2000) and The After-Hours Trader (McGraw Hill, August 2000). Past television appearances include CNBC, ABC, and Yahoo! FinanceVision. Wagner is a frequent guest speaker at various trading and financial conferences around the world, and can be reached by sending e-mail to: deron@morpheustrading.com.



    DISCLAIMER: There is a risk for substantial losses trading securities and commodities. This material is for information purposes only and should not be construed as an offer or solicitation of an offer to buy or sell any securities. Morpheus Trading, LLC (hereinafter "The Company") is not a licensed broker, broker-dealer, market maker, investment banker, investment advisor, analyst or underwriter. This discussion contains forward-looking statements that involve risks and uncertainties. A stock's actual results could differ materially from descriptions given. The companies discussed in this report have not approved any statements made by The Company. Please consult a broker or financial planner before purchasing or selling any securities discussed in The Wagner Daily (hereinafter "The Newsletter"). The Company has not been compensated by any of the companies listed herein, or by their affiliates, agents, officers or employees for the preparation and distribution of any materials in The Newsletter. The Company and/or its affiliates, officers, directors and employees may or may not buy, sell or have positions in the securities discussed in The Newsletter and may profit in the event the shares of the companies discussed in The Newsletter rise or fall in value. Past performance never guarantees future results.

    Charts created by TradeStation (tradestation.com).

    © 2002-2010 Morpheus Trading, LLC
    Reproduction without permission is strictly prohibited.
Back To Morpheus Trading Group's Instablog HomePage »

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.

Comments (0)
Track new comments
Be the first to comment
Full index of posts »
Latest Followers

StockTalks

More »

Latest Comments


Posts by Themes
Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.