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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
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Advanced Technical Analysis of ETFs
  • Watching (RTH) for a pullback entry - December 23, 2010 0 comments
    Dec 23, 2010 8:33 AM | about stocks: RTH, VGT
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    The Wagner Daily - December 23, 2010
    Concise technical analysis and picks of the leading global ETFs



    Commentary:

    All five major indices closed in positive territory on Wednesday, with the Nasdaq, S&P 500 and the S&P MidCap 400 all posting gains for the fifth consecutive session. However, the day's action was void of any serious conviction that would send Bears running for cover. Across the board, gains were modest. Both the S&P 500 and the S&P MidCap 400 led the action by posting gains of 0.3% yesterday. The Dow Jones Industrial Average and the Nasdaq edged higher by 0.2%, while the small-cap Russell 2000 ended the day flat. Yesterday's activity was typical for a pre-holiday session.

    Trade was light for a second consecutive day. Volume fell by 2% on the NYSE, while turnover on the Nasdaq was off by about 1%. Advancing volume outpaced declining volume by a modest 1.4 to 1 on the NYSE and 1.7 to 1 on the Nasdaq. It's been quite a while since we've seen a definitive accumulation or distribution day in the broad market.

    The following chart of the Retail HOLDRS ETF (NYSEARCA:RTH), provides an excellent example of a technical pattern that has proven bullish since the market bottomed in March of 2009. It's a simple setup....consolidation, followed by a false breakout (generally on strong volume), a retracement and then the actual breakout on strong volume. We will be monitoring RTH for a possible entry should this technical pattern continue to prove accurate.



    The Vanguard Information Technology ETF (NYSEARCA:VGT), has been in consolidation mode for the past twelve trading sessions. A rally back above the December 13th false breakout ($62.25) should provide a potential buying opportunity for VGT.



    Recently, there has been a noticeable flow of money into ETFs that have significantly lagged the market over the past year (oil/related, homebuilders, banking, pharmaceuticals, real estate and REITs). This is often a leading indicator that a rally may be nearing exhaustion. It is too early to definitively suggest that the market is about to change trend, but when laggards become leaders, caution is warranted.

    Holiday publication schedule: On Friday, December 24, the stock market will be closed for Christmas Day holiday, and The Wagner Daily will not be published that day. Regular publication will resume on Monday, December 27. Warmest wishes for a Merry Christmas, Happy Hanukkah, and Happy Kwanzaa from Morpheus Trading Group. Enjoy this peaceful time with your family and friends.


    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.
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