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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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Morpheus Trading Group - swing trading blog
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Advanced Technical Analysis of ETFs
  • 3 ETFs Technically Poised For Swing Trade Entry Now 0 comments
    Nov 21, 2012 8:40 AM | about stocks: SMN, EEV, TMF

    One ETF we are stalking for potential swing trading buy entry today is ProShares UltraShort Emerging Markets ETF ($EEV), an inversely correlated short ETF. As you can see on the chart below, EEV broke out above a six-month downtrend last week, and has now pulled back to near-term support of its 20-day exponential moving average, which recently crossed above the 50-day moving average. This is a bullish trend reversal signal. With the ETF moving higher in yesterday's session, but closing just below the previous day's (November 19) low, we are now monitoring EEV as a potential short-term trade above the two-day high. Subscribers to our swing trading service should note our exact entry, stop, and target prices for this trade setup in the ETF Watchlist section of today's newsletter. The technical trade setup for EEV is shown on the daily chart below:

    (click to enlarge)

    Although the main stock market indexes were flat yesterday, there were at least two ETFs we have been monitoring that pulled back to near-term support levels. Specifically, they retraced to test or "undercut" their 20-day exponential moving averages. One of those ETFs was Direxion 20-Year Treasury Bull 3x ($TMF), a fixed-income ETF that roughly follows the price of the US long-term treasury bond, but is leveraged at a 3 to 1 ratio. Last week, we sold this ETF for a substantial trading profit, after it broke out above resistance of a four-month downtrend line. However, the ETF has remained on our radar as a potential swing trade re-entry on a pullback. The current pullback that followed the recent breakout above the downtrend line is shown on the daily chart of TMF below:

    (click to enlarge)

    As you can see, TMF sold off sharply yesterday, and closed just below near-term support of its 20-day exponential moving average. Such a price retracement off its recent highs provides a low-risk re-entry point to buy this ETF. However, remember that we do not blindly try to anticipate where a pullback will end and find support. Rather, we must now wait for the formation of a bullish reversal candlestick within the next several days, then look to buy TMF above the previous day's high, which would confirm the pullback off the highs has ended, and TMF is likely to resume its bullish trend reversal. Therefore, although TMF is not yet listed on today's watchlist as an "official" buy entry, it is now on our internal watchlist as a potential trade setup we are monitoring for the proper trigger point for buy entry.

    Another ETF with a similar pattern is ProShares UltraShort Basic Materials ETF ($SMN), another short ETF. After buying the breakout above its downtrend line, we sold this ETF into strength last week for a 9.2% gain on an 8-day holding period (click here for a quick educational video recap of the technical setup of this recent swing trade). Now, it has pulled back to near-term support of its 20-day EMA, but probably needs another day or two to either "undercut" support of the 20-day EMA, or at least form a bullish reversal candle, before we would look for an actual re-entry point into this ETF. Like TMF, this setup in SMN has been added to our internal watchlist as a potential near-term buy entry. The daily chart pattern of SMN is shown below:

    (click to enlarge)

    Going into yesterday's session, we were stalking SPDR S&P Homebuilders ETF ($XHB) as a potential short sale entry if it traded below the November 19 low. However, the ETF opened slightly higher, then rallied to close near the previous day's high. As such, the ETF did NOT trigger for short sale entry, and has been temporarily removed from our "official" watchlist as a swing trade setup. Whenever we list a swing trading setup that does not hit our trigger price, we don't care because there is "no harm, no foul" for disciplined traders.

    To receive the exact entry, stop, and target prices for our best daily ETF and stock picks for consistent swing trading profits, subscribe to The Wagner Daily newsletter today. To learn how to trade our winning ETF and stock trading strategy and improve your trading education, check out our online stock trading course.

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