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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
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Morpheus Trading Group - swing trading blog
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Advanced Technical Analysis of ETFs
  • Why We Are Stalking This Shiny Solar ETF ($TAN) 0 comments
    Feb 14, 2013 5:58 AM | about stocks: TAN

    Solar energy stocks have made a comeback over the past few months, with First Solar ($FSLR) leading the way. SolarCity ($SCTY), MEMC Electronic Materials ($WFR), and JinkoSolar Holding ($JKS) have been exploding higher as well. The Guggenheim Solar ETF ($TAN), which is heavily weighted in leading solar stocks from the United States and China, has also been shaping up nicely and may provide us with an ideal, low-risk buy setup within the next few days.

    $TAN recently reversed a long-term (multi-year) downtrend, and the ETF is now beginning to show classic signs of a bullish trend reversal. On the weekly chart of $TAN below, notice the 10-week moving average crossed above the 40-week moving average two weeks ago. This moving average crossover is a bullish technical signal that signals a reversal of the dominant trend:

    (click to enlarge)

    Zooming in to the shorter-term daily chart interval below, we see that $TAN broke out above a month-long base of consolidation yesterday (February 13), but closed near its intraday low. If $TAN now turns into a false breakout by pulling back over the next three to five days, we may be able to grab a low-risk swing trade buy entry as the ETF retraces to near-term support of its rising 20-day exponential moving average, around the $18.40 - $18.50 level:

    (click to enlarge)

    The false breakout entry is low-risk because traders who buy the breakout are quickly forced to sell, which absorbs overhead supply. Accordingly, the next breakout attempt has higher odds of succeeding and following through to the upside. Furthermore, false breakout entries enable short-term swing traders to have a clearly defined stop price below the low of the pullback, which creates a very positive reward-risk ratio for the setup.

    If the next move of $TAN is to drift back down into its previous range (false breakout), we will add it to our "official" watchlist as an actionable momentum trade buy setup. As always, regular subscribers of The Wagner Daily, our technical trading newsletter, will be notified in advance of our predetermined entry, stop, and target prices for the $TAN swing trade if it meets our strict, rule-based criteria for buy entry.

    Learn how to swing trade with our technical stock trading system that has yielded consistent trading profits in bull, bear, and sideways markets since 2002. Check out our sample stock trading course for details.

    Stocks: TAN
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