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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
  • Bullish consolidation pattern in the Commodity Index ETF (RJI) - May 4, 2011 0 comments
    May 4, 2011 7:04 AM | about stocks: RJI, PBW
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    The Wagner Daily - May 4, 2011
    Concise technical analysis and picks of the leading global ETFs



    Commentary:

    Stocks lost ground on Tuesday as volume expanded. For the second consecutive day small and mid size companies took the brunt of the selling. The small-cap Russell 2000 and the S&P MidCap 400 plummeted by 1.3% and 1.1% respectively. The Dow Jones Industrial Average finished flat on the day while the Nadsdaq shed 0.8% and the S&P 500 lost 0.3%. A late session rally prevented what could have been a very bad day for Wall Street.

    Internals were bearish on Tuesday. Volume increased as stocks dropped, and declining volume had the upper hand for most of the day. Turnover improved by 7.4% on the Nasdaq and 11.1% on the NYSE. The ratio of declining to advancing volume ended the session at 1.5 to 1 on both indices. Further, market leaders were under pressure most of the day. The combination of the slippage in leadership, higher volume, higher declining volume and broad market losses suggest that Tuesday was a distribution day among institutional traders.

    The ELEMENTS Rogers Intl Commodity ETN (NYSEARCA:RJI) has been consolidating in a tight range and setting a sequence of lower highs since late March. If RJI can hold support near yesterday's low and consolidate for several days, then a move back above $10.40 would likely trigger a buy entry for this ETF. We are monitoring RJI closely as a possible long candidate.



    The PowerShares WilderHill Clean Energy ETF PBW is in danger of losing support of its 200-day MA. Yesterday this ETF tested the 200 MA for the third time in the past two months. Further, PBW closed below the reversal candles it formed on April 27th and April 28th that preceded the gap up of April 29th. This is quite bearish price action. Several days of sideways movement followed by a volume fueled move below yesterday's low of $9.97 could provide a short trigger for PBW.



    Market leadership was tested yesterday as big names like AMZN, BIDU, NFLX, CRM and PCLN underperformed significantly. Nonetheless, all of these market leaders were likely due for a pullback given the recent run up in the market. It would take a sharp follow through day to the downside before we would entertain the possibility of a more significant reversal.

    Trade setups have been sparse the past few days. We are inclined to be patient given the recent run up in the market.


    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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