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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
  • Potential short entry in (OIH) - May 25, 2011 0 comments
    May 25, 2011 8:55 AM | about stocks: IWC, OIH
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    The Wagner Daily - May 25, 2011
    Concise technical analysis and picks of the leading global ETFs



    Commentary:

    Stocks ended the session modestly lower yesterday on mixed trade. All of the major indices lost ground on the session. Once again the small-cap Russell 2000 demonstrated the most relative weakness as it dropped 0.6% on the day. The tech rich Nasdaq fell almost 0.5% while the S&P MidCap 400 shed 0.3%. The Dow Jones Industrial Average and the S&P 500 appear to have been the benefactors of a flight to quality as they slid a modest 0.2% and 0.1% respectively.

    Market internals were mixed on Tuesday. Turnover was up 4% on the Nasdaq but down 1.3% on the NYSE. The spread ratio fell in favor of advancing volume by a factor of 1.1 to 1 on the NYSE. However, on the Nasdaq declining volume held the upper hand to advancing volume by a ratio of 1.3 to 1. The mixed market internals suggest an absence of institutional participation during yesterday's session.

    UUP continues to consolidate above its 20-period EMA on the 60-minute chart since breaking out on Monday. This is the type of price action we look for as confirmation to the strength of a breakout move. IWM continues to exhibit relative weakness to the broad market as it closed near session lows. Further, for the second consecutive day the Russell 2000 has led the market lower.

    We entered a new short position in the iShares Russell Microcap ETF (NYSEARCA:IWC) via an intraday alert yesterday. We liked the trade as a minor diversification from our position in IWM since IWC was showing signs of being the slightly weaker of the two. The 20-day EMA has clearly crossed below the 50-day MA on the daily chart of IWC while this is not yet the case with IWM. Trade details are available to our subscribers in the open positions segment of the newsletter.



    Since selling off sharply and surrendering a key support level in early May, the Oil Service HOLDRs ETF (NYSEARCA:OIH) has been consolidating below its 20-day EMA. Yesterday, for the third time in four days, this ETF found resistance near this moving average. A loss of support at Tuesday's low or an "over cut" of the 20-day EMA followed by a quick reversal off this level could provide a shorting opportunity in this ETF. We are monitoring this trade carefully for a possible entry.

    The broad market continues to struggle. It is noteworthy that both bank and international ETFs are being met with stiff resistance. We are looking for possible short entries into a bounce. As of this writing both the Nasdaq and S&P futures are trading modestly lower. Should this trend hold and/or strengthen we may look to cover some our short positions into weakness. We believe it is important to evaluate potential exit strategies in advance of the opening bell when a potentially favorable move involves a gap.


    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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