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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
  • Stalking $OIL For Pullback Entry 0 comments
    Feb 22, 2012 7:58 AM | about stocks: OIL, SRS

    For the second time in as many days, stocks ended the session mixed. The major indices were under pressure for most of the session but a late day rally salvaged what could have been a very negative day on Wall Street. For the most part the broad market held up well but there were signs of selling into strength. This is the second time we've seen this type of price action in the past seven sessions. The DJIA and the S&P 500 showed the most resiliency as both indices closed higher by 0.1%. The Nasdaq shed 0.1% while the S&P MidCap 400 and small-cap Russell 2000 dropped 0.4% and 0.7% respectively. The top performing sectors included gold, gold miners, oil & gas, computer hardware and internet services. Underperforming sectors included retail, airlines, biotechnology, semiconductors and homebuilders.

    Internals ended mixed on Tuesday. Volume slid by 7.2% on the Nasdaq and 13.1% on the NYSE. However, advancing volume managed to outpace declining volume by a ratio of 1.1 to 1 on the Big Board. On the Nasdaq, declining volume held the upper hand by a factor of 1.8 to 1.

    Since October of 2011, the ProShares UltraShort Real Estate ETF (NYSEARCA:SRS) has been in a significant downtrend. However, over the past 2.5 weeks, SRS has been consolidating in a tight range as it has set a sequence of higher lows. Further, SRS has rallied above its 10-day MA and is now poised to break above its 20-day EMA. A volume fueled move above yesterday's high of $32.41 could provide a buying opportunity in this ETF.

    Over the past two weeks the iPath Goldman Sachs Crude Oil ETN (NYSEARCA:OIL) has been showing relative strength to the broad market. Yesterday, OIL broke to new highs on a massive spike in volume. The ideal entry point for this trade would have been on February 13th when OIL broke above its short term downtrend line. Now that OIL has surged higher, it is not advisable to "chase the trade". Instead, we will be looking at a possible long entry into a pullback. An undercut of support near $26.30 could provide a buy entry for this ETN. We are montoring OIL closely for a possible long entry.

    We exited our long positions in DVY and SOXL yielding solid profits. We also exited XLU for a small loss. We made a judgment call to reduce our exposure to the market due to the negative price action in the early afternoon session. In addition, SOXL and XLU were exhibiting relative weakness and it therefore made sense to exit both trades given market conditions. IAU hit its adjusted trigger and we entered the trade yesterday. IAU closed at the high of the session. Although we remain bullish on the market, it appears that we could see a pullback, or at a minimum, sector rotation. We believe that it is best to stay mostly in cash until new setups develop.

    The commentary above is an abbreviated version of The Wagner Daily, a daily ETF and stock swing trading newsletter. Subscribers to the full version also receive detailed entry and exit prices for potential swing trade entries, and an additional section dedicated to individual stock trades. To learn more about our trading strategy, please visit our blog.

    Deron Wagner is a professional hedge fund manager who founded Morpheus Trading Group, a swing trader education firm, in 2002. He is the author of the best-selling book, Trading ETFs: Gaining An Edge With Technical Analysis. His new book, Advanced Technical Analysis of ETFs, will be released in August 2012. Past television appearances include CNBC, ABC, and Yahoo! FinanceVision. Wagner is also a frequent guest speaker at various trading events 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.

    © 2002-2012 Morpheus Trading, LLC
    Reproduction without permission is strictly prohibited.

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