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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
My company:
Morpheus Trading Group
My blog:
Morpheus Trading Group - swing trading blog
My book:
Advanced Technical Analysis of ETFs
  • Two "Short ETFs" On My Watchlist For Potential Swing Trade Entry Today 0 comments
    Jun 8, 2012 8:18 AM | about stocks: FAZ, DUG

    Over the past four days, we have been tracking the inversely correlated ProShares UltraShort Oil and Gas ETF ($DUG) for a possible long entry on pullback into the 20-day and 200-day moving averages. Yesterday, DUG formed the reversal candle we were looking for, as a possible pivot for a buy entry. As a result, we have now placed DUG on our watchlist for potential swing trade entry. Specific entry and exit price details for this "short ETF" swing trade setup are available to subscribers of The Wagner Daily in the watchlist section of the newsletter. Note that if DUG triggers our buy entry price, it will be entered as a very short-term trade (2 to 5 days) because inverse and leveraged ETFs underperform their underlying indexes as the holding time increases. The daily chart below illustrates the "undercut" with reversal bar we were anticipating:

    (click to enlarge)DUG

    Yesterday, on a spike in volume, the Direxion Financial Bear 3x ETF ($FAZ) formed a bullish reversal candle. After undercutting support of its 20-day EMA, FAZ rallied sharply and closed at session highs. FAZ now offers a potential long entry just above yesterday's high of $26.99. We are also placing this inversely correlated "short ETF" on today's watchlist:

    (click to enlarge)FAZ

    Several days ago, we exited and took profits on our remaining short positions because the main stock market indexes had finally undercut their 200-day moving averages and formed reversal candles (as we anticipated and discussed in our June 4 ETF trading commmentary). With the undercut and reversal candles in place, the odds favored that we would see a bounce in the broad market. Consequently, we suggested patience by sitting in a cash position as the broad markt bounced and to wait for new ETF and stock trade setups to develop. Yesterday, all of the major indices put in reversal candles and there are now a plethora of potential short entry setups in the market. As we've often discussed in the past, it's important to wait for proper technical trading setups to develop; otherwise there is a high likelihood of overtrading and churning one's trading account. This is where the short-term element of our market timing system keeps us out of trouble by being on the right side of the market, or at times being fully in cash.

    The commentary above is an excerpt from The Wagner Daily newsletter. Subscribers to the full version receive our exact entry and exit prices for swing trades of our best stock and ETF picks, access to our market timing model, and more. To get started today, sign up for your 30-day risk-free trial to our Wagner Daily swing trading newsletter.

    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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